Research Paper on "Convergence of GAAP and IFRS"
Research Paper 4 pages (1144 words) Sources: 3
[EXCERPT] . . . .
convergence of GAAP and IFRSIFRS, GAAP and convergence
The two acronyms stand for International Financial Reporting Standards and for Generally Accepted Accounting Practices. The International Financial Reporting Standards were created by the International Accounting Standards Board and they represent a set of principles, rules and regulations on reporting and accounting. The aim of these standards is that of creating a "single set of high-quality, understandable, enforceable and globally accepted financial reporting standards based upon clearly articulated principles" (Website of IFRS, 2010).
The Generally Accepted Accounting Principles are the reporting regulations used within the United States and some other countries. Their global presence is reduced in comparison to that of the IFRS and their popularity is registering significant decreases. Today, emphasis is being placed on the convergence of the two and the creation of a globally normalized reporting system.
Throughout the past recent years, efforts have been intensified in the direction of a convergence between IFRS and GAAP. The number of countries subscribing to the regulations of IFRS has significantly increased and by 2013, their total numbers are expected to be around 150 states. Before adopting the International Financial Reporting Standards, countries traditionally form their own divisions to investigate the current reporting systems in the country and to develop a plan for convergence to the IFRS. The convergence plan usually spreads out through a duration of several years. Within the United States of America, the convergence process was commenced by the Securitie
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2. Differences between IFRS and GAAP
The process of convergence is slow and implies tedious work. One of the reasons which created delays in the competition of the convergence is given by the differences between International Financial Reporting Standards and the Generally Accepted Accounting Principles. Some of the existent differences have been resolved throughout the past recent years, but some of them continue to raise difficulties through today. The most relevant differences which continue to exist are as follows:
a. General approach -- in case of the IFRS, the general approach is a principles-based one, whereas the general approach in the case of GAAP is a rule-based one
b. Comparative information -- the IFRS requires one year of comparative information, whereas the GAAP does not take an official stand in this aspect (SEC does however state a three-year requirement for comparative information)
c. Extraordinary items -- they are prohibited by the IFRS but accepted as rare by the GAAP
d. Jointly controlled entities -- IFRS allows both proportionate consolidation as well as equity, whereas GAAP normally requires the equity method
e. Revenue recognition -- IFRS contains 18 principles, whereas GAAP are wider as they are industry specific
f. Development costs -- capitalized and amortized under IFRS and incurred with GAAP
g. Property, plant and equipment -- IFRS permit revaluation of the assets, whereas GAAP do not
h. Inventories -- differentiated by the use of LIFO (last in, first out) as IFRS do not permit it whereas GAAP do
i. Investment property -- under the IFRS, the investment property is measured at fair value or depreciated cost, whereas under GAAP, it is only measured as depreciated historical cost (Robertson, 2009).
3. Similarities between IFRS and GAAP
In spite of… READ MORE
Quoted Instructions for "Convergence of GAAP and IFRS" Assignment:
Prepare a 4 page paper in APA style format on the convergence of GAAP and IFRS. You should respond to the following:
*****¢ Describe IFRS and GAAP and what convergence means.
*****¢ Discuss at least three significant differences between IFRS and GAAP.
*****¢ Discuss at least three similarities between IFRS and GAAP.
Identify three potential risks of IFRS and GAAP convergence
How to Reference "Convergence of GAAP and IFRS" Research Paper in a Bibliography
“Convergence of GAAP and IFRS.” A1-TermPaper.com, 2010, https://www.a1-termpaper.com/topics/essay/convergence-gaap-ifrs/5768846. Accessed 5 Oct 2024.
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Sat, Oct 5, 2024
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