For years, IASB and FASB have been working diligently on convergence with IFRS. Different countries develop their own accounting standards based on their unique rules, principles, business base, and tax; however, with globalization it’s very important to reconcile between different accounting standards. Two major standards are the US GAAP and IFRS, and they share many differences and similarities. One of the main differences is the conceptual approach and framework, IFRS is principle based whilst US GAAP is rule based (Forgeas, 2008). When comparing IFRS and US GAAP, we can discover many differences in several areas. Based on note 27 of Swisscom’s consolidated financial statements, today we are going to reconcile and restate its financial statements based on capitalization of interest cost, restructuring charges, depreciation expense, capitalization of software, and restructuring charges of affiliates. Debit Credit Property, plant and equipment $ 54.00 Depreciation and amortization $ 5.00 Interest expense $ 13.00 Retained earnings $ 46.00 First, let’s look at capitalization on interest cost. Note 27 states that under US GAAP, Swisscom would have capitalized CHF 13 million and amortized 5 million for current year. Based on this information, we can make an adjustment entry to debit 54 million property, plant and equipment; 5 million to depreciation and amortization. On the other hand, credit interest expense of 13
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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
In September 2002 the IASB and the FASB agreed to work together, in consultation with other national and regional bodies, to remove the differences between international standards and US GAAP. (Dorata, 2008) However, the convergence of IFRS and FASB is coming to the end. (Golden, 2013)
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.
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
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
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.
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.
A contingent liability is an obligation that has a probability of occurring in the future. These items will not be included in financial statements, but should be disclosed within the notes. For example, imagine an oil company that was involved in an accidental oil spill in the Mississippi River. An example of a contingent liability would be potential fines imposed by the Union for environmental violations. The company may not know the extent of the fines yet, but they
This paper will also analyse the various studies to identify whether firms have changed since the conversion to IFRS from GAAP. Furthermore we were unable to clearly identify whether there were any changes within firms that have converged from the previous GAAP towards
There are several differences between the International Financial Reporting Standards (IFRS) and the U.S. Generally Accepted Accounting Principles (GAAP). The IFRS is considered more of a "principles based" accounting standard in contrast to U.S. GAAP which is considered more "rules based." By being more "principles based", IFRS, arguably, represents and captures the economics of a transaction better than U.S. GAAP. As a team me collaborated to answer the following seven questions.
Differences Between GAAP and IFRS and Implications of Potential Convergence - Boundless Open Textbook. (n.d.). Retrieved February 5, 2015, from https://www.boundless.com/accounting/textbooks/boundless-accounting-textbook/introduction-to-accounting-1/conventions-and-standards-21/differences-between-gaap-and-ifrs-and-implications-of-potential-convergence-131-7049/
The International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) are working together to eliminate a variety of difference between the United States generally accepted accounting procedures (U.S. GAAP or GAAP) and International Financial Reporting Standards (IFRS). This convergence project grew out of an agreement reached by the two boards in 2002 (Deloitte, 2004).
The US Generally Accepted Accounting Principles (GAAP) is a set of international accounting rules which originated from the United States. US GAAP can be defined as a set of accounting principles, standards and procedures that companies use to compile their financial statements (Elliott & Elliott, 2008). The International Financial Reporting Standards (IFRS) on the other hand are accounting rules originating from the United Kingdom. International Financial Reporting Standards (IFRS) are a set of accounting rules designed with a common global language for business affairs so that financial accounts of companies are understandable and comparable across international boundaries (Devinney, Pedersen & Tihanyi, 2010).
With complete notion and awareness of how each country has their set of rules, “the goal of IFRS is to provide a global framework for how public companies prepare and disclose their financial statements” (Rouse, 2011). This view is meant to provide general guidelines, as well as international comparisons through conventional and edifying means. To bring broader and vivid objectives, IFRS replaced IAS, the older standards, in order to bring a more comprehensive and simplified accounting procedures.