International Financial Reporting Standards

In 2008, the Securities and Exchange Commission (SEC) issued a road map for the United States (US) to implement International Financial Reporting Standards (IFRS) that would eventually lead to the dissolution of US Generally Accepted Accounting Principles (US GAAP) (Cox 2008). US GAAP is rules based system of accounting that contains over 25,000 detailed pages of guidance, whereas IFRS is a principles based system of accounting that contains 2,500 pages of guidance. IFRS allows accountants to exercise professional judgment when making many decisions. This paper will compare and contrast US GAAP with IFRS on Intermediate Accounting Topics.

it provides a better indication of ability to generate cash flows than the cash basis.

For investors to objectively analyze and rate companies they need to have access to certain financial information in order to make informed business decisions. Key financial figures such as Statement of Income, Balance Sheet Statements, and Cash Flow Statements are used to make these comparisons. To ensure that companies are reporting the same financial information several accounting and auditing standards have been created and must be followed. In the follow paper two companies, Abercrombie and Fitch and Hennes & Mauritz, will be evaluated based on their financial statements in a goal to determine which company is more

The accounting standards used by Abercrombi and Fitch are 'International Financial Reporting Standards' (IFRS), while Hennes & Mauritz (H&M) AB uses 'Generally Accepted Accounting Principles' (GAAP).

AASB 8 is an important Accounting Standard from the financial information reporting perspective. It ensures that the entity has to disclose enough information to the user of financial information about the economic activities the entity is involved into and the scope or spread of these activities. The standard requires the entity to provide information about the reportable operating segments of the entity. Operating segments are the components of the entity of which separate financial information is available and it is regularly evaluated by the management – more specifically – the CODM – i.e. the Chief Operating Decision Maker to assess the performance of the particular component and to allocate resources in appropriate

There are several parts of accounting that help make corporations flow smoothly and efficiently. Accounting can be used by anyone in his or her everyday life whether balancing your checkbook or checking on your income statement. In accounting there are several rules, standards, and procedures one must follow in order to maintain fairness and legitimacy. This being said there are two main frameworks that make that possible which are referred to as GAAP and IFRS. GAAP stands for Generally Accepted Accounting Principles, which refers to the accounting standards guidelines and structure for typical accounting used in the United States. IFRS stands for International Financial Reporting Standards, which is a more principle, based accounting

In mainly everything, sports, class rooms, or work places you have a set of rules to go by. In the accounting world, you must also follow a set of rules and standards. The Generally Accepted Accounting Principles (GAAP) or the International Financial Reporting Standards (IFRS). Most countries around the world use IFRS while the United States uses GAAP. International Financial Reporting Standards and Generally Accepted Accounting Principles do things differently. Each country’s government sets which principles the accountants will use. There are also organizations that have been formed to help with all the confusion between countries. The organizations are called Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB). FASB is the organization that has been designed by the US government to establish GAAP in the United States. IASB is the international organization developing and promoting accounting standards to be used throughout the world.

The U.S Generally Accepted Accounting Principles and the International Financial Reporting Standards are the two major accounting standards used by accountants today. The GAAP is currently used only by firms in the United States, while the IFRS is used by firms in 110 countries, including those in the European Union. The U.S Securities and Exchange Commission is in charge of GAAP for public companies, while the Financial Accounting and Standard Board overlooks private companies. The standards for IFRS are set by the International Accounting Standard Board. The main difference that separates the GAAP and the IFRS is that the GAAP was constructed based on rules, while the IFRS was created based on accounting principles. Although there are many similarities in the way most things are done, there are also striking differences regarding the way financial statements are reported, including inventory valuation, balance sheets presentation, asset definition, etc. This paper seeks to identify some of the major discrepancies between GAAP and IFRS, and present arguments people have made for and against converging the two standards.

It all began on October 2002 where the International Accounting Standards Board and Financial Accounting Board signed a memorandum of understanding that has come to be known as the “Norwalk Agreement”. Here the two boards met and decided to make their standards fully compatible and put it into practice and once they conquer their goal, they have to make sure it is maintained. But before I divulge into details regarding the future and presently achieved goals of the convergence, I would like to throw some light on the history and background of the two boards involved.

Over the past few decades there has been a significant transformation in the global financial structure. These remarkable changes are a result of increasing global competition, changes in business and political climate, increasing technological advancements etc. Globalization in particular has given the corporations and individual borrowers to look beyond the borders for finance and investment opportunities. In order to protect these investors and to maintain the market integrity a financial reporting framework was developed. This framework ensures high quality of financial reporting and true and fair representation of general information for the users of financial statements (SEC, 2000).

International Financial reporting standards (IFRS) and General accepting accounting principles (GAAP) convergence issue began in the late 2000’s. International Financial Reporting Standards (IFRS) are a set of standards stating how particular types of transactions and other events should be reported in financial statements. Therefore, business and accounts can be understood from company to company and country to country. General accepting accounting principles (GAAP) are set of common accounting principles, standards and procedures that companies use to produce their financial statements. GAAP are a combination of accurate standards that are simply the commonly accepted way of recording and reporting accounting information.

Both speakers have made credible arguments towards the contradictory nature of the International Accounting and Financial Reporting Standards. Accounting standards are a method of regulating the reporting of everyday transactions within the profession, alongside laws, regulations and codes of professional bodies (Guest Lecturer, 2014). Regulatory regimes are necessary as they aim to achieve a uniform objective that published accounts in the market are to show a true and fair view of the entity they purport to represent. However, the qualitative characteristic “true and fair” is very much subjective to the professional publishing the accounts. As it is open to interpretation, certain entities can use this vulnerability to their advantage

The (IASB) International Accounting Standards Board published International Financial Reporting Standard 8 (IFRS 8) Operating Segments on 30 November 2006. The standard superseded IAS 14 Segment Reporting, which was applicable pursuant to Regulation 1606/2002/EC (IAS Regulation).

The International Financial Reporting Standards (IFRS) have made an impact on the foundations of accounting, resulting in a different stance from the prior UK GAAP. Some of the more noticeable changes included; the increase of government resources being allocated to the standard. Companies will be required to provide all information of the incoming and expenditure of all money and assets under the new regulations. The presentation and terminology were altered in the current “Income Statement” and “Statement of Financial Position” leading to a change of some aspects on the budgets and estimates. “Fair value”; the unbiased evaluation of an assets potential market

The International Financial Reporting Standards (IFRS) has been adopted by a majority of first world countries and emerging markets. However, the U.S. still uses the U.S. Generally Accepted Accounting Principles (U.S. GAAP). The 2008 financial crisis and the cost of implication halted the adoption, but there are other obstacles and implications to take into consideration. One important aspect to consider is the tax implications upon adoption, and this typically translates into how the taxes paid will be affected. The implications to tax arise due to the differences in aspects such as revenue recognition, transfer pricing agreements, compensation, strategies in repatriation, debt agreements, and so on. Specifically focusing on the effective tax rate, the income tax, differences in accounting for assets and liabilities, and income and expenses. Included in this paper will be a short explanation on preparing the accounting profession and accounting systems for IFRS adoption, and other tax implications effects to the accounting world.