IFRS AND GAAP CONVERGENCE

IFRS and GAAP Convergence



IFRS and GAAP Convergence

Describe IFRS and GAAP and what convergence means

It is a set of documents (standards and interpretations), governing the rules of the financial statements required for external users to make economic decisions with respect to the company. The purpose financial statements prepared in accordance with IFRS, is getting useful information about the financial position, results of operations and cash flows of the company. Financial statements prepared in accordance with IFRS, focused on the information needs of a wide range of users, such as shareholders, creditors, employees. IFRSs designed for financial reporting of any trade, industrial and other commercial companies (including banks and insurance companies), regardless of the activity, sector and legal form. They can also be used by state enterprises. Application of Standards (IFRS requires a completely new professional knowledge and skills. IFRS are not the set of strict, detailed rules, but represent a set of principles and requirements'. Approach to implementation, each expert independently determine, taking into account the specific economic situation. Statements prepared in accordance with IFRS, transparent and informative to foreign investors and companies to open access to international capital markets.

Generally Accepted Accounting Principles

GAAP represents the possibility of extending and refining the theoretical support of the rules governing accounting practices. The term "Generally Accepted Accounting Principles" means normative concepts to all general and specific standards issued or adopted, regulate the financial statements in a place and date. GAAP widely accepted, they must go through a formal process of auscultation open to observation and active participation of those involved and interested in the information (Alvin and James, 1980).

Convergence

Convergence would be working together toward common results and the merging of IFRS and GAAP. The main objective of convergence put players in the playing field and a recurrence of the crisis. The most important differences remain between the two dominant accounting systems and US GAAP and IFRS (Ball, 2006).

Analyze how convergence will affect public companies, accounting firms, and small and medium companies?

The different accounting standards may cause disruptions in valuations during the transition from one set of accounting standards to the converged accounting standards under IFRS. It has estimated that the convergence model may cost the company more than $ 1 million dollars will spent on investment required for translation of financial statements to the market value of assets ("tied to the market") and cancellation of much of their value. U.S. and European lawmakers are fighting to date on the order to exempt small businesses from the majority or at least part of the accounting rules (Edwards and John, 1999).

Approach of the Committee on Financial Accounting Standards Board to achieve the objectives of convergence, means that private companies would also be affected. With regard to the renewable energy industry, the degree of impact on these companies will be determined primarily by their size and complexity of transactions - but the impact will in any case. Regardless of his feelings about either or not joining in between ...