Latin American Capital Markets

220 PIETRO MA5CI AND IVAN SOTOMAYORUnited States, International, and National Accounting Standardsand PrinciplesFASB and the International Accounting Standards Board (IASB) are the prominentstandard-setting bodies. 6 Developments over the past few years show that, while eachof the standard-setting bodies intends to preserve the validity of its choices, FASB andIASB are working together to resolve differences in standards and provide the globalbusiness community with a common language.In appearance, U.S. GAAP and IAS are similar, thanks to the efforts of the respectivestandard-setting bodies in eliminating differences. In reality, once the standardsare applied within the context of national customs and policies, substantial differencesremain. However; the IASB constitution envisions a partnership betweenIASB and national bodies working together to achieve the convergence of accountingstandards worldwide.The convergence between U.S. GAAP and IAS continues tomove at an accelerated pace, with FASB and IASB working in concert. For instance,it is becoming customary that when IASB decides to review a particular practice onits agenda, FASB immediately does the same.FASB's objective for participating in international activities is to increase internationalcomparability and the quality of standards used in the United States. FASBpursues that objective in cooperation with national standard setters and in particularwith IASB. FASB believes that the ideal outcome of cooperative international accountingstandard-setting efforts would be the worldwide use of a single set of highqualityaccounting standards for both domestic and cross-border financial reporting(FASB 1998). While U.S. GAAP and IAS represent the main contenders, many emergingand nonemerging markets have their own solid accounting systems ruled by an independentbody that follows the so-called local or national GAAP6 FASB is a private, independent, nonprofit body, based in Connecticut, led by members of the accounting professionand industry, responsible for establishing and interpreting general accounting principles.The mission of FASB is to establishand improve standards of financial accounting and reporting for the guidance and education of the public, includingissuers, auditors, and users of financial information. Accounting standards are critical to the free enterprise system,the depth and liquidity of capital markets, and their efficiency. The information that results when the standardsare applied is used to help allocate scarce capital resources and to provide a basis of corporate accountability. FASBwas formed in 1973.IASB is an independent, privately funded accounting standard setter based in London. IASB members come fromnine countries and have a variety of functional backgrounds. IASB is committed to developing, in the public interest,a single set of high-quality, understandable, and enforceable global accounting standards that require transparent andcomparable information in general-purpose financial statements. IASB cooperates with national accounting standardsetters to achieve convergence in accounting standards around the world. It was founded in 2001.Copyright © by the Inter-American Development Bank. All rights reserved.For more information visit our website: www.iadb.org/pub