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Ifrs As Global Mean For Financial Reporting

1322 words - 5 pages

AbstractThis paper explores the differences between the International Financial Reporting Standards and Generally Accepted Accounting Principals that all companies use to prepare financial statements. Now more than ever companies feel the need to be more globalized and expand into different markets within foreign countries, and in doing that their needs to be one set of accounting standards that all companies should be in compliance with; The United States operates under the GAAP standards, note that there are comparable differences between the two standards, but operating under IFRS standards would be very beneficial for the US because they would have a better understanding of the markets they are trying to capture if there is only one accounting language.IFRS are mandated standards by the International Accounting Standards Broad, and majority of foreign countries such as Russia, Australia, Europe, South Africa, and Saudi Arabia all are required to use IFRS. GAAP principles are set forth by the Financial Accounting Standards Board which is what the United States follows. Taking into consideration that the world and our economy is becoming more globalized, the SEC decided back in 2008 that by 2014 all US companies should operate under one set of accounting standards. Operation under the IFRS standards US would have a better understanding of the global market in which the are trying to operate in or expand to. Under one set of standards American and foreign countries would be able to compare financial statements which would aid them in producing foreign capital. Also, cost that some the companies have would be cut, many companies have to fill out two sets of financial statements which is not very cost effective, under one standard companies would only be required to fill out one book. As our market becomes more and more global it is vital that companies make the switch to IFRS, making it much easier to compare companies on a more broader scope.To many people International Financial Reporting Standards is often looked at as more "principles based" accounting method than Generally Accepted Accounting Standards, which is mainly a "rule based" system. GAAP tends to give companies a considerable amount of discretion in determining the assumption behind their accounting statements; for example items such as depreciation methods and inventory costing methods, which are things that can influence the bottom line at the end of the fiscal year by millions of dollars. Companies that use IFRS can basically the same financial statements when comparing its self to foreign competitors, which would allow the company to make easier comparisons. Also, companies with subsidiaries in other countries that require or permit IFRS may be able to use one accounting language company-wide instead of translating between the two standards. Due to globalization many companies have been leaning towards IFRA as the preferred set of accounting rules.There are considerable...

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