Harmonization of International Accounting Standards: Advantages & Disadvantages, Obstacles & Solutions

Globalization has been changing the world. It has interconnected people, nations, and even businesses. Today´s business can share information to investors around the world thanks to the intelligent software of the actual society. Being more specific, the way in which investors and users evaluate businesses performance is through the information contemplated in their financial statements. These financial statements illustrate the current assets, liabilities, and stockholder equity a company has in order to help users take economic decisions. However, not all the companies are regulated to provide the same structuralized information around the world. Each country possesses its own accounting standard that regulates the preparation of financial statements of a company. In that way, companies’ information might differ between countries making the comparability between financial statements difficult to be implemented by users in order to assess the performance of foreign businesses. In view of the need of a globally accepted accounting standard that promotes uniform standards for worldwide financial reporting, the International Accounting Standards Committee (IASC), which then becomes replaced by the International Accounting Standard Board in 2001, was created (Cathey and Schroeder 130). The IASB issues International Financial Reporting Standards (IFRS) that stands as the set of accounting standards that prepare and present the financial

Fosbre, Anne, Ellen M. Kraft, and Paul B. Fosbre. "The Globalization of Accounting Standards: IFRS Versus US GAAP." Global Journal of Business Research. 3.1 (2009): 61-70. Web. 27 Mar. 2012.

It has been argued over years that Convergence of financial reporting is possibly one of the most important and controversial topics in accounting and corporate governance across countries, of which I could not wholly agree them. The Issue of the convergence of the National Accounting Standards with International Financial Reporting Standards (IFRS) among policy makers, standard setters, regulators, professional bodies, and companies worldwide has peaked up and widely been discussed lately. (Yu Chen & Zabihollah R 2012)

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.

Fosbre, A. B., Kraft, E. M., & Fosbre, P. B. (2009). THE GLOBALIZATION OF ACCOUNTING STANDARDS: IFRS VERSUS US GAAP. Global Journal Of Business Research (GJBR

This research project will inform the reader of the difference between the United States accounting standards and International accounting standards. The United States uses the Financial Accounting Standards Board (FASB) to issue financial reporting procedures. The International Financial Reporting Standards (IFRS) are issued by the International Accounting Standards Board (IASB). There are proposals for the United States to adopt the International standards. Financial reporting procedures are debated about the United States using the Generally Accepted Accounting Procedures (GAAP) or following the global procedures. This

‘There has been a worldwide demand from regulators, investors, businesses, and auditing firms for a single set of high-quality, globally-accepted accounting standards. The American Institute of CPA’s (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” (aicpa.org).

There is no universal GAAP standard and the specific vary from one geographic location or industry to another. In the United States, the Securities and Exchange Commission (SEC) mandates that financial reports adhere to GAAP requirements. The financial accounting standards Board (FASB) stipulates GAAP overall and the Governmental accounting standards Board (GAAP) stipulates GAAP for state and local government. Publicly traded companies must comply with both SEC and GAAP requirements. In recent years it also has had the chance to look at the United States Generally Accepted Accounting Principles (GAAP) and modify the rules to enhance clarity and consistency, intentionally setting itself apart from U.S. GAAP. The convergence of these two accounting frameworks is a must for both foreign and domestic businesses. The International Financial Reporting Standards (IFRS) is the accounting framework used by the European Union, Japan, Canada, and other world economic leaders. Companies need an accurate and reliable financial accounting systems not matter if globally or in the United

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

Although the International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP) have a lot of similar guidelines and expectations, they also differ in many ways. The IFRS employs more of a “principles based” accounting standards whereas GAAP utilizes more of a “rules based” approach. Even though there are differences between terminology, revenue recognition, gains and/or losses, and statement presentation, both standards do follow the same conceptual guidelines. With the Sarbanes-Oxley Act (SOX) of 2002, the standards expected of foreign countries are significantly less than those that reside as publically

Over a decade ago, it was believed that the whole world would likely adopt the Generally Accepted Accounting Principles (GAAP). At the point in time, the International Financial reporting Standards (IFRS) was only about ten years old. In the last decade, the IFRS has been adopted in many growing countries. Currently, it is anticipated that the U.S. will converge its GAAP with the international IFRS, leaving behind only a modified IFRS. This may occur as early as 2014.

For nearly half a century, a movement has been underway to establish a high-quality, comprehensive set of international accounting standards, with the goal of facilitating international trade and investment. In the global capital market, differences in the rules of accounting for the purposes of recognition, measurement, and reporting of financial results have impaired the smooth transfer of information across borders. Given that it accounts for nearly a third of the global market, there is considerable pressure for the United States to conform to the International Financial Reporting Standards (IFRS), as promulgated by the International Accounting Standards Board (IASB). While moving to a single set of accounting standards could create

There are two sets of accounting standards that are used worldwide. One is the International Financial Reporting Standards (IFRS) and the U.S. Generally Accepted Accounting Principles (GAAP). There is a huge desire for there to one set of accounting standards worldwide with the increase of companies performing business in many different countries and global expansion.

International comparability of financial statements attracts capital from foreign investors and reduces the barriers to cross-border capital flows. When international accounting standard replace domestic accounting standard, corporate discourse is reduced. This enables investors to monitor managerial performance better because information asymmetry is reduced. IFRS adoption made it easier for companies in U.K to access the capital markets (Lee, 2008).

This paper examined the relationship between U.S. Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS) and found that merging both accounting standards into one “worldwide” standard would be ideal for all investors. This paper analyzed GAAP and IFRS differences and similarities. A comparison and contrast of GAAP and IFRS was conducted. Discuss roadblocks to achieve “worldwide” accounting standards. GAAP and IFRS have to