The Importance of Converging the International Financial Reporting Standards and US GAAP

626 WordsFeb 1, 20183 Pages
The concern of companies could provide significant differences in financial information by adopting different set of standard had made convergence IFRS and US GAAP become important. For instance, although company value is not affected by accounting policies but valuation techniques like EBITDA multiples can be impacted due to earnings variations resulting from accounting policy differences between IFRS and US GAAP. (Bauman, DeSmith, Jones, Py, Schmid, & Sheward, 2013) Furthermore, in some circumstances, the accounting differences between the boards could turn positive earnings into a loss after some adjustment has been made on conversion of IFRS to US GAAP. Companies will report better earnings under IFRS than under GAAP. However, this problem can be minimized through the convergence project which is to reduce the diversity and inconsistency between IFRS and US GAAP. The effort of the boards helps standardize accounting principles, policies and application worldwide. Besides, it makes apples-to-apples comparisons of financial information of U.S. and international companies become possible which are helpful to investors in analyzing the financial report as well as helps companies to raise their capital more easily in other countries. Furthermore, the International Accounting Standards Board (IASB) have been aim to develop a single set of high-quality, and understandable International Financial Reporting Standards (IFRS) for nearly 40 years that could used by the domestic and
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