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International Financial Reporting Standards (IFRS)

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Abstract
In today’s business, markets are demanding increasing conformity due to world’s capital
markets tend to globalisation. This lead to the introducing of International Financial Reporting
Standards (IFRS) which is a comprehensive, principles-based system of accounting standards and
developed by the International Accounting Standards Board (IASB) as a common standards apply in
everywhere. However, only United States still remains its own U.S. Generally Accepted Accounting
Principles (U.S. GAAP) which is developed by Financial Accounting Standards Board (FASB) which
is not a rigid set of rules but flexible guidelines and are rules based. Recently, FASB has decided to
adopt IFRS in United States. Nevertheless, the convergences of US GAAP and IFRS have bring some
benefits which included increase comparability, reduce the complexity and reduce the international
differences of financial statement and problems which included loss contingency, dual reporting system
and human capital readiness. Currently, they have work together to achieve the converged solution for
Revenue Recognition and plan to achieve converged solution for Leases. At last, I also evaluate the
decision on the convergence of US GAAP and IFRS.

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Introduction
In today’s business, markets are demanding increasing conformity due to world’s capital
markets tend to globalisation. Thus, it becomes more difficult for the investors and creditors to make
comparison on companies’ financial statements among different countries. This, lead to the introducing
of accounting standards which is a guidelines regarding to the principles and methods on preparing the
financial statements to provide a true and fair view to the investors and creditors about the companies
economic performance (Tulsian 2006). Nevertheless, many countries have converted to and
implemented the International Financial Reporting Standards (IFRS), but, only United States is still
remains its own U.S. Generally Accepted Accounting Principles (U.S. GAAP) (Deegan 2012, pp25-33).
IFRS (Ball 2006) is a comprehensive, principles-based system of accounting standards which
is developed by the Interntational Accounting Standards Board (IASB), an independent organisation
which based in London, UK. They are committed in setting a single set of high quality, enforceable
standards that can apply equally to financial reporting by public companies globally in order to provide
general guidance on preparing financial statement (Scanlon & Patch 2010, p11). US GAAP (Luxottica
Group 2013) is a standard guideline of accounting rules for financial accounting and preparing
financial statements to private and public trading companies in United States. They are developed by
the Financial Accounting Standards Board (FASB) which is not a rigid set of rules but flexible
guidelines and are rules based. The idea of convergence between US GAAP and IFRS is actually due to
the collapsed of Enron and the scandals have shaken the complacency of American regulation to the
core. Therefore,in September 2002, when after joint meeting of IASB and FASB and issued the
‘Norwalk Agreement’ (Alexander, Britton & Jorissen 2011, p48) which affirmed their mutual
commitment to work towards converging the US GAAP and IFRSs (Picker et al. 2009, p24). The
purpose of the convergence is to develop common, high-quality standards with ultimate goal of a single
set of high-quality accounting standards (Derstine & Bremser 2010, p6). They are trying to eliminate
the differences between two standards in order to develop a common standard which is quality so that
investors can use the financial information to make a precise decision (Alexander, Britton & Jorissen
2011, p49; Pacter 2003). At the same time, they are trying to replace the weaker standards with
stronger standards to satisfy the needs of investors (Alexander, Britton & Jorissen 2011, p49).
The convergence of US GAAP and IFRS will bring some benefits to the investors and
creditors in United States. Firstly, it helps to increase the comparability of financial reports prepared
among different countries and providing better quality information on investment and credit decisions

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Abstract In today’s business, markets are demanding increasing conformity due to world’s capital markets tend to globalisation. This lead to the introducing of International Financial Reporting Standards (IFRS) which is a comprehensive, principles-based system of accounting standards and developed by the International Accounting Standards Board (IASB) as a common standards apply in everywhere. However, only United States still remains its own U.S. Generally Accepted Accounting Principles (U.S. GAAP) which is developed by Financial Accounting Standards Board (FASB) which is not a rigid set of rules but flexible guidelines and are rules based. Recently, FASB has decided to adopt IFRS in United States. Nevertheless, the convergences of US GAAP and IFRS have bring some benefits which included increase comparability, reduce the complexity and reduce the international differences of financial statement and problems which included loss contingency, dual reporting system and human capital readiness. Currently, they have work together to achieve the converged solution for Revenue Recognition and plan to achieve converged solution for Leases. At last, I also evaluate the decision on the convergence of US GAAP and IFRS. Introduction In today’s business, markets are demanding increasing conformity due to world’s capital markets tend to globalisation. Thus, it becomes more difficult for the investors and creditors to make comparison on companies’ financial state ...
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