In 2002, the Financial Accounting Standards Board (FASB) began the process of working with the International Accounting Standards Board (IASB) to converge international financial reporting standards (IFRS) with the US's generally approved accounting standards (GAAP). The goal was to create one set of standards that was appropriate for a more global economy. This is the primary connection between the IFRS and FASB. Aside from the working relationship between the two boards, they are also connected by a shared interest in optimizing account standards backed up by substantial experience in the field.
A major connection between the IFRS and FASB is the years that the organization has devoted to merging these international standards with GAAP. The board has worked with the IASB to find similarities between the two sets of standards, manage the differences, and to make improvements to the system overall.
Another connection between the IFRS and FASB is that this group has played an unprecedented role in finding the weaknesses in this set of standards. Due to its experience setting widely-used standards, the FASB is uniquely qualified to analyze and improve international standards. It has the benefit of its experience in the field and the fresh perspective of an outside party where the IFRS is concerned.
There are other important ways that the IFRS and FASB connect. One key factor is that because the FASB has comprehensive experience managing and developing a set of standards such as the IFRS, the group can more easily determine how to expand its reach. While the GAAP tends to be less rigid, it is generally the same overall structure. The ultimate goal is to continually determine which approach best suits the global style.
Merging the IFRS and GAAP standards was meant to address several issues. Overall it was a way to simplify the process of accounting by having one universally-accepted set of standards. It is also meant to adapt standards to the increasingly global economy. Though the primary purpose of merging the standards was to make them more functional globally, they have also been geared towards domestic use.
The partnership between the FASB and the IASB inspired many companies to make a transition to IFRS in order to begin the transition to a more global style of accounting. This change was primarily one of philosophy, as the GAAP is based on rules while the IFRS is more focused on principles. The structure of the latter leaves more room for interpretation. This can require the intervention of the board in order to clarify intent, so that the end result is a more restricted set of standards.
