TheUnited States business entities and other institutions have to takeinto regard the matter of principles of global accounting as well asthe consequences that these principles have on an extensive array ofconcerns that pertains day to day industry management. Theseorganizations are obliged to assess a number of necessities allied tocurrent facts comprehended in financial statements of units whileconverting to International accounting Principles so as to establishthe effect of the conversion (Lindberg& Seifert, 2010).Having said that, this paper looks at importance of converting GAAPto IFRS basing on the perspective of a company, as well as thebenefits that the U.S. corporations will obtain by this conversion.Besides, the paper discusses other issues related to GAAP and IFRS inrelation to financial reporting methods and issues of conversion onaccounting for leases by the lessees in terms of supporting FinancialAccounting Standards Board (FASB) position.
Conversionof Generally Accepted Accounting Principles (GAAP) to InternationalFinancial Reporting Standards (IFRS) is an important step for theU.S. companies. This is so because there are quite a number ofbenefits that the U.S. corporations will obtain. To start with, everynation has come up with a suite of accounting standards over a periodof time that is best known to it and can only be functioned withinits boundaries (Lindberg& Seifert, 2010).These standards act as a basic foundation for recounting thefinancial level of corporations that operate within the boundaries ofthese nations. These principles are known as GAAP. These principlesin the U.S. are frequently known as ‘US GAAP’[ CITATION Stu10 l 1033 ].All in all, there is a great importance for converting GAAP to IFRS.This is primarily for the fact that the U.S. GAAP can no longer beassumed to be the core courses of assessing various businessentities. The U.S. companies need to progressively take intocontemplation international accounting principles as well as theinferences they have, on the matters pertaining to any commercialoperation (Nelson, 2003). IFRSis progressively more important now to numerous the US industries asthey involve in cross-border M&A, account to their non-USshareholders, as well as administer their foreign businesses.InternationalFinancial Reporting Standards (IFRS) are well known InternationalAccounting Principles (Nelson, 2003). Some of the benefits that theU.S. corporations will benefit from converting GAAP to ISFR arediscussed here. First, IFRS will lead to a cheap cost of investment,since there will be application of the same principles irrespectiveof locality. This will eventually lead to overwhelmingly reduced costas well as duration of concerning various principles of accounting.In addition, the U.S. corporations will benefit in a sense that therewill be improved info on making assessments using just one accountingprinciples set. International Financial Reporting Standards will aswell expedite more precise appraisals to external rivals thusbenefiting the U.S. companies by augmenting their existing reportingwith interpretation founded on IFRS[ CITATION Stu10 l 1033 ].
Thereare a few financial reporting differences between the U.S. GAAP andIFRS, though these bodies seem to be more alike than they areunalike. One of these financial differences is InternationalAccounting Standards 27 under International Financial ReportingStandards (IFRS) needs a trunk to depict amalgamated financialstatements for affiliates it rules by means of identical accountingdogmas. On the other hand, the U.S. GAAP does not need a parent aswell as divisions to adapt their accounting dogmas. IFRS would be somuch beneficial to financial statement users [ CITATION Stu10 l 1033 ].IFRS is byand largeregarded as being more values-based in proclivity but theU.S. GAAP is viewed as being anchored on rules than values. Onceagain, IFRS is beneficial to financial statement users, since it isbased on ethics rather than rules. Another financial reportingdeference between the U.S. GAAP and IFRS is based to lawyers.InternationalAccounting Standards 32 under IFRS entails adaptable dues mechanismsto be divided in their liability as well as equity modules atissuance time. On the other hand, under the U.S. GAAP, adaptable duesmechanisms are to be regarded exclusively as a liability, apart fromwhen securities are separable. This means that the ratio of equity todues manages the evasion prerequisites of a treaty of finance thedisposableoutcome of anamendment to IFRS from the U.S. GAAP is thataninvestor’shazard is augmented whereas the debtor’s risk ofevasion is lessened. This difference is also a benefit to financialstatement users. There are possible problems that the U.Scorporations may encounter when converting their financial statementsto IFRS.
Afew probable effects that the convergence of GAAP and IFRS will haveon lease accounting exist. One effect of the convergence is thatthere will not be a weighty modification in the manner that leasesare accounted for since a factual change between these principleslacks when equating the total cost of the change between IFRS andGAAP lease responsibilities to GAAP aggregate resources and to IFRSaggregate resources. Another long-term conversion issue is under IAS17 Lease Taxonomy, the taxonomy of a lease is dependent on theconstituent of the contract. These are explicitindicators. It meansthat the taxonomy of a lease is dependent on the lease acquiring somestated standards.
Deming, S. H. (2010). International Accounting Standards Law. Michigan: Adventure Works Press.
Lindberg,D. L., & Seifert, D. L. (2010). A new paradigm of reporting onthe horizon: International financialreportingstandards (IFRS) andimplications for the insurance industry. JournalOf Insurance Regulation,28(2), 229-252.
Nelson,M. W. (2003). Behavioral evidence on the effects of principles- andrules-based