Essay: Differences in Financial Standards

Sample Essay

There are several differences in financial standards outlined by FASB and IASB which include initial recognition of financial transactions, measurement and valuation approaches, choice between alternative procedures and processes, stringency of certain rules in one standard and flexibility in the other. The two differences discussed here relate to measurement and valuation approaches and selection between alternative methods.

The two boards outline different valuation methods for several accounting procedures such as inventory valuation and depreciation. The IASB has banned the use of last in first out method of inventory valuation whereas this method is still applicable in companies who prepare financial statements under FASB (Epstein, Nach, & Bragg, 2007).  The recognition of assets and liabilities at fair values is applied by both IASB and FASB but there are several differences in measurement of these fair values. IASB implies fair values on a much broader scale which not only covers financial assets but nonfinancial assets as well. Fair values in FASB on the other hand are more focused on financial assets. The two boards also differ in presenting a guideline for implementation of fair values in various industries such as manufacturing, retailing and service industry.

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