...Advantages and Disadvantages of switching from U.S.GAAP to IFRS Nara Yoon Charles Center Summer 2009 Advantages and Disadvantages of switching from U.S.GAAP to IFRS 2 In today’s business, markets are demanding increasing conformity. Many countries have converted to and implemented the International Accounting Standards Board (IASB)’s accounting standards. The United States, however, still maintains its own Financial Accounting Standards Board (FASB). Both IASB and FASB have created International Financial Reporting Standards (IFRS) and U.S. Generally Accepted Accounting Principles (U.S.GAAP) respectively. These accounting standards are rules of measurements for financial statements that companies issuing stock to the public must provide to stockholders (Libby, 21). There are various advantages and disadvantages of the U.S. companies changing their systems from U.S.GAAP to IFRS. As the markets have grown to become more complex and global, the disparities between the two standards have been a significant issue as consumers and producers call for reform. The current differences between U.S.GAAP and IFRS affect many aspects of business. There seems to be some future losses but the U.S. is continuing to move toward conversion. The primary benefits U.S. hopes to get are comparability, and thus, greater market liquidity and lower cost of capital. They also hope to see cost savings for multinational companies who keep record of several accounting standards. Most...
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...General Accepted Accounting Principles to International Financial Reporting Standard: The Potential Change for Leasing The United States, via the US Financial Accounting Standards Board (FASB), International Accounting Standards Board, and SEC all have begun the process to migrate from General Accepted Accounting Principles (GAAP) to the International Financial Reporting Standard (IFRS). This migration has advocates for and against the change. A major change in the IFRS proposal is the accounting of leases. One noticeable aspect of the proposals involves classifying operating leases as assets. The proposed rule would, from the lessee perspective, consider all long term leases as assets and not as operating expenses.1 The tax implications of this change would be significant, long term operating leases are currently considered expenses. Since these leases are treated as current expenses and reduce income, they are not currently taxed. A financed lease, also known in the U.S. as a capital lease, is considered an asset and therefore flows to the income statement. A financed lease increases income and is therefore paid with post tax revenue and subsequently depreciated. 3 The current IFRS proposal would classify operating leases as expenses only if those leases are 12 months or less. This change would reclassify most leases under GAAP from operating leases to finance or capital leases under IFRS. These proposed changes could have wide ranging affects on real estate, automobile...
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...IFRS vs U.S. GAAP Victoria Harris American Public University Acct 610 There are two sets of accounting standards that are used worldwide. One is the International Financial Reporting Standards (IFRS) and the U.S. Generally Accepted Accounting Principles (GAAP). There is a huge desire for there to one set of accounting standards worldwide with the increase of companies performing business in many different countries and global expansion. The International Financial Reporting Standards are issued by the International Accounting Standards Board. These set of accounting standards are international in more than 110 countries and the state how certain transactions and other events should be reported in the preparation of financial statements. This set of standards’ purpose is to make international comparisons easier. This is not an easy task, though, because there is already set rules in every country. U.S. Generally Accepted Accounting Principles are another set of accounting standards that is adopted by the U.S. Securities and Exchange Commission (SEC) and are the rules followed by companies in the United States when compiling financial statements. These set of standards was originally developed by auditors and regulated by the American Institute of Certified Public Accountants (AICPA) historically. The SEC is now considering changing the standards for the United States and going with the International Financial Reporting Standards in order to create a more constant...
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...for their practices. These guidelines have come to be known as the Generally Accepted Accounting Principles, or GAAP. Since their creation, these principles have protected companies and investors from fraud, as accounting practices can sometimes be questionable. The GAAP holds companies accountable for their financial reporting activities and includes rules accountants must follow regarding recording transactions and preparing financial statements. Recently, there have been questions regarding the Generally Accepted Accounting Principles in the United States as opposed to the International Financial Recording Standards, or IFRS ; and whether or not the United States should adopt these new accounting standards. There are a number of pros and cons to the International Financial Recording Standards as well as the Generally Accepted Accounting Principles; however, I do not think that the United States should fully adopt the IFRS considering the history of the GAAP and the reason for the creation of its principles. As previously mentioned, the American Institute of Certified Public Accountants (AICPA) has been responsible for setting accounting standards. In 1973, the Financial Accounting Standards Board and the Governmental Accounting Standards Board joined with the AICPA in advising, providing input, and determining United States accounting standards- GAAP. The Generally Accepted Accounting Principles include, but are not limited to, standards regarding the following components:...
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...PROS AND CONS OF FAIR VALUE ACCOUNTING Abstract The speed of globalization in the capital markets and the increasing complexity of financial instruments have caused financial statement users to question the relevance and usefulness of historical cost accounting (HCA). The propensity to use fair value accounting (FVA) is imminent as we enter into a borderless economy and as financial markets evolve that require more current and relevant financial information. The U.S. Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS) joint effort to establish a uniform accounting standard has caused alarm to U.S. companies and accounting professionals. They contend that fair value accounting has some inherent flaws that will cause adverse effects in the economy. This paper will compare fair value accounting and historical cost accounting and will discuss the advantages and disadvantages of the two valuation methods. It will also explore several issues embedded between the two valuation methods and will examine other alternatives possible to reduce the limitations inherent between the two valuations. Key words: fair value accounting, historical cost accounting, and pro-cyclicality Introduction The use of fair value accounting has gained so much attention in the past decade due to the global economy and increasing complexity of financial instruments. Many critics believe that fair value accounting offers more relevant and...
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...THE FUTURE OF THE IFRS IN THE USA. IS THERE ONE? by MIRANDA FORBES Chartered Accountant, KPMG To : ICAEW Date : 11 November, 2013 INTRODUCTION International Financial Reporting Standards are designed as a common global language for business affairs so that company accounts and reports are recognizable and proportionable across international borderlines. They are notably influential for companies that have proceedings in numerous countries. They are increasingly substituting the many different national accounting standards with the goal that these standards will some day be globally accepted. Such adoption is expected that will be beneficial to investors and other users of financial statements by reducing the costs of comparing alternative investments and increasing the quality of information. Companies that have high levels of international activities are among the group that would benefit from a switch to IFRS. Companies that are involved in foreign activities and investing , benefit from the switch due to the increased comparability of a set accounting standard. Benefits and drawbacks of having one set of global standards are being debated in the monograph by ICAEW as well as what else can be done in the future. A concern that is enclosing the financial world for a while now is being taken up in this report, and coming my investigation and self-reliant study I am going to give my opinion and answer the following question:...
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...The IMPLeMeNTATION OF IFRS IN The UK DeVOLVeD ADMINISTRATIONS Ciaran Connolly Tony Wall The IMPLeMeNTATION OF IFRS IN The UK DeVOLVeD ADMINISTRATIONS by Ciaran Connolly Tony Wall Published by CA house 21 haymarket Yards edinburgh eh12 5Bh First published 2013 © 2013 ISBN 978-1-904574-94-1 eAN 9781904574941 This report is published for the Research Committee of The Institute of Chartered Accountants of Scotland. The views expressed in this report are those of the authors and do not necessarily represent the views of the Council of the Institute or the Research Committee. No responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication can be accepted by the authors or publisher. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopy, recording or otherwise, without prior permission of the publisher. Printed and bound in Great Britain by Garnett Dickinson CONTeNTS Foreword .................................................................................................................... Acknowledgements .................................................................................................... Abbreviations .............................................................................................................. executive summary ...................
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...Financial Reporting Standards Colin Erskine DU- Accounting 301 03/13/2014 International Financial Reporting Standards “Over the last decade, progress has been made to harmonize financial accounting standards and practices into one set of single standards to be implemented by businesses domestically and internationally” (Harper, A. Leatherbury, L. Machuca, A. Phillips, J.). There has been some controversy among accounting professionals regarding the impact that switching to International Financial Reporting Standards (IFRS) from Generally Accepted Accounting Principles (GAAP) will have on United States corporations and investors. On November 14, 2008 there was a proposal that was later made mandatory, issued by the SEC making corporations within the United States switch to International Financial Reporting Standards for fiscal years ending after 2014. There are many disadvantages and advantages that could arise when moving to a global set of standards. International Financial Reporting Standards are a set of international accounting standards, which state how transactions and other events should be reported within financial statements. These standards are becoming the global standard for the preparation of public companies financial statements. “Approximately 120 nations and reporting jurisdictions permit or require IFRS for domestic listed companies, although approximately 90 countries have fully conformed with IFRS as promulgated by the IASB and include a statement...
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...International Financial Reporting Standards (IFRS) MBA 691: Managerial Accounting Professor: Prepared by: April 19, 2009 Bibliography: • Ernst & Young, “U.S. GAAP vs. IFRS: The basics”, January 2009. • Securities & Exchange Commission, “Roadmap for the Potential Use of Financial Statements Prepared in Accordance with International Financial Reporting Standards by U.S. Issuers”, www.sec.gov/spotlight/ifrsroadmap.htm (Release No. 33-8982; November 14, 2008). • The Association of Chartered Certified Accountants (ACCA), “Impact of IFRS in Europe”, www.accaglobal.com/publicinterest/activities/research/reports/global_integration/, October 7, 2008. • Internal Auditor, magazine, “Getting Up To Speed with IFRS’, October 2008. • International Accounting Standards Board, “IASB Responds to G20 Recommendation and US GAAP Guidance’, www.iasb.org/News/Press+Releases/IASB+Responds+to+G20+Recommendations+and+US+GAAP+Guidance.htm, April 7, 2009. • EU Finance Ministers Statement, www.eu2009.cz/en/news-and-documents/news/statement-by-the-informal-ecofin-15621/ , April 4, 2009. • National Association of Corporate Directors (NACD) – Directors Monthly article, “IFRS – What The Board Needs to Know”, http://www.deloitte.com/dtt/cda/doc/content/us_assur_IFRS_DM%20Sep08_20080911pdf.pdf, September 2008. • Deloitte, www.deloitte.com/us/debates/IFRS. • Deloitte, “IFRS Conversion: Front or back Burner?”...
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...GAAP or IFRS WHEN WILL WE CONVERT? Paris Williams 10/1/2013 The accounting profession is on the verge of one of the most significant changes since the 1930s. In the very near future there is a great possibility that the United States Generally Accepted Accounting Principles (GAAP), as it is known today, will be replaced by the global standards known as the International Financial Reporting Standards. This paper will provide a history of IFRS and discuss the time frame of the conversion, along with is effects on U.S in the accounting perspective. Over the past few years, much talk of U.S adopting the IFRS as the basis for accounting principles has circulated amongst the accounting and business world. Although many may resent the conversion from U.S Generally Accepted Accounting Principles (GAAP) to the London-based International Financial Reporting Standards (IFRS), the movement has already began. Plans for this movement have already been proposed and put into effect, project and trials are being observed, and results are soon to come as the SEC and others make their final decision. However, with such a complex transition one must propose many questions such as, how will the movement affect us? What are some of the advantages and disadvantages? How do we adjust, and what is the ultimate benefit and purpose of converting? GAAP and IFRS are two separate sets of accounting standards used in different countries of the world. Although they both have the same...
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...the aim of the company to tap into the high demand in the food and restaurant industry. There is increased demand by various individuals on the availability of the food service over the internet, and place where they can enjoy various food service at serene environment offered at a cheaper price. Therefore, the objective of Mac at-home food and restaurant Ltd is to offer variety, quality, and affordable food to all segment of the society thereby tapping into customers neglected by big food and restaurants. As such, the business plan preparation aims at raising capital of approximately $30,000. In addition, the business plan aim at raising additional finances required to purchase necessary equipments, launch Mac at-home food and restaurant Ltd website, and other finances required for the first fiscal year operations. The finances already acquired are $35,000 from micro-loan initiative, $13,000 loan from bank, $5,000 government loan, and $30, 000 from the five company investors. The company aims at tapping into the high demand in the food and restaurant industry because of increased demand of the food services over the internet and place where they can enjoy various food services at serene environment offered at a cheaper price. Staffing plan Mac at-home food and restaurant Ltd because of the nature of the business, which is a home-based business type and for the first fiscal year will not have any branches apart from the main center. Therefore, the starting staff for the...
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...In a broad sense a conceptual framework can be seen as an attempt to define the nature and purpose of accounting. A conceptual framework must consider the theoretical and conceptual issues surrounding financial reporting and form a coherent and consistent foundation that will underpin the development of accounting standards. Conceptual frameworks can apply to many disciplines, but when specifically related to financial reporting, a conceptual framework can be seen as a statement of generally accepted accounting principles (GAAP) that form a frame of reference for the evaluation of existing practices and the development of new ones. As the purpose of financial reporting is to provide useful information as a basis for economic decision making, a conceptual framework will form a theoretical basis for determining how transactions should be measured by historical value or current value and reported is how they are presented or communicated to users. Some accountants have questioned whether a conceptual framework is necessary in order to produce reliable financial statements. Past history of standard setting bodies throughout the world tells us. In the absence of a conceptual framework, accounting standards were often produced that had serious defects that is: * They were not consistent with each other particularly in the role of prudence versus accruals or matching. * They were also internally inconsistent and often the effect of the transaction on the statement...
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...How managers are dealing with the switch to IFRS Xiaochen Zhang Texas A&M University-Commerce Abstract Recently, there are an increasing number of companies switching from GAAP to IFRS. The subject of this article is mainly about how managers deal with the switch to IFRS. This paper discusses the background of changing standard, and why manager must switch the standard to IFRS. At last, it points out several methods that managers should take in order to switch to IFRS. Keywords: IFRS, GAAP, switch Introduction International Financial Reporting Standards (IFRS) is a standard accounting system easy to International Accounting Standards Board (IASB) issued by the countries in the cross-border economic exchanges. IFRS is a global harmonization of financial rules to regulate the operation of financial management in accordance with international standards guidelines. For specification worldwide accounting operations of enterprises or other economic organizations, and economic, interests can be protected in a standard, and will not lead to the same calculation methods vary in terms of the criteria arising from unnecessary economic loss. However, now GAAP stands for generally accepted accounting principles and refers to business accounting practices that most U.S. companies use. The switch to International Financial Reporting Standards (IFRS) for all U.S. companies means that both accountants and managers have to learn some new practices. This switch...
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...Highlights of IFRS Research By CYNTHIA BOLT-LEE, CPA and L. MURPHY SMITH, CPA, DBA NOVEMBER 2009 Conversion from U.S. GAAP to IFRS is a heavily discussed topic in the corporate world. Expected benefits of adoption include reporting consistency, enhanced global competition and improved financial reporting transparency. While many countries worldwide have already adopted IFRS, many other countries are closely examining its effects before adoption, not only from an economic perspective but also from a reporting quality position. COMPARING RESULTS Researchers Elaine Henry, Stephen Lin and Ya-Wen Yang evaluated the difference between financial results under U.S. GAAP compared to IFRS. Their results show that convergence between U.S. GAAP and IFRS is occurring. Using 2004 to 2006 reconciliation disclosures, the authors found that the calculated difference between shareholders’ equity under U.S. GAAP and under IFRS declined from 2004 to 2006. In addition, the difference between U.S. GAAP and IFRS reported net income during this period also declined but remained significantly different. Pensions and goodwill appeared to be the dominant reconciliation items. Reconciliation amounts varied by industry and country, raising questions about consistency between region and industry. Additionally, more than 70% of the companies examined in 2004 through 2006 had a higher return on equity under IFRS compared to U.S. GAAP. The 2007 SEC elimination of the IFRS-to-U.S. GAAP reconciliation...
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...Alice Hines IFRS vs. GAAP Monday May 11, 2015 ACCT/290 Principles of Accounting I Tom House When it comes to accounting and dealing with finances, there is a lot to be knowledgeable when it’s in regards to International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP). IFRS is a set of accounting standards developed by an independent, not for profit organization called the International Accounting Standards Board (IABS). GAAP are the standard framework of guidelines for financial accounting used in a given jurisdiction, also known as accounting standards or standard account practice (FASB). The rule to these two terms falls under the double entry of accounting, where debits equal credits. The reason for IFRS and GAAP is the purpose which is reliable and useful to keep track of accounts. Assumptions for accounting determines monetary unit, meaning US currency. Economic entity what reports everything into a particular unit. Followed by the amount of time known as time period which is distinguished by economic life of a business divided into the artificial time period. Then after is the going concern assumptions. Principles are then put into play with revenue recognition, matching, full disclosure and cost principles. The format for IFRS and GAAP may differ from a statement of financial under IFRS or position and a balance sheet under GAAP because of the...
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