The aim of developing international financial reporting standards (IFRS) was to ensure uniformity in the practice of accounting around the world and to certify that financial reporting languages are comparable and understandable across the globe.
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Write My Essay For MeA precise order in the accounts classification is not mandatory in IFRS financial position statement but a reverse liquidity order is generally recommended in reporting the assets of a firm. The key objective is to supply a financial statement to the users with a succinct understanding of the assets structure in the organization (Bonham, 2008). The reporting of the assets is followed by the reporting of the equity of the shareholders and the liabilities come last. The order of accounts therefore appears as indicated here:
The long term assets – the current assets – the shareholders equity – the long term liabilities – the current liabilities.
On the contrary, GAAP makes use of precise requirements of ranking the measurable liquidities. This therefore implies that, the assets that are highly liquid such as money will be given the first priority in the order. The shareholder equity comes at the last point in the order of reporting in the GAAP balance sheet. The following is the order:
Current assets – the long term assets – the current liabilities – the long term liabilities – the shareholder equity (Bonham, 2008).
The IFRS and GAAP conceptual frameworks do not differ in terms of the objective of financial reporting. In any organization that is a first time adopter of international financial reporting standards if in the past financial year, it complied with some although not all guidelines that are stipulated in IFRS and involved a reconciliation of specific figures from previous Generally Accepted accounting principles(GAAP) to IFRS. However, an organization is not a first time adopter if its financial statement complies with IFRS even though the auditor opinion disqualifies them in relation to non complicity with IFRS. Further, if the preparation of the statement for the previous year complied with GAAP and IFRS, the organization ceases to be a first time adopter if IFRS.
The terms that are commonly used under IFRS are synonymous with common stock and balance sheet
The statement of financial position in IFRS is the synonym to the balance sheet in GAAP while the term common stock in GAAP is the synonym to share capital ordinary in IFRS that implies to the common ownership stake. This is also the value of the equity which the owners acquire as an exchange with their money
The issues of important consideration in SEC in deciding whether the United States should adopt IFRS.
The future of the public companies in US with respect to International accounting standards is surrounded by uncertainties as a result of IFRS analysis results by SEC. according to the perceptions of some people, the indecision of SEC concerning IFRS creates a state of isolation and limitations to international capital availability for US organizations. The most important consideration being made at SEC is the gains attributed to to informal proposal that will pave way for a voluntary filing in supplemental material in the financial statements of US companies. The role of GAAP in financial statements is anticipated to be retained and investors, issuers as well as interested parties shall be consulted by SEC on the possibility of taking financial statements based on IFRS as an optional supplementary as they report to SEC (Paul, Jerry & Donald, 2015). Therefore, the GAAP financial information shall continue to be available to the investors while the alternative will be considered as optional as well as supplemental to the issuers. It is commonly appreciated that the provision of IFRS in a voluntary manner on supplemental basis bearing in mind the audit, the review of SEC as well as any other relevant regulatory scrutiny can serve a constructive purpose in enhancing the convergence of IFRS and GAAP, FAF and FASB. (Epstein & Eva, 2007). Permuting the issuers to embrace the information in IFRS is likely to indicate if people are in favor of the system and if that is the case, further steps in IFRS implementation can be considered forthwith. This is in consideration of retaining the role of FASB as well as the primacy of GAAP.
The rules regarding revenue recognition under IFRS versus GAAP
GAAP is keen in the maintenance of the principles that guide recognition of revenue which are targeted on the basis of different industries. For instance with a home building firm different principles of revenue recognition are applicable in contrast to a company dealing with pharmaceutical development.
On other hand, IFRS adopts a general stand on revenue recognition which is recorded at a time that it is considered as economically significant. In this regard, the revenue must be extremely probable to flow to firms in its future and must be quantifiable with a high degree of accuracy
The definitions of revenues and expenses include gains and losses under IFRS
In consideration of the rules of IFRS, the application of revenue is commonly in regard of describing the entirety amount of all the economic benefits that are attributed to the normal operating activities in the business. As a result, this never accounts for the non-operating gains. This principle is also used with regard to the expenses, which never accounts for the losses that may be attributed to the non-operating activities.
Some people argue that the internal control requirements of the Sarbanes-Oxley Act (SOX) of 2002 put U.S. companies at a competitive disadvantage to companies outside the United States. The the following are the competitive implications (both pros and cons) of SOX.
The most important pro that can be associated with Sarbanes-Oxley Act, SOX, of 2002 involve restoration of the confidence of investors and this was the initial intention. SOX also highlighted the impacts of the control to the firm such those allied to IT. Sarbanes-Oxley Act has been a source of revelations to the majority of organizations (Williams, Susan Haka, Mark, Bettner & Joseph, Carcello, 2008). With majority of the CFOs as well as other members in senior management, ignorance to the financial overrides as well as the potentials of the system was a common feature before compliance to the SOX.
On the other hand, the most important pro that can be associated with Sarbanes-Oxley Act involve the cost. The law is very comprehensive as well as sweeping to a point of becoming susceptible to over-appraisal by practitioners as well as business organizations and this is a cost and time intensive process.
References
Bonham, M., (2008). International Gaap 2008: Generally Accepted Accounting Practice Under International Financial Reporting Standards. Chichester, West Sussex, England: J. Wiley & Sons.
Epstein, B. & Eva K. J., (2007). Interpretation and Application of International Financial Reporting Standards. John Wiley & Sons
Paul D. K., Jerry J. W. & Donald E. K., (2015). Financial Accounting: Tools for Business Decision Making, 7thEdition, Wiley.
Williams, Jan R.; Susan F. Haka; Mark S. Bettner; Joseph V. Carcello (2008). Financial & Managerial Accounting. McGraw-Hill Irwin
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