Financial Reporting And International Accounting Standards Essay

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Financial reporting is a branch of accounting which involves presenting the financial information of a company to the stakeholders so that they can be in a position to evaluate its financial performance and make an informed decision based on the information. There are two general sets of standards governing financial reporting in the major economies across the world. They include the International Financial Reporting Standards (IFRS) regulated by the International Accounting Standards Board (IASB) and the United States Generally Accepted Accounting Principles (US GAAP) governed by the Financial Accounting Standards Board (FASB). The following academic paper seeks to analyze the debate that has been ongoing on whether the US limited companies should adopt the use of IFRS in their financial reporting as proposed by the Securities and Exchange Commission (SEC) in August 2008.

Accounting standards are guidelines for valuing and reporting every item in the financial statements. US GAAP is a rules-based accounting framework. This type of framework follows a strict set of rules that are to be followed when accountants are preparing financial statements. IFRS are principle-based standards which provide a framework for decision making rather than provide specific guidelines as the US GAAP. It is not clear on the possibility of the IFRS evolving into rules-based standards until they are thoroughly scrutinized by both practitioners and the judicial system. IASB

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