Describe IFRS and GAAP and what convergence means:
IFRS is set of international accounting standards stating how particular types of
transactions and other events should be reported in financial statements. IFRS are issued
by the International Accounting Standards Board.
GAAP stands for Generally Accepted Accounting Principles. A widely accepted set of
rules, conventions, standards and procedures for reporting financial information as
established by the Financial Accounting Standards Board. Convergence associated with
accounting standards is a decisive strategic importance to the global capital markets.
Analyze how convergence will affect public companies, accounting firms, and small and medium companies
The different accounting standards may cause disruptions in valuations during the
transition from one set of accounting standards to the converged accounting standards
Evaluate at least three significant differences and similarities between IFRS and GAAP and the impact these similarities and differences can have on financial statements
There are quite a few similarities between IFRS and US GAAP and the differences are
rapidly getting reduced owing to the convergence agenda of both these organizations. The
differences explained below are just a few significant ones and as of this point of time.
These can change due to developments in the convergence agenda of the IFRS and US.
1)Regarding revenue recognition, US GAAP is more detailed and industry-specific than
2)Expense recognition has some differences with respect to the time period and expense
amount that can be recognized by the companies.
3)Some financial instruments that were recognized as equity by GAAP will be recognized as debt under IFRS.
Recommend three ways companies can prepare for IFRS and GAAP convergence
Because this change... [continues]
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