In early 2002 a project was launched by the two standard-setting organizations IFRS (IASB) and US GAAP (FASB) with the purpose of introducing a single accounting standard, for recognising revenue across industries, as well as national borders. This convergence project between IASB and FASB is intended to eliminate earlier standards for revenue recognition, and replacing the IASB standards, IAS 11 – Construction Contracts and IAS 18 – Revenue as well as a large amount of FASB standards. The function of the new standard is: 1. Eliminate weaknesses and inconsistencies in the current standards. 2. Deliver a more fixed framework regarding turnover. 3. Improve the basis of comparison across companies, industries, national borders and markets. 4. Providing further useful information to recipients of financial reports by heightening the disclosure requirements. 5. Simplifying the preparation of financial reporting by reducing the requirements to the companies. The primary weakness of the existing IAS-standards is a lack of consistency internally, and towards the conceptual framework, but also a lack of guidelines for the use of the standards. The lack of guidelines is particularly visible in relations to complex sales transactions that composite contracts often entail. The lack of consistency is obvious in the standards where IAS 18 incorporates a calculating method, which is not in line with the conceptual framework. When reviewing the new standard it is apparent that a significant amount of flaws and weaknesses in the old accounting standards, have been identified and recognized by the issuing board. There is now a clear red thread, and the basic guidelines have been improved. Most weaknesses have been eliminated, but in certain cases new ones have taken their place. The extended process time also proves that the developers have tried to purge as many flaws as possible before the final implementation. There are many considerations to include; among these that the comparison basis must be strengthened, inconsistencies uncovered, expenses for analysis must be reduced, and so on and so forth. Despite the attempt to meet and counter all problem areas it is impossible to avoid every practical issue when implementing such a vastly reaching accounting standard, which entails not only an alteration in work routines but also a change in the basic way of thinking. The latest update from IASB indicates that the convergence project is close to being finished, and that the finalization-process will commence in September, resulting in the first new global and integrated possibly being approved in the spring of 2013. This is a major and groundbreaking step in global cooperation, which may have a significant impact on future financial and work-markets.
|Educations||MSc in Auditing, (Graduate Programme) Final Thesis|
|Number of pages||134|