Converting from GAAP to IFRS 2400 words plus outline

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Business Finance

Description

Choose a company from the SEC EDGAR Web site https://www.sec.gov/edgar/searchedgar/webusers.htm for your Key Assignment to evaluate for the impact of convergence to IFRS.

Part 1

Deliverable Length: 1,200 words

Review the financial reports and notes of the company you have chosen from the EDGAR Web site. Using this company as your point of reference, provide general information on the following questions:

•Create an overview on IFRS.

•What will be some of the main concerns for your company as they move from U.S. GAAP to IFRS?

•Generate a list of differences that you would expect to see on your Income Statement and your Balance Sheet after the convergence process is complete.

•Describe what impact the convergence will have on your company’s inventory account (IAS 2).

•Describe some of the differences between IFRS and US GAAP regarding the accounting for financial instruments

•Give a minimum of two examples of how your company will be impacted by the conversion process (IAS 32, IAS 39 & IFRS 7)

Part 2

Deliverable Length:1,200 words

For this assignment, use the company you have chosen from the EDGAR Web site as your point of reference.

After the reporting period has ended, you could potentially encounter other events that will have impacts on your company (IAS 10).

•Describe the recognition and measurement differences currently existing between IFRS and U.S. GAAP.

•What impacts could these differences have on disclosure requirements?

Create an overview of considerations regarding income taxes that the company may encounter.

•Give 2 examples of areas you see as the greatest concern.

•What impact will the convergence process have on your company’s tax planning?

A key area of contention between IFRS and U.S. GAAP lies in the classification and measurement of leases.

•Describe the 2 main types of leases and where the differences lie.

•What impact will this have your company?

Give your opinion on the U.S. moving into IFRS.

•For the company you have selected, what do you see as the major advantages and disadvantages of convergence?

•Provide a minimum of 3 examples of each supported by your research.




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Explanation & Answer

Attached.

Running Head: CONVERSION FROM GAAP TO IFRS

Conversion from GAAP to IFRS
Name
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CONVERSION OF GAAP TO IFRS

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Part 1
Overview on IFRS.
The conversion from GAAP to IFRS will be of great impact to different sectors and parts of
the economy. For instance, software used for accounting purposes as well as training will be
heavily impacted. On this note, application of different methods of accounting may lead to
achievement of varying financial results and may even lead to an increase in the tax liabilities.
Analyzing financial statements, with the introduction of IFRS, may require great attention. In
this case, the IFRS requirements may sync up with certain versions of Microsoft while they may
not sync up with others. Companies in the U.S. became aware of the existence of IFRS not so
long ago, a decade or so ago probably. This happened when the matter about convergence came
up. IFRS in itself is of great significance to the U.S. companies since it began being planned for
the last few years.
Main concerns for Microsoft in conversion from U.S. GAAP to IFRS
One of the main concerns of Microsoft will be the fact that judgment will be required to be
given detailed explanations as well as analysis, which will be conducted by the management. The
judgment becomes a concern given the fact that the financial instruments in use in modern times
are complex in nature therefore requiring good understanding.
Differences expected on the Income Statement and Balance Sheet after the complete
convergence process.
Following the convergence from GAAP to IFRS, there are a few differences expected to
appear on the financial statements for the Microsoft Company, and in this case, income statement
and the balance sheet. These two financial statements will have a difference in the number of

CONVERSION OF GAAP TO IFRS

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sections in them. This is to mean that they will now be divided into five sections inclusive of the
business section, the discontinued operations section, the financing section, the income taxes as
well as the equity section compared to how they will have been previously. The other difference
will appear on the income statement and the cash flows statement which will be reconciled by
use of a fourth statement. Another difference will be seen in the business section of all the
statements where it will now be divided further into the operating and investing assets and
liabilities as well as the income and cash flows divisions. The operating section mentioned will
contain details of what the company finds essential to its business while the investing section
will contain details of investments that the company will find as integral to its business activities.
Several other differences will be seen in these statements. The balance sheet, for instance,
compared to how it listed total assets and liabilities, that portion will be scrapped out and instead
of having total assets and liabilities, the assets and liabilities in question will undergo breaking
down into business and financing assets and liabilities. The numbers in business assets and
liabilities will undergo further breakdown into investing and operating assets and liabilities.
Equity will be arrived at by deducting liabilities from assets as opposed to equalizing assets with
liabilities and equity like it has been done before. The income statement will also experience
several differences. The income statement in IFRS will undergo greater fragmentation therefore
having a statement of income that is more detailed and therefore, much easier to understand.
Impact of the convergence on Microsoft’s inventory account (IAS 2).
Observation of the standards by IFRS is an important part of ensuring that Microsoft fully
embraces IFRS into its everyday conducting of business, especially in the case of measuring the
costs of various items as well as the values of inventories. Inventory is usually used to create or

CONVERSION OF GAAP TO IFRS

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generate gross profits to the company. Conversion from GAAP to IFRS by companies in the
United States will lead to accounting standards changing as well. The idea of convergence of the
two standards, that is, GAAP and IFRS will help eliminate any inconsistencies that may have
been found when working with a single st...


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