IFRS VS. GAAP

IFRS vs. GAAP

IFRS vs. GAAP

Introduction

When matching and characterizing accounting benchmark regimes, IFRS are typically labeled as concept-based while US GAAP are categorized as rules-based. During recent years the FASB repeatedly solicited for research on the feasibility of changing towards more concepts-based standards, as more and more critique arose on its current approach, especially in the aftermath of Enron. Rules-based measures are said to supply businesses with the opportunity to structure transactions to meet requirements for a specific accounting remedy, even if such treatments do not contemplate the true economic substance (see for demonstration, Vincent et al. 2003). Likewise, Sawabe (2005) sets up that proliferation of accounting directions, like in a rules-based approach, is usually affiliated with more creative accounting devices, proposing that it directs to more profits management. In today's enterprise, markets are demanding expanding conformity. Many nations have altered to and applied the International Accounting measures Board (IASB)'s accounting standards. The joined States, however, still sustains its own economic Accounting measures Board (FASB). Both IASB and FASB have conceived worldwide economic Reporting Standards (IFRS) and U.S. Generally acknowledged Accounting values (U.S.GAAP) respectively. These accounting measures are directions of measurements for economic statements that companies issuing supply to the public must provide to stockholders (Libby, 21). There are various advantages and handicaps of the U.S. companies altering their schemes from U.S.GAAP to IFRS. As the markets have grown to become more complex and global, the disparities between the two standards have been a significant issue as consumers and producers call for reform. Regulators in more than 100 countries now allow or require the use of international accounting standards (IFRS) when preparing financial reports for certain companies. The U.S. Securities and Exchange Commission (SEC) has announced a “roadmap” project towards U.S. adoption of IFRS. In this paper we make suggestions for incorporating significant aspects of international standards in the accounting classroom.

Brief annals of the source of the Two Sets of benchmarks

The U.S. Securities and Exchange Commission (SEC) now allows foreign companies trading on U.S. stock exchanges to report financial information using International Financial Reporting Standards (IFRS) without the former requirement of reconciling to U. S. Generally acknowledged Accounting values (US GAAP). U. S. regulators are considering whether IFRS should be allowed for reporting by U.S. companies as well [9]. On August 27, 2008, the SEC handed out a proposed “roadmap” in the direction of the U.S. adoption of IFRS [8]. In this business environment, accounting education is among the institutions now preparing for the integration of IFRS. Anticipating the demand for integration into the accounting curricula, we have formulated a framework for educators to communicate the essential differences between IFRS and US GAAP in a short amount of time. Our approach is evolved from the annals and underlying principles of these two accounting frameworks. By introducing the topic of IFRS with these simple reference points, students can better understand the competing treatments sometimes offered by the two frameworks.

IFRS were first developed in an environment in which the standards ...