Essay on Pros and Cons of Gaap and Ifrs Convergence

778 Words Oct 27th, 2012 4 Pages
Pros & Cons of GAAP and IFRS Convergence
The International Accounting Standards Board (IASB) was formed in an attempt to bring uniform accounting standards within international countries through its issuing of the International Financial Reporting Standards (IFRS). Today, over 100 countries including Canada, India, and Japan have adopted these standards for financial reporting. The growth of multinational companies such as Coca Cola and the increasing desire of cross-border investing have made it apparent that the U.S.accounting standards known as the Generally Accepted Accounting Principles (GAAP) issued by the Financial Accounting Standards Board (FASB) can no longer remain separate from IFRS. Under the request of the Securities and
…show more content…
As the IASB will have the responsibility of creating new accounting standards after the convergence is achieved, another advantage that arises is the prevention of influence from special interest groups since the regulating of IASB is made up of many international agencies alongside FASB.
Although the integration of IFRS and GAAP bring advantages to businesses and investors alike, there are some disadvantages that should be recognized. Once the convergence is complete, accounting firms will have to figure out the costs of introducing IFRS to their employees, and universities will have to determine the costs of implementing IFRS into their accounting curriculums. There are also pending issues that need to be addressed in regards to the differences that GAAP and IFRS have, which could ultimately affect the uniformity of financial reporting. The accounting standards of GAAP are rule-based, whereas IFRS are more principle-based and allows companies to make decisions based on judgment. For example, in regards to revenue recognition, GAAP defers revenue until the earnings process is complete, and expenses are matched with revenue earned during the period. However, IFRS recognizes revenue at the occurrence of the sale. As a result of this

Related Documents