AIS 301 Case 1 Essay

642 Words Mar 26th, 2014 3 Pages
MEMORANDUM
To: George Bluth
From:
Subject: Reporting Financial Statement Under IFRS
Date: 09/30/2013
Introduction
Due to the forecasted high demand in the future, Gobias Industires, Inc. plans to report the company’s financial statements as soon as the next year. However, the argument is whether the company should report its financial statements consistent with the US Generally Accepted Accounting Principles (US GAAP) or the International Financial Reporting Standards (IFRS), when IFRS may be the reporting standard for US companies in the near future. I suggest Gobias Industries start reporting financial statements under both US GAPP and IFRS because the company is a U.S. based potential global firm.

What Are GAAP and IFRS
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4, ETB).

IFRS Will Attract International Investors
IFRS is the internationally accepted accounting principle. Thus, international investors appreciate to invest in companies report under IFRS. As forecasted, Gabias Industries will have an increased sale in Africa, Europe and Pacific areas, where IFRS are the main accounting standard (AICPA, 2013). Similar to American domestic investors, international investors have more confidence on financial reports that are familiar to them. Therefore, reporting financial statement under IFRS will attract international investors to invest in Gabias Industries.

Avoid Huge Transition Cost From GAAP to IFRS Implementing GAAP and IFRS will reduce huge transition cost that may occur in the future. Due to this difference between GAAP and IFRS, the transition cost from GAAP to IFRS is very high. If a company wants to change accounting reporting method, it must report the current year, pervious year or years depend on the situation and the first year started to report financial statements using the new-implemented method (Kieso Et al., Chap. 5, ETB). It cost a lot for the company to do so.
The U.S. Is Moving Toward IFRS
The U.S is moving toward IFRS (Forgeas, 2008). In the near future, all US company may need to report financial statements under IFRS. This makes the adaptation of IFRS unavoidable. Recently, some large multinational

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