July 17, 2013
Introduction Many countries in the world speaks many different languages when it comes to financial reporting. When one compare the accounting standards years ago to what is seen today, it’s shown that investors tolerated a great deal. As the markets are becoming global, investors are choosing the better global accounting standards that are available to them. For this reason, this paper will point out the International Financial Reporting Standards (IFRS) and the US GAAP within the oil and natural gas industry.
By definition “International Financial Reporting Standards (IFRS) are a set of accounting standards developed by the International Accounting Standards Board (IASB) that is becoming the global standard for the preparation of public company financial statements.” (AICPA). The main goal for IFRS is to help international investors make better comparison with the global world and also make it an easier process. On the other hand, US GAAP is accounting standards, ethics and morals that different companies use to gather their financial statements. For this reason, the oil and natural gas industries financial statements for IFRS and US GAAP has some form of differences. Many of the European countries converted to IFRS because of the tight timelines that was introduced to the European regulations. Internationally, many of the vendors that the oil and gas industry does business already adhered to IFRS regulations. After further reviews, decision making, reviewing cost and benefits, the oil and gas industries decided to make a switch from using any other regulations and standard such as US GAAP except for IFRS. The oil and gas industries had to make sure that they understand the premise of both IFRS and US GAAP. In this case, US GAAP is more about systems based rules and IFRS is more about principles based standards. There are some benefits when a company makes a switch