AC551 – 01N
Professor Sandra Gates
May 25, 2014
US GAAP and IFRS Convergence: Why It Shouldn’t Happen
With the boom in technological advances, the world is becoming smaller. These advances have fostered the growth of an increasingly global economy. In turn, worldwide economic intermingling brings with it the need for a universal language of accounting. Doubtless, this endeavor would prove helpful for many affected.
In the United States, the Securities and Exchange Commission (SEC) and the Financial Accounting Standards Board (FASB) have worked tirelessly to create a system that works; our Generally Accepted Accounting Principles (GAAP) provide guidelines that we can trust. The International Accounting Standards Board (IASB) seeks to accomplish the same mission on a global scale through the International Financial Reporting Standards (IFRS). The goal of IFRS and US GAAP convergence is “to create a common set of high quality standards” that will “improve the quality, consistency, and comparability of financial information for investors” all over the world (Fischer, 2012, p. 1). However, major differences between US GAAP and IFRS, and in culture and ethics justifiably hinder hopes of convergence
Differences between rule-based and principle-based accounting are found throughout the accounting profession. Rule-based accounting provides more detail and structured analysis of accounting standards however the final goal of the outcome is not stated. Principle-based accounting provides little guidance. It focuses mainly on the final outcome and leaves the burden of interpretation on up the accountant. The SEC strongly suggests that using a principle-based standard along with more technical guidance will help establish an effective financial standard-setting framework. This framework allows standards to be more flexible to the complexity of
References: Cohn, M. (2013). FASB, IASB Chairs Air Differences. Accounting Today. Retrieved May 22, 2014, from http://www.accountingtoday.com/ato_issues/27_1/FASB-IASB-chairs-air-differences-65073-1.html#Login Fischer, M., & Marsh, T. (2012). Accounting and Reporting Convergence. International Journal of the Academic Business World, 6(1). 1-10. Retrieved from http://eds.a.ebscohost.com.lib.kaplan.edu/eds/pdfviewer/pdfviewer?sid=ba220668-ec4b-4426-8827-5eb548c6acf5%40sessionmgr4001&vid=3&hid=4211 Pacter, Paul.(2013)What have IASB and FASB convergence efforts achieved? http://www.journalofaccountancy.com/Issues/2013/Feb/20126984.htm Weirich,T., Pearson, T. & Churyk, N. (2014). Accounting & Auditing Research: Tools & Strategies (8th ed.). Hoboken, N.J.,John Wiley & Sons.