The Norwalk Agreement between the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) marked a significant milestone in the global convergence of financial reporting standards.

In essence, the Norwalk Agreement was signed in 2002 to provide a framework for the two boards to work together towards the development of a single set of high-quality global accounting standards. The agreement aimed to reduce the differences between the US Generally Accepted Accounting Principles (GAAP) and the International Financial Reporting Standards (IFRS).

The focus of the Norwalk Agreement was to promote international harmonization and standardization in financial reporting. It recognized that the growing globalization of markets and businesses necessitated a common set of accounting standards that could be applied consistently across different jurisdictions and industries.

In practice, the Norwalk Agreement led to a series of joint projects between the IASB and FASB aimed at improving the alignment of their respective standards. These projects included the convergence of standards related to revenue recognition, financial instruments, and leasing.

One of the key outcomes of the Norwalk Agreement was the development of the Memorandum of Understanding (MoU) in 2006. The MoU outlined a plan for achieving convergence between US GAAP and IFRS by 2011, which included a commitment to regular communication and collaboration between the two boards.

While the convergence of US GAAP and IFRS was not fully realized by the target date, the Norwalk Agreement and subsequent initiatives have had a significant impact on the global harmonization of financial reporting standards. Today, many countries around the world have adopted IFRS as their national accounting standards, and the momentum towards global convergence continues.

In conclusion, the Norwalk Agreement was a landmark moment in the development of a single set of high-quality global accounting standards. Its focus on promoting international harmonization and standardization has led to significant progress in aligning the financial reporting standards of different jurisdictions and industries.