Convergence of GAAP and IFRS
Prof. Kara Mahon
Intermediate Accounting II
May 14, 2011
Convergence of IFRS and GAAP 2
Convergence of IFRS and GAAP
For many years major accounting and reporting differences have existed between U.S GAAP and international reporting standards. In 2002 a letter of “understanding between the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB), commonly known as the Norwalk Agreement, two accounting standard setting bodies made a firm commitment to develop high quality accounting standards that converge” (986).
Convergence is the occurrence of two or more things coming together. In this case it would be the United States and international countries coming together to reach an ultimate goal of convergence towards a single set of high-quality, international accounting standards. Companies worldwide would use these standards for both domestic and cross-border financial reporting. The benefits of the convergence is a single set of worldwide standards which is expected to produce financial reporting that is more comparable, transparent and achieves greater level of understanding.
Companies can prepare for convergence by taking simple steps.
First they should conduct a IFRS and” needs analysis”, (ledgerlink) they will need to look at their own financial and accounting department and CFO to determine what level of knowledge and skill they have internally and what level of training they need to effectively position their company in regard to convergence. Secondly, “conduct a
Convergence of IFRS and GAAP 3
Business analysis of ramifications of IFRS convergence and last take a close look at management information systems” (ledgerlink). . They should also communicate with outside users of financial information and develop an overall plan and timeline.
There will be a number of... [continues]
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