Ifrs and Gaap

The United State is the latest country to agree on working towards converging it own accounting standard, US GAAPs (United States Generally Accepted Accounting Principles) with IFRSs (International Financial Reporting Standards). This report is about the evaluation of the convergence project to form a global standardized financial statement. IFRS is a set of international accounting standards stated how particular types of transactions should be reported in financial statements. However, U.S GAAP is a common set of accounting principles, standards and procedures that companies use to compile their financial statement. IFRS is issued by the International Accounting Standard Board (IASB) whereas U.S GAAP is issued by the Financial Accounting Standard Board (FASB). This report includes the objective and advantages of the convergence as well as the problems that may face to prevent the successful of convergence. Besides that, major milestones that have achieved and opinions about convergence project also written in this report.

Table of Contents
1.0 Introduction3
2.0 Advantages of convergence between IFRS and US GAAP3
3.0 Problems that prevent the successful convergence of standards4
4.0 Major milestones that have been achieved5
5.0 Conclusion7
6.0 References8

1.0 Introduction
As the question stated, globalisation had cause creditor & investors difficult to compare the financial statements of companies in different countries because each of them had its own accounting standard. In addition, financial crisis and economic recession in recent year had pressure United State to agree work towards the convergence of US GAAP (General Accepted Accounting Principles) and IFRS (International Financial Reporting Standards). IFRS is a set of international accounting standards that have been widely adopted in more than 12000 companies and over 100 countries in the world. (Gornik-Tomaszewski & Showerman, 2010) At theoretically level, IFRS are considered as a more “principles based” accounting standard whereas GAAP are considered as more “rules based” accounting standard and there are many differences in both standards. (Briginshaw, 2008)

The purposes of convergence are eliminate differences between GAAP & IFRS, create an international accounting standard which can aid to increase comparability and capture a more transparent overall picture of global economics. (Pologeorgis, 2013) 2.0 Advantages of convergence between IFRS and US GAAP

The advantages of convergence project include it will result in create a single set of high quality and global standardized financial report, which means US will having common accounting statements with 100 other countries including Japan, Canada, Australia and European Union which permitted the use of IFRS. It allows greater comparability of financial information over all financial market regardless of borders since all having common standard of financial statement. (Mohr, 2010) This will allow foreign investors use the standardized financial reports from different countries to interpret, compare and analysis which aid them to know a more transparent pictures that able them to make better investment decision and the risk of the investment can be reduced since they just have to undergo one type of analysis. (Fogarty, 2011) Other than that, if convergence happens, U.S companies may able to compare their financial reports with their overseas competitors. (Street 2008, pp.199-208)

The convergence project will reduce the complexity of financial statement. (Paul & Burks, 2010) Example as, before convergence U.S based multinational company such as Coca Cola, Nike would have to prepare financial statement in IFRS forms and also tedious GAAP forms which have many requirement such as over 100 standard for revenue recognition required by US GAAP. However thru the convergence, they could benefit from it which only needed to produce a common...
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