Ifrs Compared to Us Gaap

The United States is currently going through a big decision. It is deciding on whether to fully adopt International Financial Reporting Standards (IFRS), or to stay with the current U.S Generally Accepted Accounting Principles (GAAP). Since this is such a major decision, now would be an opportune time to take a look at what the pros and cons would be of switching to this new way of financial reporting, and in doing so, show why I believe the costs (both financial and otherwise) are too high to adopt a new set of reporting standards.

2007/2008 Edition This PricewaterhouseCoopers publication is for those who wish to gain a broad understanding of the key similarities and differences between IFRS, US GAAP and Swiss GAAP FER. No summary publication can do justice to the many differences of detail that exist between IFRS, US GAAP and Swiss GAAP FER. Even if the guidance is similar, there can be differences in the detailed application, which could have a material impact on the financial statements. It needs to be stressed that this brochure deals with the main differences only. Many more pages would be needed to be

The five research articles I have chosen to further my research on the convergence between U.S. GAAP and IFRS are The Implication of US GAAP and IFRS Convergence on American Business by Austin Willmore (2015), IFRS adoption by country by PWC (2015), International Financial Reporting Standards and American Generally Accepted Accounting Principles: the Convergence Lessons by Kuzina (2015), The economic impact of IFRS - a financial analysis perspective by Seay (2014), and Accounting for Leases The New Standard by CPA Journal (2016). These articles are related to my topic, where these researchers researched and analyzed the financial statement reporting on convergence of the U.S. Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS), and certain accounts when adopting IFRS present a different result in the financial reporting for U.S. reporting companies when U.S. GAAP standards combined with IFRS. Also, these research articles discuss the existence of two systems of standards, U.S. GAAP and IFRS; and the issue and difficulty of the process to fully converge.

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

Fischer, M., & Marsh, T. (2012). ACCOUNTING AND REPORTING CONVERGENCE. International Journal Of The Academic Business World, 6(1), 1-10.

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

Since 2002, Financial Accounting Standards Board (FASB) and International Accounting Standards Board’s (IASB) have been working toward “convergence” of US General Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS). They have made significant progress in efforts to converge critical accounting standards such as those dealing with revenue recognition, financial instruments and leases. Once these projects are complete, the "era" of convergence will be at an end. Nevertheless, the benefits for investors of eventually getting to consistently applied, high-quality, globally accepted accounting

Deloitte Touche Tohmatsu (2008). IFRS and U.S. GAAP A Pocket Comparison. Retrieved on November 7, 2011 from: http://www.iasplus.com/dttpubs/0809ifrsusgaap.pdf

The IFRS are described like founded on principles, which means that they leave a big freedom of action to the companies about the evaluation of the accounting data. The US GAAP are described like founded on rules and they aim to regulate all the possible aspects of the presentation of the accounts. These standards thus require very detailed information on behalf of the companies. In the case of convergence between IASB and FASB, the harmonization of the IFRS and US GAAP is currently working and common solutions have already been found. That do not prevent from the divergence of several points of view, among the principal aspects to be solved one we think about the financial instruments and the presentation of the performances.

A congruent between International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP) is that both specification tend to use a statement of cash flows, income statement and a balance sheet (Nadel, 2010). When confronting cash equivalents and cash, both approaches are essentially similar in characteristic. Furthermore, the leading reciprocal is that both IFRS and GAAP assist in producing financial statements on an accrued basis; generally meaning that revenue is often recognized once it is realized (Nadel, 2010). In the course of time this will assist in a complete merger of both accounting principles in the near future; eventually a merger will assist with the differences associated with both IFRS and GAAP allowing for certain principles to be removed or restructured.

recognition requirements in U.S. GAAP are different from those in IFRSs and both are considered in need of improvement. U.S. GAAP comprises broad revenue recognition concepts and numerous industry or transaction-specific requirements that can result in different accounting for economically similar transactions. Although, IFRSs contain less guidance on revenue recognition, its two main standards IAS 18 Revenue and IAS 11 Construction Contracts can be difficult to understand and apply beyond simple transactions. Also, they lack guidance on important topics such as revenue recognition for multiple-element arrangements.

IASB. 2010, "The Conceptual Framework for Financial Reporting" IFRS, pp. A21- A38, viewed 23 April 2014,

The country selected for this study is the United Kingdom (UK). UK Generally Accepted Accounting Practice (GAAP) has been in place for a long period of time and was harmonized in 2005 so as to comply with the international accounting standards. The UK embraced the principles of the International Financial Reporting Standards (IFRS) in 2005 after the European Union (EU) mandated that all members that were publicly listed companies be subject to reporting under the International Accounting Standards (IAS). This was to help facilitate that those listed companies could easily be compared to onr other on their performance and transparency was improved since they were now subject to the same principles of reporting. Companies in the United

Chris Gilmore has been given the task to convert the financial reportings of Ruckmac Inc from the generally accepted accounting principles of the United States (GAAP) into the internationally accounting standards (IFRS). They share the many similarities, including the same framework and goal, however they both require different techniques and have different regulations and allowances to attain this goal. In general, GAAP utilizes a rule based approach, its straight forward in exactly what is allowed and what is taboo. This fits mirrors a low context culture, such as the United States, where communication is concrete. On the other hand, IFRS leaves more room for interpretation and is a little more open ended. This is befitting of high context cultures such as China, where communication is more abstract, like IFRS.

Blanchette Michel et al. (2012) talk about the inherent difference between national GAAP and IFRSs and analyzed its impact on financial statements. Similarly, Iatridis G., (2010) also mentions the difference between IFRSs and UK GAAP and analyzed impact of IFRSs convergence on the financial statements of companies in UK.