Week 8 Assignment 1 IFRS and GAAP Convergence Janet Rivera Cruz Prof. Basil Jackson Accounting 304 December 2, 2012
The purpose of this paper is to describe what accounting convergence means and assess the likelihood of the convergence being completed and implemented in the next five (5) years. IFRS is the principle based set of standards that establish standards and dictate specific treatments. IFRS has become a global standard for companies when preparing financial statements. IFRS consist of multiple reports stated on the Wikipedia website. The two reports that will be discussed in the paper are IFRS and GAAP. GAAP is an Accounting Standard that provides guidance for financial accounting that accountant has to follow for preparing financial statements, and transaction summaries. Certified Public Accounting (CPA) firms and other companies use the GAAP as guidance for financial statements when preparing business expense, income, assets and liabilities. The GAAP does not have one accounting standard but consist of multiple standards for accounting transactions. The Securities and Exchange Commission (SEC) reaffirmed its support for the convergence of U.S. Generally Accepted Accounting Principles (U.S. GAAP) and International Financial Reporting Standards (IFRS) in its “Commission Statement in Support of Convergence and Global Accounting Standards” in February 2010.The SEC also reaffirmed it continues to believe that a single set of highquality, globally accepted accounting standards will benefit U.S. investors and that this goal is consistent with its mission of protecting investors; maintaining
fair, orderly, and efficient markets; and facilitating capital formation. The SEC will continue to evaluate, through 2011, whether to incorporate IFRS into the financial reporting system for U.S. issuers; if it does proceed, the first time U.S. firms would report using IFRS would be no earlier than 2015. Meanwhile, businesses should count on aggressive IFRS and U.S. GAAP convergence in the next few quarters and begin plans for the transition. The SEC views convergence as a way to help narrow and reduce the differences between these sets of standards over time. The SEC also notes the ongoing convergence project by the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) will play a key role in its determination whether to move forward with U.S. adoption of IFRS. IFRS are principles based financial reporting requirements adhered to by more and more countries worldwide. Canada, Japan, India and Mexico are among the countries currently converting to the standards. The SEC has long supported global accounting standardization through convergence, citing benefits such as increased competition among exchanges, better global resource allocation and capital formation, lower cost of capital, and a higher global economic growth rate. U.S. GAAP and IFRS convergence raises numerous issues for companies. They can assist with policy and procedure development or modification, accounting and reporting process redesign, IT/ERP system controls updates or improvements, and IFRS-related project management, among other areas, and help you transform people, process and technology. They continue to assist clients with their internal
controls, developed by other technology solutions that help CAEs, CFOs, CIOs and chief legal officers to manage change. Their approach is based on the early establishment of a sound foundation with tone- at-the-top support and rigorous project management. In describing the single most important difference between U.S. GAAP and IFRS rules, The IFRS is based on the tenets of understandability, reliability, and comparability. It is based off the International Accounting Standards (IAS) and had the opportunity to be built from accounting ideas and principles used across the...