The U.S adopting the International Financial Reporting Standards (IFRS).
Accounting is molded by the political and economic factors. The International Accounting Standards Boards (IASB) has attained almost global adoption of its International Financial Reporting Standards (IFRS). IFRS is a broad set of financial reporting standards. Although most countries around the globe have continued to adopt IFRS accounting standards, the U.S is still unwilling to include IFRS in its financial reporting system completely. It is important for the U.S to include IFRS in its accounting reporting system because it is the greatest capital market in the globe.
IFRS appear to be set of high-quality bookkeeping guidelines that would perfectly be implemented consistently by the Public Corporations worldwide to ensure that they are convened by the capital markets around the globe. Because there is no agreement as to what comprises high-quality bookkeeping standards, IFRS are assumed to be of high quality because they exemplify a gathering of the globe's best accounting standards and are presumed to be more capital market leaning than many accounting standards. It is suggested that the adoption of the IFRS is related to high accounting quality. For instance, according to Barth et al., (2012) companies that adopt IFRS willingly show fewer incomes management, more timely loss realization and higher value significance of accounting income. The principle-grounded nature of IFRS inspires companies to report financial information that better mirrors the economic substance over form, thus promoting greater transparency. Moreover, research has found that IFRS enables comparison of financial statement across nations and markets, which is a constituent of high-quality financial reporting (Barth et al., 2012).
Pros of IFRS adoption
Simplicity and bookkeeping benefits
Under IFRS, financial users, including the public can comprehend the financial statements because they are not complicated. In fact, IFRS has less than 3,000 pages of standards and rules compared to at least 25,000 ages that generally accepted accounting principles (GAAP) utilizes (Brown, 2011). IFRS utilizes two-step principles for income recognition, while GAAP has a particular step-by-step approach for recognizing income. Under IFRS, firms can capitalize development and research costs, while in GAAP, they must expense these costs. Cost capitalization empowers the balance sheet as well as the income statement. Moreover, the fact that IFRS enhance firms to report the fair market value of asset less accrued depreciation, while GAAP permit reporting of costs less accrued depreciation strengthen a firm’s balance sheet.
Adopting IFRS for accounting statements planning permit American firms to freely compare their financial statement to those of other countries using IFRS. Public corporations and global medium-sized...