Homework Question on IFRS and GAAP Convergence
- Events in the world of corporate finance during the past few years have shown the importance of transparent and accurate financial reporting by businesses. There are numerous methods for evaluating the financial well-being of a business. In this paper, you will review and evaluate the financial analysis tools available to business manager, investors, and government regulators.
- Write a five to six (5-6) page paper in which you:
- Describe what accounting convergence means and assess the likelihood of the convergence being completed and implemented in the next five (5) years.
- Evaluate and describe the single most important difference between U.S. GAAP and IFRS rules, and explain your answer.
- Analyze and summarize the main obstacles to convergence from both the U. S. and European accounting perspectives.
- Analyze the balance sheet and income statement presentation methods that will be impacted the most by convergence, and explain why.
- Evaluate and explain what types of business entities and accounting practices will be affected the most by convergence.
- Use at least three (3) quality academic resources in this assignment.
- Note: Wikipedia and other Websites do not qualify as academic resources.
- Your assignment must follow these formatting requirements: Be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides; citations and references must follow APA or school-specific format.
Homework Answer on IFRS and GAAP Convergence
The International Financial Reporting Standards (IFRS) and the Generally Accepted Accounting Principles (GAAP) are the main branches of International Accounting Standards (IAS) that provide commercial entities with guidelines on how to report transactions in the financial statements. However, there are numerous variations on provisions on how certain transactions should be reported thus creating inconsistency and disharmony in company financial reporting, especially for companies operating across geographical borders.
To solve the problem, the International Accounting Standards Board (IASB) and Financial Accounting Standards Board (FASB) plan to converge these two reporting standards. This paper discusses convergence and its likely impacts on financial reporting.
Meaning of Convergence and Its Progress
According to Pounder (2009), converging GAAP and IFRS is concerned with combining the two sets of financial reporting standards into one set of standards with a higher quality and that can be applied by all countries across the globe.Thus, convergence is not only about harmonizing the differences between GAAP and IFRS, but also about creating one superior set of standards that combines the strengths of the two standards and eliminates their weaknesses. In the process of convergence, Pounder (2009) posits that US GAAP is the most affected by the changes.