In keeping with an article on Diffen.com, over 110 international locations use IFRS, whereas the USA continues to make use of GAAP. Typically Accepted Accounting Ideas (GAAP) are the rules that accountants observe in the USA for getting ready and summarizing monetary statements; IFRS is a single set of world-wide accounting requirements that enables corporations to report in a single language to the remainder of the world, thus simplifying the reporting course of. The U.S. Securities and Alternate Fee (SEC) is seeking to change to IFRS within the very close to future (“GAAP vs IFRS”). The U.S. is among the most affluent international locations on this planet and it continues to develop. Why would it not not undertake IFRS if it does enterprise with so many different international locations? In any case, IFRS simplifies the rules that accountants use by permitting corporations to make use of only one reporting language all through the world. With lots of of nations and languages, IFRS is a will need to have set of requirements for accountants to observe. There are fairly just a few variations between GAAP and IFRS, and outlining why the USA ought to change over to IFRS is kind of essential.
The primary main motive that the USA wants to contemplate switching from GAAP to IFRS is the going concern assumption. Going concern is the belief that companies will proceed to function for the foreseeable future or at the least lengthy sufficient to perform their targets as a enterprise. The enterprise assumes that it’ll proceed to perform for at the least the following 12 months or so and produce monetary statements below the framework of IFRS. The difficulty with GAAP is the going concern assumption has not been well-developed in the USA below these tips (“GAAP vs IFRS”). It’s not clearly outlined inside GAAP and this could trigger a lot confusion. This is among the many causes that the U.S. ought to undertake IFRS. As a substitute of adjusting the requirements of GAAP, the U.S. might merely change its requirements to IFRS. IFRS and GAAP are already a lot alike, and the USA might merely make a change to learn itself. Going concern is essential, however the subsequent motive could also be crucial of all of them.
The subsequent motive that the USA ought to think about switching to IFRS is as a result of so many different international locations on this planet are utilizing these requirements. In keeping with a journal article from the World Journal of Enterprise Analysis, among the most vital international locations on this planet that use these requirements are Canada, France, Germany, and the UK (A. Fosbre, Kraft, & P. Fosbre, 2009). These international locations are included on an inventory of the numerous international locations which can be utilizing IFRS at present and extra international locations and areas world wide proceed to be added to this checklist. The US interacts and trades with these international locations very ceaselessly, and adopting the identical accounting requirements as these lots of of nations would make accounting procedures that a lot simpler. If the USA needs to get even additional forward sooner or later, then it should undertake IFRS. As time goes on, an increasing number of international locations will begin to use IFRS. Many international locations will proceed to do enterprise with the U.S., however they are going to be much more glad if the U.S. adopts IFRS. This remaining motive will spotlight why.
A remaining motive that the USA ought to think about switching over to IFRS is that it provides the U.S. the aggressive benefit that it wants to stay one of many prime economies on this planet. Utilizing IFRS over GAAP will give the USA a bonus over the international locations that do not use IFRS and a greater benefit than it presently has with GAAP. As said in an article on Markspaneth.com, IFRS has the best high quality of data out there to traders, regulators and different stakeholders, and is taken into account the “gold customary” (Henning 2010). That is very intriguing with regards to traders and different vital stakeholders. Traders need to put money into corporations which can be clear and excessive in high quality, and IFRS assures simply that. If the USA doesn’t change to IFRS within the close to future, it might see its financial dominance take a large hit.
In abstract, IFRS has turn out to be the gold customary in at present’s accounting world. The Typically Accepted Accounting Ideas (GAAP) that the USA continues to make use of are acceptable, however they won’t get the U.S. forward. Too many international locations on this planet use IFRS and that quantity continues to develop every year. It’s a aggressive world at the moment, and the USA might want to make a change if it needs to keep up its standing as a prime economic system on this planet.
Fosbre, Anne B., Ellen M. Kraft, and Paul B. Fosbre. “THE GLOBALIZATION OF ACCOUNTINGSTANDARDS: IFRS VERSUS US GAAP.” GLOBAL JOURNAL OF BUSINESS RESEARCH 3 (2009): 61-71. Internet.
“GAAP vs IFRS.” Diffen.com. Diffen LLC, Internet. 4 Nov 2015.
Henning, Steven L. “Govt View, Why the US Should Undertake Worldwide Monetary Reporting Requirements.” MarksPaneth. 16 Mar. 2010. Internet.