Essay On IFRS

Discuss the move by the SEC towards using international accounting standards (IAS). Do you believe that the use of IASs will make it easier for investors in a global economy, or do you think the SEC is abdicating our national sovereignty to foreign regulators?

SEC will not require American companies follow IFRS at least until 2015. If they follow IFRS, accounting could become simpler and more flexible since the guidance of IFRS. (Frye, 2009) The foundation of IASB and the time of responses is questioned by a report from SEC. It also address it will be costly if American public companies adopt IFRS. (Rehm, 2011)

In 1973 the Financial Accounting Standards Board (FASB) was established to set the financial accounting standards in the United States of America for nongovernmental entities. These standards are collectively called U.S. Generally accepted Accounting Principles, or U.S. GAAP. The Securities and Exchange Commission (SEC) and the American Institute of Certified Public Accountants acknowledge the authority of these standards (FASB, n.d). A “proven, independent due process” is used to collect the viewpoints of the financial statements prepares and users for the constant improvement of these standards. An Accounting Status Update(ASU) is not an authoritative source however documents the amendments to communicate the changes in the FASB Codification for a user to understand the reason and future of those changes (FASB, n.d).

The IOSCO plan does not cover accounting standards.(66) These standards are important for providing financial statements in a scheme that are prepared in the similar manner as those by issuers from other countries. The development of international accounting standards is the subject of a distinct project by IOSCO, and many accounting professionals who are concomitant with that undertaking are hopeful that a satisfactory solution is within reach.(67) Supposing, however, that an agreement is possible on a core set of financial standards and that they too are embraced by securities regulators as compulsory for foreign issuers, the road to commonality has at least two other impediments.

In 1973, the Financial Accounting Standards Board (FASB) was created and their mission is “to establish and improve standards of financial accounting and reporting for the guidance and education of the public, including issuers, auditors, and users of financial information.” (FASB.org, 2009a). The FASB is a private, not-for-profit organization whose primary purpose is to develop generally accepted accounting principles (GAAP) within the United States. The Securities and Exchange Commission (SEC) designated the FASB as the organization responsible for setting accounting standards for public companies in the U.S. Therefore, the FASB plays a vital and important role in protecting the financial well being and the overall stability of our

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

As stated earlier, the IASB arose from specific needs of the accounting industry and the public. As international trade has increased, the need for transnational accounting information has increased as well. This sparked the demand for development of international accounting standards to make financial data between countries more comparable. In 1973, the International Accounting Standards Committee (IASC) was formed to develop these international standards. The standards issued by the IASC, prior to 2001, were called International Accounting Standards (IASs). In 2001, the IASC made the International Accounting Standards Board (IASB) the official international standard-setting body. The standards issued by the IASB are called International Financial Reporting Standards (IFRSs) (Schroeder, Clark, & Cathey, 2011, p. 82-87).

A joint convergence committee created the members of (FASB) and (IASB). (IASB) is recognized as an independent accounting standard-setting body that is similar to (FASB) that joins (GAAP), and is governed by the (IFRS) foundation. Due to this convergence, (AICPA) believes U.S. adoption of a single set of high-quality, globally accepted accounting standards will benefit U.S. financial markets and public companies by enabling preparation of transparent and comparable financial reports throughout the world, (American Institute of CPAs, 2016). Secondly, (AICPA) is dedicated to supplying the whole accounting profession with information, tools and IFRS.com for instance to assimilate as well as implement a new set of standards. As the (AICPA) supports continual convergence of reliable accounting standards between (IFRS) and (GAAP) the mission of completion between (IASB) and (FASB) is prolonged. (AICPA) will always support funding mechanisms of the body-making

With the growth of international business there is a need to standardize financial statements globally. Presently there are “approximately 120 foreign private issuers currently that report to the Commission using IFRS financial statements.” By standardizing accounting practices investors will be able to make informed decisions based on comparability and accuracy of financial statements. The SEC released this statement in 2008, “We believe that IFRS has the potential to best provide the common platform on which companies can report and investors can compare financial information.” The SEC has created a “Roadmap” or plan to convert US GAAP over to IFRS. According to The Committee of

The FASB-IASB convergence project sought to merge U.S. GAAP with IFRS in a way that would combine the best of both standards to make financial reporting easier in a world that grows smaller each day. To say that the project was challenging would be a gross understatement; convergence faced many setbacks that arose out of disagreements about the best way to represent information for a vast set of users. One reason why disagreements arose is because the process for accounting standard-setting is considerably political. When a diverse group of people argues for the interests of massive groups of other very different people, each with their own competing interests, complications are bound to occur. Everyone brings their own issues to the table,

The boards disagree on the reasons as to why the project failed. As Hans Hoogervorst, chairman of the IASB explains, “two independent boards with different imperatives have a nasty habit of reaching different conclusions”. He isn’t the only one that lost the ability to see the point in the convergence project. According to Christopher Cox, former chairman of the SEC, the IASB killed the convergence effort because they “[had] a lack of interest in accounting convergence on the part of U.S. investors and corporations”. Cox also said that “on the few occasions when IASB members did appear at U.S. roundtables and meetings, they seemed aloof. They simply weren’t accustomed to the more relaxed and supple interactions that FASB has [had] with

The SEC has several aspects to consider when it comes to the adoption of IFRS in the United States. First, the SEC should consider the overall costs impact this will have on businesses. It is likely that it would cost billions of dollars in new reporting expenses for U.S corporations to implement IFRS. It would also require accounting firms to vastly change their education requirements. Second, the SEC’s main job is to protect investors from fraud on public exchanges. The commission must determine whether IFRS does a better job of protecting investors from unlawful activity.

On February 24, the SEC unanimously agreed to publish a statement of continued support for a single set of high-quality global accounting standards. The SEC acknowledged that IFRS is best positioned to be the global standard. Even without a set conversion timeline from the SEC, IFRS has been affecting

Another challenge convergence faces is the fact that under IFRS, there are little industry-specific standards, which has led many commentators to voice “concerns about how IFRS would impact their particular industry” (AICPA, 2009). Other critics have voiced concerns regarding the uncertainty surrounding funding for the IASB as it’s “largely funded through voluntary contributions from a wide variety of participants across the world’s capital markets. The concern with that model is that it leaves the IASB open to the perception that organizations that provide funding could try to influence the accounting standards” (SIAC, 2012). This observation questions whether there is true independence of the IASB and the integrity of its standard-setting process.

IFRS addresses practical application issues that any entity is supposed and expected to encounter within the standards. These practical issues provide a comprehensive analysis. For instance, IFRS 1 provides extensive guidelines “…and addresses practical application issues that a first-time adopter of IFRSs could expect to encounter when transitioning to IFRSs”. (KPMG, 2009). The IFRS, being principle-based, generally do not contradict with Generally Accepted