U.S. Gaap vs. Ifrs

Thao Vu Accounting 303 October 9, 2012 US generally accepted accounting principles vs. IFRS The Financial Accounting Standards Board (FASB) developed the join States Generally judge Accounting Principles (generally accepted accounting principles) has been exercised in US corporations for over 75 years. It allows monetary statements from all corporations to be compared accurately and efficiently, and serves as a guideline for accountants. generally accepted accounting principles is lento being taken out for the International Financial Reporting Standards (IFRS) as global business goes across the world. generally accepted accounting principles applies only to join States financial reporting. generally accepted accounting principles and the international rules pee-pee close similarity.The differences can lead a financial statement drug abuser to believe incorrectly that a company A make more money than company B because they report using distinguishable rules. The difference b etween generally accepted accounting principles and IFRS is the means of inventory valuation. In this case, generally accepted accounting principles permits accountants to use Last-in First-out, First-in First-out, and weighted average. Under IFRS, LIFO is not allowed. If United States corporations are forced to switch to LIFO under a universal accounting standard, they will run through large increases in income tax. The use of LIFO allows them to avoid larger income taxes in times of inflation.Another example of the unlike procedures between IFRS and generally accepted accounting principles is in the evaluation of intangibles. GAAP focuses mostly on recording them at a set price, and amortizing that value over the amount of useful life of the intangible. IFRS stresses constant re-evaluation of the price, and recognition at the intangibles good value (Miska). One of the greatest benefits of adopting IFRS is the fact that the Securities Exchange Commission (SEC) and the Internation al Accounting Standards Board (IASB) would be working together to develop the best, most useful accounting principles.Converting to an accounting standard that is less rule-based, and more principle oriented would definitely save American businesses trouble as well. IFRS authorize three radical accounting models I. Current Cost Accounting, under Physical Capital Maintenance at all levels of inflation and deflation under the Historical Cost paradigm as well as the Capital Maintenance in Units of Constant buying Power paradigm. II. Financial capital tutelage in nominal monetary units, i. e. globally implemented Historical cost accounting during low inflation and deflation only under the traditional Historical Cost paradigm III. Financial capital keep in units of constant purchasing power, i. e. , Constant Item acquire Power Accounting CIPPA in terms of a Daily Consumer Price Index or daily rate at all levels of inflation and deflation under the Capital Maintenance in Units of C onstant Purchasing Power paradigm and Constant Purchasing Power Accounting CPPA during hyperinflation under the Historical Cost paradigm. What are the advantages of IFRS?First, it allows a company to compare itself to competitors overseas, because they will all be using the same financial language (IFRS FAQs). Second, a company that has offices all around the world will be able to use one set of standards rather than many diametrical sets unique to each country. Third, it may make it easier for companies to grow globally because the accounting methods will be the same everywhere and time wont hire to be spent learning new rules. The projects listed below are a move toward achieving a common accounting framework, a step in the globalisation of business and investment. Financial instruments * Revenue recognition * Leases * Statement of comprehensive income * Fair value measurement * Derecognition * Consolidations * Post-employment benefits * Balance sheet Netting * Financial sta tement demo * Discontinued operations * Financial instruments with characteristics of equity * Insurance contracts * Emissions trading schemes Currently, the first three projects (in bold) are priority projects due to the existing divergence of US GAAP and IFRS and the withdraw for improvements in the standards they replace.In conclusion, going from GAAP to IFRS will take time, money, training, and patience, but it will be well worth it in the long run for the United States and international businesses. Globalization of business is growing and students and professionals need to become aware of what the IFRS will mean in their careers. As of 2011, IFRS will be eligible for interrogation in the CPA exam so, it is important for students to understand the implications of the newest set of global standards (IFRS FAQs).In a profession that needs a lifetime commitment to learning, IFRS is not incompatible than Sarbanes-Oxley (SOX) and GAAP before it it is one more academic step for ac countants to overcome and master during their professional career. Sources IFRS FAQs. IFRS. com. 2011. Web. 09 Nov. 2011. Imhof, Rori. Accounting Standards Go Global. Articlebase. com. Web. 10 Nov. 2011. Kaiser, James G. US GAAP IFRS Convergence. PWC. com. Web. August 2012. Miska, Kevin. US GAAP vs. IFRS. Articlebase. com. Web. 20 Nov. 2010.U.S. Gaap vs. IfrsThao Vu Accounting 303 October 9, 2012 US GAAP vs. IFRS The Financial Accounting Standards Board (FASB) developed the United States Generally current Accounting Principles (GAAP) has been used in US corporations for over 75 years. It allows financial statements from all corporations to be compared accurately and efficiently, and serves as a guideline for accountants. GAAP is tardily being taken out for the International Financial Reporting Standards (IFRS) as global business goes across the world. GAAP applies only to United States financial reporting. GAAP and the international rules have close similarity.The differences c an lead a financial statement user to believe incorrectly that a company A make more money than company B because they report using different rules. The difference between GAAP and IFRS is the means of inventory valuation. In this case, GAAP permits accountants to use Last-in First-out, First-in First-out, and weighted average. Under IFRS, LIFO is not allowed. If United States corporations are forced to switch to LIFO under a universal accounting standard, they will have large increases in income tax. The use of LIFO allows them to avoid larger income taxes in times of inflation.Another example of the different procedures between IFRS and GAAP is in the evaluation of intangibles. GAAP focuses mostly on recording them at a set price, and amortizing that value over the amount of useful life of the intangible. IFRS stresses constant re-evaluation of the price, and recognition at the intangibles modal(a) value (Miska). One of the greatest benefits of adopting IFRS is the fact that the Securities Exchange Commission (SEC) and the International Accounting Standards Board (IASB) would be working together to develop the best, most strong accounting principles.Converting to an accounting standard that is less rule-based, and more principle oriented would definitely save American businesses trouble as well. IFRS authorize three basic accounting models I. Current Cost Accounting, under Physical Capital Maintenance at all levels of inflation and deflation under the Historical Cost paradigm as well as the Capital Maintenance in Units of Constant Purchasing Power paradigm. II. Financial capital maintenance in nominal monetary units, i. e. globally implemented Historical cost accounting during low inflation and deflation only under the traditional Historical Cost paradigm III. Financial capital maintenance in units of constant purchasing power, i. e. , Constant Item Purchasing Power Accounting CIPPA in terms of a Daily Consumer Price Index or daily rate at all levels of inflation and deflation under the Capital Maintenance in Units of Constant Purchasing Power paradigm and Constant Purchasing Power Accounting CPPA during hyperinflation under the Historical Cost paradigm. What are the advantages of IFRS?First, it allows a company to compare itself to competitors overseas, because they will all be using the same financial language (IFRS FAQs). Second, a company that has offices all around the world will be able to use one set of standards rather than many different sets unique to each country. Third, it may make it easier for companies to grow globally because the accounting methods will be the same everywhere and time wont need to be spent learning new rules. The projects listed below are a move toward achieving a common accounting framework, a step in the globalization of business and investment. Financial instruments * Revenue recognition * Leases * Statement of comprehensive income * Fair value measurement * Derecognition * Consolidations * Po st-employment benefits * Balance sheet Netting * Financial statement intro * Discontinued operations * Financial instruments with characteristics of equity * Insurance contracts * Emissions trading schemes Currently, the first three projects (in bold) are priority projects due to the existing divergence of US GAAP and IFRS and the need for improvements in the standards they replace.In conclusion, going from GAAP to IFRS will take time, money, training, and patience, but it will be well worth it in the long run for the United States and international businesses. Globalization of business is growing and students and professionals need to become aware of what the IFRS will mean in their careers. As of 2011, IFRS will be eligible for interrogation in the CPA exam so, it is important for students to understand the implications of the newest set of global standards (IFRS FAQs).In a profession that needs a lifetime commitment to learning, IFRS is not different than Sarbanes-Oxley (SOX) and GAAP before it it is one more academic step for accountants to overcome and master during their professional career. Sources IFRS FAQs. IFRS. com. 2011. Web. 09 Nov. 2011. Imhof, Rori. Accounting Standards Go Global. Articlebase. com. Web. 10 Nov. 2011. Kaiser, James G. US GAAP IFRS Convergence. PWC. com. Web. August 2012. Miska, Kevin. US GAAP vs. IFRS. Articlebase. com. Web. 20 Nov. 2010.