GAAP vs IASB
With increase in international trade and also the size of companies operating in a number of countries, it became imperative for the world to have a uniform accounting standard applicable on all countries. This initiative was taken by International Accounting Standard Board (IASB) to set a framework of guidelines, known as GAAP, or Generally Acceptable Accounting Principles, that were to be followed by different countries of the world to bring about standardization in accounting procedures and the way parameters were reported in financial statements of companies. Let us take a closer look at IASB and GAAP.
It is an independent, private body that is engaged in setting standards for accounting principles applicable upon all countries of the world. It is based in England. IASB came into existence in 2001 replacing IFRS, and in the last 10 years has done much to promote uniform accounting standard in many parts of the world. The operations of IASB, which is made up of a board with 16 members, are funded by banks and other institutions that have interest in promoting uniform accounting standards worldwide.
Generally Accepted Accounting Principles, or GAAP as they are popularly known all over the world are set of guidelines issued by IASB, from time to time, to maintain a standard of accounting that is transparent and uniform across the world. The need to harmonize accounting principles arose mainly because every country had its own standards when it came to reporting and recording financial transactions by accountants of companies. This was because of cross cultural differences as well as accounting traditions peculiar to a country. With companies becoming multinational, uniform accounting standards became all the more necessary to let potential investors compare the performance of a company operating in different countries.
Because of vast differences in accounting principles of various countries, IASB has admitted that to impose GAAP successfully in all parts of the world is a Herculean task that will take years and a final solution will emerge only slowly and with tacit approval of member countries.
Difference Between GAAP and IASB
IASB is the private body that has been trying to bring about uniformity in accounting principles in different countries of the world whereas GAAP is a set of guidelines that IASB wishes countries to adopt as standard accounting principles.