In the Norwalk Agreement, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) pledged to work together to improve financial reporting practices globally. The agreement, which was reached in 2002, marked a significant milestone in the history of accounting standards convergence.
The Norwalk Agreement was seen as a critical step towards the development of a single set of global accounting standards. Prior to this agreement, the FASB and the IASB had been working together to reduce the differences between their respective standards. However, the Norwalk Agreement formalized this collaboration and set new goals for the two organizations.
One of the primary goals of the Norwalk Agreement was to develop high-quality, transparent, and comparable accounting standards that could be used by companies globally. The FASB and the IASB recognized that global capital markets required consistency and clarity in financial reporting, and that this could only be achieved through the development of a shared set of standards.
To achieve this goal, the FASB and the IASB committed to several initiatives. These included the joint development of new accounting standards, the convergence of existing standards, and the promotion of the adoption of high-quality standards globally.
Since the Norwalk Agreement was signed, the FASB and the IASB have made significant progress towards the convergence of their respective standards. The two organizations have worked together to develop several joint standards, including those related to revenue recognition, leasing, and financial instruments.
The Norwalk Agreement has also led to increased adoption of IFRS (International Financial Reporting Standards) around the world. Today, more than 120 countries require or permit the use of IFRS, and this number continues to grow.
In conclusion, the Norwalk Agreement was a significant milestone in the development of global accounting standards. The FASB and the IASB`s commitment to work together towards the convergence of their respective standards has led to increased transparency, comparability, and consistency in financial reporting. As the world continues to become more interconnected, the importance of high-quality, global accounting standards cannot be overstated.