...IFRS Section 1 As a result to the 1988 policy statement that the Securities and Exchange Commission (SEC) issued, regarding the establishment of a common international accounting standards, there has been a growing acceptance of International Financial Reporting Standards (IFRS) for a basis of U.S. financial reporting. The number of countries adapting to this convergence has increased since its first suggestion. Within the United States, the SEC is taking its first steps as to whether or not the U.S. is to converge in to this universal approach to accounting. The international standard-setting process began a few decades ago as an effort by industrialized nations to create standards that could be used by developing and smaller nations unable to establish their own accounting standards, states the author of International Financial Reporting Standards. However, as the business world became more global, regulators, investors, large companies, and auditing firms began to realize the importance of having common standards in all areas of the financial reporting chain, continued the author. At this time, there are approximately 120 different nations that are required to, or have the option to report under IFRS. A few examples that already use IFRS include Australia, New Zealand, and Israel. It has been confirmed that the European Union has virtually adopted all international standards. Canada is said to adapt to IFRS in 2011, with Mexico following in 2012. The U.S. SEC has...
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...world follow guidelines for financial reporting to make use and comparability of financial reports more consistent across all geographical areas. The Financial Accounting Standards Board (FASB) is the independent body that is responsible for the creation of GAAP. The board is the standard setting body in charge of standards for nongovernmental companies operating in the United States. Since 2002, the IASB and FASB have been working together to improve and converge U.S. GAAP and IFRS. The United States is not the only country working toward convergence, as of 2009, Japan and China were both working toward convergence of IFRS as well as their accounting standards. In February 2010 the Securities Exchange Commission (SEC) issued statements of support of the convergence in IFRS and U.S. GAAP. The FASB intends to analyze each of the differences within the scope and either (1) amend applicable U.S. GAAP literature to reduce or eliminate the difference or (2) communicate to the IASB the Board’s rationale for electing not to change U.S. GAAP. Concurrently, the IASB will review IFRS and make similar determinations of whether to amend applicable IFRS or communicate its rationale to the FASB for electing not to change the IASB’s GAAP (Schroeder,...
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...Accounting Principles (U.S. GAAP) are required throughout the United States, other countries utilize other methods of classifying their financial statement items. While the standards of accounting differ among many countries, there has recently been an effort to attain a universal set of standards under International Financial Reporting Standards (IFRS). While this has not yet been achieved, multiple countries have made an effort to converge their standards with IFRS. This paper attempts to illustrate the diversity that currently exists throughout the accounting world, briefly comparing several key differences of U.S. GAAP to the standards used in Hong Kong, China, Mexico, and the United Kingdom. Hong Kong With a few minor exceptions, Hong Kong has officially converged its financial reporting standards with IFRS effective January 1, 2005 (AdoptIFRS.org). Hong Kong’s primary GAAP-required statements are known as Hong Kong Financial Reporting Standards (HKFRSs), including their interpretations (Deloitte Global Services Limited, 2013). Other mandated GAAP requirements are found in Hong Kong’s Companies Ordinance as well as its Listing Rules (Deloitte Global Services Limited, 2013). The following paragraphs briefly highlight key financial statement items and their differing treatments by Hong Kong under IFRS and U.S. GAAP. The Balance Sheet While U.S. GAAP only provides a small amount of direction when clarifying how assets and liabilities should be offset, IFRS gives specific directions...
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...CASE 1 The key principle of IFRS 1 is full retrospective application of all IFRS standards that are effective as of the closing balance sheet or reporting date of the first IFRS financial statements. IFRS 1 requires companies to: • Identify the first IFRS financial statements; • Prepare an opening balance sheet at the date of transition to IFRS; • Select accounting policies that comply with IFRS and to apply those policies retrospectively to all of the periods presented in the first IFRS financial statements; • Consider whether to apply any of the 15 optional exemptions from retrospective application; • Apply the five mandatory exceptions from retrospective application; and • Make extensive disclosures to explain the transition to IFRS. There are 15 optional exemptions to ease the burden of retrospective application. There are also 5 mandatory exceptions where retrospective application is not permitted. The exemptions provide limited relief for first-time adopters, mainly in areas where the information needed to apply IFRS retrospectively may be most challenging to obtain. There are, however, no exemptions from the demanding disclosure requirements of IFRS and companies may experience challenges in collecting new information and data for retroactive footnote disclosures. Many companies will need to make significant changes to existing accounting policies in order to comply with IFRS, including in such key areas as revenue recognition, financial instruments and hedging...
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...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 acknowledging such conformity in audit reports. Other countries, including Canada and Korea, are expected to transition to IFRS by 2011. Mexico will require IFRS for all listed companies starting in 2012. Japan has introduced a roadmap for adoption that it will decide on in 2012 (with a proposed adoption date of 2015 or 2016) and is permitting certain...
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...The road to international reporting The Convergence of GAAP and IFRS | Leroy Meadows Advanced Accounting | The road to international reporting The Convergence of GAAP and IFRS | Leroy Meadows Advanced Accounting | The Road to International Reporting The convergence of a rules-based approach and a principles-based approach in relation to accounting and the dissemination of financial information is not something to be taken lightly. With the need for convergence increasing due to globalization, there are sure to be some contentious issues that must be addressed if convergence is to succeed. While the main issue for those who use a rules-based approach is the issue of comparability, there are other issues that must be taken into account as well. This paper will provide a brief history of globalization as well as the response of the United States in the wake of massive corporate fraud between 2000-2002. The differences between a rules-based approach and a principles-based approach and some difficulties that arise when trying to merge two different systems of accounting will also be examined. Lastly, this paper will address why convergence is not only probable, but necessary. The Need to Be One The modern push for globalization has occurred in two stages. The World Trade Organization, in its 2008 report, provides a chronology of this push which shows the first stage of globalization starting in the mid-19th century and continuing until the start of WWI. The...
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...Relationship between the IASB and the FASB ACC 541 Relationship between the IASB and the FASB The United States plays an enormous influence on the accounting standards set forth throughout the world in the global economy. The United States follows the Financial Accounting Standards Board (FASB) which has created a large number of accounting standards that are interpreted and accepted by international companies and by the International Accounting Board (IASB). The IASB plays a similar role like the FASB for the rest of the global economy. The IASB is located in London, England and is an independent, privately funded accounting standard-setter. The IASB board consists of members from nine different countries with the IASB’s sole purpose to ‘achieve convergence in accounting standards throughout the world’ (Cellucci, 2011). The IASB and FASB have been collaborating since 2002. This collaboration was derived to create a convergence of the United States Generally Accepted Accounting Principles (GAAP). The convergence project started when the two organizations met during a joint meeting in Norwalk, Connecticut on September 18, 2002. The two board’s goal for the convergence project was for developing a high-quality compatible accounting standards that can be used for both domestic and cross-border financial reporting. They also promised to use their best efforts to make their existing financial reporting standards compatible as soon as practicable and to coordinate their...
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...Standards (IFRS) An AICPA Backgrounder 1 Table of Contents Get Ready for IFRS ........................................................................................ 2 Worldwide Momentum ................................................................................. 2 SEC Leadership in International Effort .......................................................... 3 The SEC Work Plan........................................................................................ 4 FASB and IASB Convergence Efforts............................................................. 5 AICPA Participation ....................................................................................... 7 Two Sides of the Story ................................................................................... 7 Differences Remain Between U.S. GAAP and IFRS ....................................... 8 What CPAs Need To Know ............................................................................ 8 Appendix ..................................................................................................... 10 Organizations Involved ................................................................................ 12 1 Get Ready for IFRS The growing acceptance of International Financial Reporting Standards (IFRS) as a basis for U.S. financial reporting represents a fundamental change for the U.S. accounting profession. The number of countries that require or allow the use of IFRS for the preparation...
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...generally accepted accounting principles, also known as GAAP. Dissimilar financial reporting and accounting practices make it very difficult for users of accounting and financial reports to consolidate such information and make comparisons of firms that are listed in different countries (Prather-Kinsey, 2006). The complication arises when the firm does business in multiple countries. How can corporations be compared based upon their financials, which one are accurate, and how can investors then deal with multiple standards, which ones are accurate? The answer to these questions lies within the adoption of the International Financial Reporting Standards, or IFRS. IFRS are currently required or accepted in over 100 countries worldwide, and it looks certain that the number of countries to embrace IFRS will continue to rise over the coming years (Daske, Hail, Leuz& Verdi, 2008). It was already noticed that, IFRS issued by the IASB have been extremely doing well in terms of their acceptance and application on a worldwide basis. IFRS is the standards which is being developed and supported by the IASB. IFRS give a meaning as a set of international accounting standards that states how certain transactions and events should be reported in financial statements. Contrast to U.S. GAAP, which is a rules-based accounting standard, IFRS is upon using principles based rather than hard set rules. As a result of this fundamental difference, IFRS allows management to use greater preference and...
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...the investors in doing their business. International Financial Reporting Standards (IFRS) and US generally accepted accounting principles (GAAP) are two main accounting principles that is widely used in the majority of the companies. However, there will be still conflict in the interpreting and understanding each other financial statements due to these two different approaches. Therefore, to overcome this problem, International Accounting Standards Board (IASB) and Financial Accounting Standards Board (FASB) are working on it by taking the necessary steps as time passes to close down the gap and standardised the accounting principles globally making it easier for all parties. (157 words) 1.0 Introduction In the world of globalization, a number of countries had been experiencing the convergence of their local GAAP and IFRS in order to apply the international accounting standard to suit the growing business world. This does not left out the people of the United States who are also trying to converge the accounting standards of US GAAP and IFRS in order to close down the gap between the accounting standards. FASB and IASB are the main international bodies assisting the Securities and Exchange Commission (SEC) to achieve this goal. 2.0 Benefits 2.1 Facilitate international business and economy growth There are a number of benefits that people can gain from the convergence of US GAAP and IFRS. For example, the convergence of these accounting standards will...
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...IFRS and GAAP Convergence Mercy Hudson Strayer University I have read and understand Strayer University’s Academic Integrity Policy. I promise to conduct myself with integrity in the submission of all academic work to the University and will not give or receive unauthorized assistance for the completion of assignments, research papers, examinations or other work. I understand that violations of the Academic Integrity Policy will lead to disciplinary action against me, up to and including suspension or expulsion from the University. I understand that all students play a role in preserving the academic integrity of the University and have an obligation to report violations of the Academic Integrity Policy committed by other students. Chevron Corporation, an American multinational energy corporation is active in more than 180 countries. Chevron is one of the world’s six ‘super major’ oil companies. For the past five years, Chevron has been continuously ranked as one of America’s five largest corporations. Chevron’s headquarters is in San Ramon, California (Fox, 2012). It is engaged in every aspect of the oil, gas, and geothermal energy industries, including exploration and production; refining, marketing and transport; chemicals manufacturing and sales; and power generation. Chevron was originally known as Pacific Coast Oil Company in 1979, where they made their oil discovery in Pico Canyon north of Los Angeles, California (2012)....
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...Convergence or Adoption: From U.S. GAAP to IASB Deanna E. West American Public University Accounting 600 Professor: Dr. Kuhn Abstract This paper discusses how the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) signed the Norwalk Agreement in 2002, and agreed to work together towards the development of high-quality, compatible accounting standards that could be used globally. The creation of short-term and long-term convergence plans in order to assist the boards in prioritizing so that they could adhere to their agreement of “compatibility as soon as practicable.” The outcome of 37 key joint IASB/FASB projects based on the results of the Convergence table by Paul Pacter and the ongoing debate of convergence of IASB and FASB, or the sole adoption of IASB. Convergence or Adoption: From U.S. GAAP to IASB September 18, 2002, in Norwalk, Connecticut, the IASB and the FASB signed a memorandum of understanding in which the two boards promised to work hard to “(a) make their existing financial reporting standards “fully compatible” as soon as is practicable and (b) to coordinate their future work programs to ensure that once achieved, compatibility is maintained.” This became known as the Norwalk Agreement. Under the Norwalk Agreement the IASB and the FASB each agreed that they would commit to the development of high-quality, compatible accounting standards that could be used for both cross-border and domestic financial reporting...
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...WritePoint capability in this area is limited. NOTE: WritePoint comments are computer-generated writing and grammar suggestions inviting the consideration and analysis of the writer; they are not infallible statements of right/wrong, and they should not be used as grading elements. Also, at present, WritePoint cannot detect quotations or block-quotes, so comments in those areas should be ignored. Please see the other helpful writing resources in the Tutorials and Guides section of the Center for Writing Excellence. Thank you for using WritePoint. The IASB and FASB have collaborated for the past 10 years. This collaboration was a goal toward convergence of U.S. generally accepted accounting principles (GAAP). The convergence project began with the two organizations conducting a joint meeting in Norwalk, Connecticut, on September 18, 2002. The goal for creating the convergence project was for the “development of high-quality compatible accounting standards that can be used for both domestic and cross-border financial reporting. They also promised to use their best efforts to make their existing financial reporting standards compatible as soon as practicable and to coordinate their future work programs to maintain compatibility” (Schroeder, Clark & Cathey, p. 95). Since 2002, the two boards have described what convergence means...
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...Final Project Similarities and Differences between U.S.GAAP and iGAAP – Intangible Assets The global economy is regulated by two main accounting systems: (1) United States Generally Accepted Accounting Principles, also known as U.S. GAAP, and the (2) International Generally Accepted Accounting Principles, also known as iGAAP. As the abbreviations dictate, U.S. GAAP are the standards that regulate U.S. accounting procedures and iGAAP are standards that regulate international organizations. Both standards are alike with respect to language, procedures and reporting, but there are enough key differences in reporting that it keeps a steady discussion on which standard is more suitable for and international accounting system. This paper will explore the similarities and differences in the accounting of intangible assets that have been set forth by both U.S. GAAP and iGAAP. The U.S. GAAP and iGAAP have been thoroughly working in partnership on the accounting standards merging and although many accounting regulations have already merged, there are areas of accounting reporting that are continuing to be discussed such as revenue recognition, financial instruments, and reporting of intangible assets. Once the areas of financial reporting are in the final stages of convergence, the United States will begin to move forward to a full implementation of iGAAP standards once final approval is received from the Securities and Exchange Commission (CCH Group, 2013). The key emphasis of the...
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...IFRS in the United States: If, When and How Donna L. Street s described by Erchinger (2012), for decades various United States (US) Securities and Exchange Commission (SEC) Chairs and Chief Accountants have expressed support for the development of one set of globally accepted accounting standards. Since the formation of the International Accounting Standards Board (IASB) in 2001, SEC leaders have repeatedly indicated that the logical choice for globally accepted standards is the International Financial Reporting Standards (IFRS) issued by the IASB. However, in line with other large economies, such as Japan, India and China, as of June 2012 the US had not adopted IFRS.1 This paper explores when and how, and indeed if, IFRS will become the basis for the financial reporting of domestic SEC registrants in the US. Readers are encouraged to first review Erchinger’s (2012) history of the SEC’s consideration of IFRS in the US included in this forum and especially Table 1 of this article, which provides a chronology of SEC releases regarding incorporation of IFRS into the US financial reporting model. This paper complements Erchinger’s by assessing approaches recently explored by the SEC for incorporating IFRS into the US financial reporting model. A decision can lead to correct or incorrect action. However, as articulated by many SEC constituents, uncertainty associated with repeated delays and hence ‘no decision’ by the SEC is clearly not in the best interest of investors and other financial...
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