The Norwalk Agreement of 2002, also known as the Norwalk Agreement on Financial Reporting, is an important agreement between the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) in the United States. This agreement was reached in Norwalk, Connecticut in 2002 and aimed to address the differences in accounting standards between the two countries.
Prior to the agreement, the IASB and FASB had developed their own accounting standards separately, resulting in inconsistencies between the two sets of standards. This created challenges for companies operating in both countries, as they were required to comply with different accounting rules. Furthermore, investors who invested in companies that followed different accounting standards found it difficult to compare financial statements.
The Norwalk Agreement was an important step towards harmonizing accounting standards between the two countries. Under the agreement, the IASB and FASB committed to converging their accounting standards over time. The goal was to create a single set of high-quality global accounting standards that would be used by companies around the world.
One of the most notable achievements of the Norwalk Agreement was the development of the International Financial Reporting Standards (IFRS). These standards are now used by more than 100 countries, including many of the world`s major economies. In the United States, however, the adoption of IFRS has been slower, with the Securities and Exchange Commission (SEC) choosing to delay making a decision on the matter.
Despite some challenges and setbacks in the implementation of the Norwalk Agreement, it remains an important milestone in the history of global accounting standards. By encouraging convergence and harmonization of accounting standards, the agreement has helped to improve the comparability and transparency of financial reporting around the world. It has also helped to reduce the costs and complexities associated with complying with different accounting rules in different countries.
In conclusion, the Norwalk Agreement of 2002 was a significant agreement between the IASB and FASB. It aimed to address inconsistencies in accounting standards between the United States and other countries by encouraging convergence and harmonization of these standards. While the adoption of IFRS in the United States has been slower than in other countries, the agreement remains an important milestone in the development of global accounting standards and the promotion of transparency and comparability in financial reporting.