The International Accounting Standards Board

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Introduction Accounting standards are authoritative statements intended to narrow the areas of differences and varieties in accounting practice. It is important regulatory devices of accounting. It serves as a contract template among management, creditors and investors. As companies have become more globalized, comparing financial statements has become more difficult because of different accounting rules (maxwellsci). Over 100 countries have adopted International Financial Reporting Standards (IFRS) in that matter. The accounting system in U.S. has been based on Generally Accepted Accounting Principles (GAAP) since the 1930s. In theory, switching to IFRS would make it easier to compare U.S. business to others around the world, reducing companies’ cost of capital. However, not everything changes at once (Nick). The International Accounting Standards Board (IASB) and US Financial Accounting Standards Board (FASB) have set a long-term strategic priority to achieve convergence of IFRS and U.S. GAAP into a common set of high quality global accounting standards. The convergence is to avoid conflict and confusion, promote simplicity, consistency and transparency (IFRS.org). This is not an easy journey, mostly because of the differences between those two accounting systems. The U.S. GAAP is more rule-based, where IFRS is more principle-based. The rules-based approach involves a set of guidelines that creates criteria for every potential contingency and provides the rules for
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