Financial Reporting for the U.S. Changes from GAAP to FRS

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The government of USA, through the IFRS revised the reporting standards in the USA from the GAAP to FRS. This replaces the all accounting reporting standards of the GAAP with the provisions of the three classes of IFRS. This will have a significant impact on financial reporting in USA. There are both negative and positive effects of the new policy.
One of the positive effects that will be realized from the new policy is the treatment of off balance sheet derivatives. According to the new FRS, derivatives will be recognized on balance sheet at fair value with changes in profit and loss (IFRS, 2014).
Even though this change will cause an increase in the volatility of profit and loss, it is likely to reduce risky investments in derivatives and increase accountability among managers and accountants. Treating some derivatives as off-balance sheet derivatives has in the past caused some managers and accountants not to display some derivative trading activities, especially if they are faced with high speculative risks. Highly risky investments cause a business to collapse. One example of a failed company due to risky investments is Barings Bank which collapsed due to highly risky derivative trading. The company’s manager of the Singapore branch engaged in highly risky derivative trading and kept them off balance sheet, and manipulating the accounts to show positive profits (Reserve Bank of Australia, 1995). However, the reality was that the company was making losses. The company

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