A Brief Note On International Financial Reporting Standards

1078 WordsFeb 27, 20175 Pages
International Financial Reporting Standards BA 321 Christopher McGee February 26, 2017 Introduction In the world of business, there are many aspects that go into making a company run smoothly. One of the main departments of every company is the accounting department. Accounting is all about keeping up with the financial records. The accountant can’t just keep up with the records whatever they choose; there are standards that have to be followed. The standards such as how to document, how to measure and recognize transactions for their financial statements, help potential investors see how their company is performing. In the United States those standards are called Generally Accepted Accounting…show more content…
The IFRS operates in many parts of the world already, such as the European Union, and many countries in Asia and South America. Similarities and Differences with GAAP Some people in 2005 examined a sample of European Union firms that voluntarily adopted the international accounting standards as well as the United States Generally Accepted Accounting Principles. They examined whether the firms who adopted the practices had lower levels of information asymmetry, a much cited benefit of using more transparent financial reporting, than non-adopters. The examiners also studied the three proxies for information asymmetry: analyst following cost of equity, capital, and uncertainty among analysts and investors. They documented a positive effect of international accounting standards and the U.S generally accepted accounting principles adoption (Li Li, 2014). This research shows that there are some similarities between the two standards. The frameworks for both methods are similar in the way certain objectives of accounting practices are the closely related. Both methods use an income statement, balance sheet, and statement of cash flows. Accrual-base accounting is also used by both standards as a way to prepare their financial statements. Meaning they record revenues and expenses when it is incurred (Maz, 2016) Differences The major difference between the two standards is the IFRS uses principle-based
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