There have been proposals that have been working on with regard to the replacement of GAAP (Generally Accepted Accounting Principles) with IFRS (International Financial Reporting Standards) as used in the accounting and financial reporting aspects. Such convergence requires that the functions of the GAAP standards be added to the IFRS. The International Accounting Standards Board (IASB) developed the IFRS which is a less-detailed financial reporting system. This paper seeks to analyze the GAAP and the IFRS, their mandate and functions. Further, it shall compare the differences and similarities of the two standards which have such great implications to the functions of accountants, attorneys, corporate directors and financial officers. GAAP (Generally Accepted Accounting Principles)
Accountants use GAAP as a guide in the process of recording and reporting any professional financial data. It is a set of accounting standards that were developed by cooperation between the accounting profession and the Securities and Exchange Commission. There are various assumptions that guide the application of these principles with regard to presentation of financial statements. Firstly, the economic entity assumption asserts that financial records must be maintained separately. Such economic entities include but not limited to governments, religious institutions and social organizations (IASCF, 2007). Even in cases where different entities are combined in the process of reporting, each and every economic transaction must be recorded as a separate entity. The economic entities must also not include personal assets or liabilities. The monetary unit assumption is a discovery that some accounting records are not quantifiable. For instance, the introduction of a new product cannot be recorded on the basis of monetary units. It is therefore important that such events in a company do not appear in accounting records. There are various events in a company that may...
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