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The Differences Between The Gaap And The Ifrs Accounting Systems

1239 words - 5 pages

In the world of international finance there are two major accounting systems; GAAP, which stands for Generally Accepted Accounting Principles, and IFRS, which stands for International Financial Reporting Standards. The United States prefers GAAP while the European market, as well as many other countries, prefers IFRS. By 2015 the Securities Exchange Commission is anticipating a total transfer to IFRS in the United States. Though the differences between GAAP and IFRS are few, they could affect accuracy of financial reporting throughout the world. It is important to understand the differences and similarities between both GAAP and IFRS if one is to globalize ones market (Logue).
What is IFRS, and what is its significance in the world market? In 2001 the International Accounting Standards Board, or IASB, was created to develop a set of standards by which global financial statuses could be reported. According to financialstabilityboard.org, this set of standards, known as the International Financial Reporting Standards, or IFRS, falls under the jurisdiction of the IFRS Foundation, which is a non-profit, private and independently run entity that exists for the public interest, is based on four principle objectives. The first is to develop a single set of international financial reporting standards (IFRS). This set would be high in quality, readily understandable, easily enforceable, and acceptable world-wide. The second objective is to encourage the use of this set of standards in the international business world. Thirdly, the ISAB would like to monitor the needs of different sizes and types of businesses in different settings. The fourth objective is to promote the adoption of the IFRS by converging national accounting standards with the IFRS (International Financial).
Furthermore, a body of Trustees, each of whom differs from the others both professionally and geographically, oversees the IFRS Foundation and takes responsibility for making sure that the IASB remains independent and also that the organization is fiscally solvent. A Monitoring Board of public officials ensures the accountability of the Trustees. The IASB further develops and keeps current those accounting requirements that are the IFRS. A Stringent process is utilized to ensure the geographical diversity of the sixteen members. While IFRS are enforceable and globally accepted, the IASB does not have the authority to force anyone to use these standards. However, complying with IFRS requires that all standards and interpretations of IFRS be observed. The IASB created IFRS in the best interest of the public. Through due process, the IASB engages with regulatory bodies, investors, business leaders, and the world-wide accountancy profession. In addition, the global standard-setting community is also consulted. In short, while no country or entity is required to participate using IFRS, the Foundation does offer a set group of high-quality accounting standards understandable to the...

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