As you know, FASB and IASB formally agreed in 2002 (the Norwalk Agreement) to work together to converge accounting standards by removing differences between GAAP and IFRS and to work jointly on new projects that result in common standards. This semester we have discussed various topics which began as joint FASB-IASB projects and ended with differences between the FASB and IASB proposed standards. An exception was the FASB-IASB work on
SFAC 8, Conceptual Framework for Financial Reporting, Chapters 1 and 3, The Objective of General-Purpose Financial Reporting and Qualitative Characteristics of Useful Financial Information. The International Accounting section of this course provided information on the status of IFRS in the United States and other countries.
Based upon the knowledge gained from this class, consider the following:
Under US GAAP, property, plant, and equipment are reported at historical cost net of accumulated depreciation. These assets are written down to fair value only if it is determined they have been impaired.
Other countries permit the revaluation of property, plant, and equipment to their fair value as of the balance sheet date. IAS 16 allows this under the “revaluation model.” The primary argument supporting revaluation is that the historical cost of assets purchased years ago is not meaningful.
The primary argument against revaluation is the lack of objectivity in determining fair value estimates, particularly for old assets that will not or cannot be replaced with similar assets or for which no comparable or similar assets are currently available to purchase.
Required:
Based upon the above information, create a clear and organized paper that answers the following questions and demonstrates your understanding of the issues (from the accounting perspective) involved in conducting business in a diverse, global environment.
1. Discuss the Fundamental Qualitative Characteristic of Relevance (SFAC 8, Chapter 3) as it pertains to the above treatments of property, plant, and equipment. In your opinion, would the amounts reported by US companies be more or less relevant than the fair value amounts reported by foreign companies?
2. Discuss the Fundamental Qualitative Characteristic of Faithful Representation (SFAC 8, Chapter 3) as it pertains to the above treatments of property, plant, and equipment. In your opinion, would the amounts reported by US companies be more or less faithfully representative than the fair value amounts reported by foreign companies?
3. Discuss the Enhancing Qualitative Characteristic of Comparability (SFAC 8, Chapter 3) as it pertains to the above treatments of property, plant, and equipment. In your opinion, would the financial statements of companies operating in the foreign countries be comparable to those of US companies?
4. Based on this example of FASB-IASB agreement on financial reporting concepts, but divergence in specific accounting methods (and your knowledge from this course), give your general conclusions regarding the impact of financial accounting and reporting issues on business conducted in a diverse, global environment.

As you know, FASB and IASB formally agreed in 2002 (the Norwalk Agr...