1
What agreement officially began the FASB-IASB convergence project in 2002?
The Norwalk Agreement
Which accounting standard was considered more rules-based before convergence?
US GAAP
What was the main goal of the convergence project?
To align US GAAP and IFRS and make both more principles-based
Which two accounting standard-setters led the convergence project?
The FASB and the IASB
What are the two main global accounting standards discussed in the study?
US GAAP and IFRS
What law increased demand for principles-based standards after early 2000s accounting scandals?
The Sarbanes–Oxley Act of 2002
Which U.S. organization was required to study the adoption of a principles-based system?
The Securities and Exchange Commission (SEC).
After the convergence project, which accounting system became more rules-based?
IFRS
In what year did the formal convergence project end?
2012
What type of guidance causes a higher RBC score when it's excessive?
Interpretive guidance
What is a bright-line threshold in accounting standards?
A specific numeric rule that defines how a standard applies
What is the “conceptual framework” in accounting?
A guide that explains the basic ideas and goals behind accounting rules
What method did the researchers use to make sure their PBC score worked well?
They used a type of test called factor analysis to see if the parts of the score measured the same thing
What does “accounting choice” mean in the PBC score?
It means how many different options a company has for how to report something
What do the authors call the time after the official convergence ended, from 2013 to 2016?
The informal convergence period
What new score did the authors create to measure how flexible a rule is?
The Principles-Based Continuum (PBC) score
Why does US GAAP usually have more detailed rules?
Because companies in the U.S. are more likely to get sued and want clearer rules to follow.
What happened to GAAP and IFRS after the convergence project?
They both started using more flexible, principles-based rules
Why did US GAAP stop adding so many strict rules during convergence?
Because the goal of convergence was to make standards more flexible
Why did IFRS start using more specific rules during convergence?
To make it easier for the U.S. to agree to use IFRS
What is the highest and lowest score a rule can get on the RBC scale?
The score can be between 0 and 4
What does the “examples” part of the PBC score count?
How many sample situations or illustrations are included in a rule
What did the study find about IFRS rules that were part of the convergence project?
They became more detailed and strict than other IFRS rules
What was an unexpected result of the convergence project for IFRS?
IFRS became more rules-based, even though that wasn’t the plan
Why can’t the authors say for sure that convergence caused the changes they found?
Because other things may have also affected the results at the same time.