Ifrs Vs. Gaap Ifrs

The first benefit of the conversion is comparability. Switching to IFRS would allow people to see various companies from different parts of world on the same plane. As willingness to trade increases, cross-border investment and integration of capital markets are easier with greater market liquidity and lower cost of capital. Investor bases would increase as the financial reports are becoming comparable. With better information, companies would be able to more effectively allocate their capital. Having one standard, however, does not guarantee comparability. With the same standard, practices and enforcement can differ considerably across firms and countries.

Despite those enormous advantages, it has been argued that IFRSS adoption lead to significant costs. The main argument is that IFRSs do not consider local needs and priorities as every country has their own ‘business environment, legal systems, cultures, language and political environment’ (Henderson and Peirson, 2000 cited from Malthus, S., 2004). However, to overcome this problem, IASB can accommodate flexible reporting standards that enable companies to choose alternatives that are more suitable for their external condition. It is opinion of some opponents of IFRS adoption that IAS is ‘insufficiently detailed’ (Uddin,M.S., 2005, p.4) that require accountants’ and auditor’ professional judgment. However, overly detail might be contra productive and not flexible in anticipating every changes and differences.

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)

Access to capital markets in United Kingdom is easy after the adoption of IFRs. Public capital markets play an important role in financing the activities of non-financial companies in the United Kingdom, providing them with the main option to bank loans and private sources of finance. These set of international accounting standards helped reduce the information processing and auditing costs to the UK’s market participants. With the help of adoption of IFRS it is expected to lower information costs to capital markets, and the UK

From Willmore (2015) research, a few studies have shown IFRS convergence is a hot issue within the accounting discipline; many people in the accounting and business join in on this topic. Majority agrees that IFRS is a more principles-based approach opposed to U.S. GAAP, a more rules-based approach. A source even stated American

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

The primary concern of most accountants, CPAs, CEOs, CFOs, corporations, financial analysts and managers is the treatments of different accounts. If IFRS takes effect how will it affect the revenue recognition principles, accounting treatment for leases, accounts receivable, changes in estimates and extraordinary items, inventory accounts, schools, businesses, retraining of CPA and the list goes on.

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 GAAP/IFRS convergence will require U.S. corporations to rework their financial statement presentation. If GAAP principles were to be listed in a book, it would be nine inches thick. IFRS fits into a book only

Still in flux: Future of IFRS in U.S. remains unclear after SEC report. (n.d.). Retrieved January 16, 2015, from http://www.journalofaccountancy.com/Issues/2012/Sep/20126059.htm

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.

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

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

As a famous Bulgarian saying literally states - “change is a headache”. However, there definitely are crucial advantages of the IFRS. To begin with, on the whole the financial statements are of higher quality, more reliable, understandable, complete and objective. The use of IFRS implies a high degree of confidence in the provided information. Another thing is that there exists a comparison possibility of financial data between entities that have adopted the standards. Also users of financial statements that are not aware of the Bulgarian GAAP would safe time, effort and resources to interpret the information. This would enhance the communication and trust between Bulgarian and foreign companies and therefore boost international investments. Entrepreneurs seeking high returns in emerging economies would gladly consider Bulgarian markets as prospective targets. Moreover, large companies from the European Union planning to expand in developing economies of the new members will prefer to look at financial statements produced according to IFRS. When selecting a partner, merger or acquisition target they will consider safety, reliability etcetera, which are ensured by the new standards.

IFRS also assist investors in making informed financial decisions and predictions of entity’s future financial performance and give a signal of higher quality accounting and transparency. Therefore, IFRS would tend to reduce earnings manipulation, enhance stock market efficiency and positively impact on entity’s’ stock returns and stock related financial performance measures.