Globalization, the Sarbanes-Oxley Actthe SEC adoption of international standards, and the economic and financial meltdown in recent years have been exerting pressure on a number of countries, including the United States, to eliminate the gap between the International Financial Reporting Standards IFRS and the U. Generally Accepted Accounting Principles GAAP. Such initiatives have consequences on the world of accounting diversity, and the standards convergence of the U. GAAP along with the IFRS largely impacts corporate management, investors, stock marketsaccounting professionals and accounting standards setters.

Additionally, the convergence of accounting standards is changing the attitudes of CPAs and CFOs toward the harmonization of international accounting, affecting the quality of the International Accounting Standards and the efforts made toward the goal of convergence of GAAP and IFRS standards. Financial Reporting Financial reporting standards and requirements vary by country, which creates inconsistencies in financial reporting.

This problem becomes more prevalent for investors trying to identify accounting reporting differences when they are considering providing funding to capital-seeking companies that follow the accounting standards and financial reporting of the country in which they are doing business.

The International Accounting Standards Board IASB seeks a workable solution to alleviate the existing complexity, conflict and confusion created by inconsistency and the lack of streamlined accounting standards in financial reporting.

The main difference between the GAAP and the IFRS is the approach each takes to the standards. The GAAP is rules-based while the IFRS is a principles-based methodology. The GAAP consists of a complex set of guidelines attempting to establish rules and criteria for any contingencywhile the IFRS begins with the objectives of good reporting and then provides guidance on how the specific objective relates to a given situation.

The Consequences of Initiatives on Worldwide Accounting Diversity The convergence and subsequent change of accounting and reporting standards at the international level impact a number of constituentsincluding corporate management, investors, stock markets, accounting professionals and accounting standards setters and agencies. Impact on Corporate Management Corporate management will benefit from simpler, streamlined standards, rules and practices that apply to all countries and are followed worldwide.

The change will afford corporate management the opportunity to raise capital via lower interest rates while lowering risk and the cost of doing business.

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Impact on Investors Investors will have to re-educate themselves in reading and understanding accounting reports and financial statements following the new internationally accepted standards. At the same time, the process will provide for more credible information and will be simplified without the need for conversion to the standards of the country. Further, the new standards will increase the international flow of capital.

Impact on Stock Markets Stock markets will see a reduction in the costs that accompany entering foreign exchangesand all markets adhering to the same rules and standards will further allow markets to compete internationally for global investment opportunities. Impact on Accounting Professionals The shift and convergence of the current standards to internationally accepted ones will force accounting professionals to learn the new standard, and will lead to consistency in accounting practices.

Impact on Accounting Standards Setters The development of standards involves a number of boards and entities that make the process longer, more time consuming and frustrating for all parties involved. Once standards have converged, the actual process of developing and implementing new international standards will be simpler and will eliminate the reliance on agencies to develop and ratify a decision on any specific standard.

Arguments for and Against the Convergence of International Accounting Standards Arguments for the convergence are a renewed clarity, b possible simplification, c transparency and d comparability between different countries on accounting and financial reporting. This will result in an increase of capital flow and international investments, which will further reduce interest rates and lead to economic growth for a specific nation and the firms with which the country conducts business.

Timeliness and the availability of uniform information to all concerned stakeholders will also conceptually make for a smoother and more time-efficient process.

Additionally, new safeguards will be in place to prevent another national or international economic and financial meltdown. Arguments against accounting standards convergence are a the unwillingness of the different nations involved in the process to collaborate based on different cultures, ethics, standards, beliefs, types of economies, political systems, and preconceived notions for specific countries, systems and religions; and b the time it will take to implement a new system of accounting rules and standards across the board.

The Quality of International Accounting Standards The Securities and Exchange Commission 's SEC goals and efforts both domestically and internationally have been to consistently pursue the achievement of fair, liquid and efficient capital marketsthus providing investors with information that is accurate, timely, comparable and reliable.

One of the ways the SEC has pursued these goals is by upholding the domestic quality of financial reporting as well as encouraging the convergence of the U. Research indicates that firms that apply the international standards show the following: Additionally, these firms have less earnings managementmore timely loss recognition and more value relevance in accounting amounts compared to domestic U. Therefore, firms adhering to the IFRS generally exhibit higher accounting quality than when they previously followed the GAAP.

FASB's original mission has always been to establish the U. GAAP and standards for accounting and financial reporting; however, the mission has been enhanced to include the convergence and harmonization of U.

How to do nifty futures trading is global stock market crash opposition to the convergence from all stakeholders involved, including accounting professionals CPAs, auditors etc. There are various reasons for such resistance to change, whereby traders binary options profit some are pertinent to the accounting profession, some to corporate management and some are shared by both.

The new set of standards that will be adapted will need to provide transparency and full disclosure similar to the U. Standards, and it should also ensure broad acceptance. CPAs' Attitudes Toward Harmonization of International Accounting Some reasons for the U. Culture in this context is defined by the FASB as " the collective programming of the mind which distinguishes the members of one human group from another.

The accounting value dimensions used to define a country's accounting system are based on the country's culture; they consist of the following:. The first two relate to authority and enforcement of accounting practice at a country level, while the last two relate to the measurement and disclosure of accounting information at a country level.

Examining those dimensions and factors that impact an accounting system, it becomes evident that cultural differences have a strong impact on the accounting standards of another nation, thus complicating the standards convergence.

The GAAP have been adhered to for years, and this is the knowledge that accounting professionals are familiar with. A profitable strategy binary options touch no touch would require learning a new system, which most people would be resistant to.

Another reason why U. Standards because the U. Standards are rules-based while the IFRS methodology is principles-based. With all of this said, the converged international accounting standards should provide for less complexity, conflict and confusion, which is created by the inconsistency and lack of streamlining that exists with two different accounting systems. CFOs' Attitudes Toward Harmonization of International Accounting CFOs are not embracing this change because of the costs receive sms and earn money. There are specifically two areas that are directly impacted: Another cost involved in the transition and change to the IFRS is the public's perception of the integrity of the new converged set of standards.

The SEC reporting requirements will also have to be adjusted to reflect changes of the converged system. The convergence is based is on the following beliefs: Company boards, in an effort to best serve their investors' needs, should contribute to the convergence process by replacing old standards with the new jointly developed ones.

As previously mentioned, the major difference between GAAP and IFRS comes down to one being rules- based and citi velocity fx options other being principles-based; this has posed a challenge in areas such as consolidation, the income statementinventory, the earnings-per-share calculation and development costs.

In consolidation, IFRS favors a control model whereas the U. GAAP prefers a risks-and-reward model. IFRS does not segregate extraordinary items in the income statement, but U. GAAP shows london breakout system forex as net income. IFRS does not allow LIFO for inventory valuation whereas the U.

GAAP provides the option of either LIFO, average cost or FIFO. Under the IFRS the EPS calculation does not average the individual interim period calculations, but the U.

Regarding developmental costs, IFRS capitalizes them if certain criteria are met while the U. GAAP considers them expenses. It has been agreed to " a undertake a short-term project aimed at removing a variety of individual differences between U.

GAAP and International Financial Reporting Standards' IFRSwhich include International Accounting Standards, IASsb remove other differences between IFRSs and U. GAAP through coordination of their future work programs, c continue progress on the joint projects that they are undertaking, and d encourage their respective stock option ifrs disclosure bodies to coordinate their activities" "When Accounting Finally Becomes Global," The CPA Journal 78 9 FASB 3 states that the Sarbanes Oxley Act's requirement of the SEC to investigate the feasibility of implementing a more principles-based approach to accounting means that the U.

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Both FASB and IFRS have identified short- and long-term convergence projects, including 20 reporting areas where differences have been resolved binary options strategies finance zarada completed. Further, the FASB provides clarification on the GAAP by categorizing in descending order of authority as shown in FASB No 5.

The Bottom Line Despite documented research indicating a higher accounting quality experienced by firms that either follow the IFRS or switched to the IFRS from the GAAP, there is a doubt and concern from the FASB regarding the application and implementation of principle-based standards in the U.

A solution may be that the IFRS should accept some FASB standards to accommodate the needs of the U. Despite the convergence efforts made on financial performance reporting, it appears that the main issues lie with the difference in the approach of the U. The IFRS is more dynamic and is continuously being revised in response to an ever-changing financial environment. It's anyone's guess how this convergence will evolve and impact the accounting profession in the U.

From a legal perspective, companies will be required to disclose qualitative and quantitative information about contracts with customers, including a maturity analysis for contracts extending beyond a year, as well as the inclusion of any significant judgments and changes in judgments made in applying the proposed standard to those contracts. Maybe the answer lies in the need to consider a more in-depth study and an examination of the factors influencing the molding or development of a country's accounting system.

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The Impact Of Combining The U. GAAP And IFRS By Nicolas Pologeorgis Share. The accounting value dimensions used to define a country's accounting system are based on the country's culture; they consist of the following: Professionalism versus statutory control Uniformity versus conformity Conservatism versus optimism Secrecy versus transparency The first two relate to authority and enforcement of accounting practice at a country level, while the last two relate to the measurement and disclosure of accounting information at a country level.

Understand the specific steps that have been taken in hopes of converging the GAAP and the IFRS accounting standards, despite the philosophically and culturally based methodological differences Learn about the purpose of the IFRS, as well as its benefits, goals and fundamental difference from the U.

International Financial Reporting Standards are accounting rules and guidelines governing the reporting of different types of accounting transactions. The term accounting principles refers to rules and guidelines companies use to help them record their business and financial transactions. Financial accounting is the process of gathering, recording, summarizing and reporting financial data relating to a business.

The ultimate goal is to accurately report the financial picture and Examine the divergence of GAAP and adjusted earnings in the years leading up to to identify the factors causing the gap to widen.

Read about private equity accounting and how it is different than that of other investment vehicles. The nature of private equity makes a difference. Learn more about the generally accepted accounting principles, standards and procedures that companies use to compile their financial statements. Review the fundamental differences between the International Financial Reporting Standards, or IFRS, and the generally accepted Read about some of the primary methodological and practical differences between IFRS and GAAP, the two primary financial Learn how accounting standards differ between the International Financial Reporting Standards, or IFRS, and generally accepted See why an American company might switch from the U.

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GAAP system of accounting and adopt the international-based IFRS for At the conceptual level, IFRS is considered more of a principles-based accounting standard in contrast to U. Learn how the use of international financial reporting standards IFRS affects financial ratios compared to U. An expense ratio is determined through an annual A hybrid of debt and equity financing that is typically used to finance the expansion of existing companies.

A period of time in which all factors of production and costs are variable. In the long run, firms are able to adjust all A legal agreement created by the courts between two parties who did not have a previous obligation to each other. A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. A statistical technique used to measure and quantify the level of financial risk within a firm or investment portfolio over No thanks, I prefer not making money.

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