The American Institute of Public Accountants (AICPA) is a member agency that represents the accounting profession around the world. AICPA “The AICPA is the world’s largest member association representing the accounting profession, with more than 394,000 members in 128 countries and a 126-year heritage of serving the public interest.” The AICPA establishes the guidelines that hold accounting professionals accountable to professional and ethical standards within the industry. In addition, the AICPA sets standards for the auditing professionals who serve as a safeguard against accounting improprieties. The remaining core mission of the AICPA is to establish the level of expertise and knowledge needed for an individual to become a Certified Public Accountant (CPA). This is done through the management and delivery of the Uniform CPA Exam that is held as a standard for the accounting profession. Due to the nature of the growing global economy and the convergence of accounting standards, the AICPA has “established the Chartered Global Management Accountant designation to elevate management accounting globally.” This strategy will help the AICPA stay on the cutting edge of the accounting profession as the varying international methods converge.
The Financial Accounting Standards Board (FASB) is the governing body over the Generally Accepted Accounting Principles (GAAP). The GAAP is the set of standards that hold finance professionals accountable to a set of standards for the development and presentation of the income statement, balance sheet, and statement of cash flows. The U.S. Securities and Exchange Commission (SEC) recognizes the FASB as the governing body over the filing of financial reports of publically held companies. The FASB has seven members who sit on the board and are known as high-level accounting professionals with extensive expertise and hands-on experience. In 2010, the FASB announced and signed the Norwalk agreement in response to pressures to adopt standards similar to those used internationally (FASB, n.d.). The mission of the memorandum of understanding is to show a “commitment to enhance consistency, comparability and efficiency in global capital markets.” As the global market expands, there has been growing pressure among stakeholders for businesses to adopt a common set of standards that can be universally applied. For example, if an investor wants to explore options in an emerging market, they currently have to understand two different accounting practices.
Currently, there are inherent differences between the U.S. GAAP and the International Accounting Standards. The FASB has recognized those differences and has been attending strategic sessions with the IASB in order to identify the areas that will converge with international practices. According to the FASB (n.d.), those key strategic areas are “conceptual framework project, business combinations project, financial statement presentation, and revenue recognition project.” The short term and long term projects are designed to hold the overall course of convergence to a schedule. The agreement has set goals for what standards will be changed in the short and long run. According to the FASB (n.d.) the convergence will be complete by 2015. The key fundamental areas of convergence are with accounting for revenue in terms of revenue recognition and financial statement presentation. Under GAAP, firms have been known to engage in a practice called “smoothing.” Smoothing is a word to describe the adjustment of earnings to show consistency over time. It allows for accounting manipulation that takes reporting away from the exclusive adherence to cash-in cash-out practices. The presentation of financial reports under international standards sets strict guidelines to where assets can be placed on the balance sheet. While GAAP recommends (not mandatory) the separation of assets based on current or noncurrent status, the international standards require the presentation to be separate (FASB, n.d.)
American Institute of Public Accountants (AICPA). (n.d.). Retrieved fromhttp://www.aicpa.org/Pages/Default.ASPX
Financial Accounting Standards Board (FASB). (n.d.). Convergence with the International Accounting Standards Board. Retrieved fromhttp://www.fasb.org/intl/convergence_iasb.shtml
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