International Financial Reporting Standards in the United States:

Would the United States Benefit from Moving toward the International financial Reporting Standards?

Abstract

This research would not have been possible without the support of my family, friends and research supervisor so I would like to say thank you to them.

Declaration

I hereby take an oath that this research is my own work and it represents my own ideas and not that of university. This research has not been submitted for any educational purpose in the past.

Contents

Abstract2

Declaration3

Chapter One5

Introduction5

Context of the Problem5

Statement of the Problem9

Research Question and Sub-questions10

Significance of the Study11

Research Design and Methodology12

Organization of the Study13

Summary14

Chapter Two15

The Background of IFRS-Setting Process15

IFRS in the United States16

The Impact of the Convergence in the United States17

Costs of Adoption of the IFRS Adoption for U.S. Firms18

The Effect of the IRFS on the U.S. Tax System19

The Role of the SEC20

Summary22

Chapter Three23

Introduction23

Impact on Revenue23

Impact on Expense Recognition25

Impact on Assets26

Impact on Tax28

Impact on Nonfinancial Liabilities29

Impact on Financial Liabilities and Equity30

Impact of Derivatives and Hedging31

The Cost of convergence32

Summary33

Chapter 435

The Process of the Convergence in the United States35

The Norwalk Agreement35

The Roadmap38

New Progresses40

Summary41

References42

Chapter One

Introduction

This chapter presents research ideas related to the pros and the cons of the conversion from generally accepted accounting policies to the international financial reporting standards for the United States. The chapter includes the context of the problem, statement of the problem, research questions and sub-questions, research design and methodology, and the organization of the study. This chapter also presents a tentative reference list and a summary of the chapter.

Context of the Problem

In the United States, publicly-held companies have been using generally accepted accounting standards (GAAP) as a set of accounting principles, standards and procedures to compile their financial statements.

The U.S. accounting standards provide a framework for reporting that seeks to deliver transparent, consistent, comparable, relevant and reliable financial information. (U.S SEC, 2000, http://www.sec.gov/rules/concept/34-42430.htm)

The globalization has become common in the world and trade companies moved into the global market for goods, labor and services. The United States recognizes the need to adopt an international set of policies and standards. The International Financial Reporting Standards are used in many parts of the world, including the European Union, part of Asia, Australia, Russia, South Africa, Singapore and Turkey. At August 27, 2008, more than 113 countries around the world, including all of Europe, currently require or permit IFRS reporting. About 85 of those countries require IFRS reporting for all domestic companies listed. (Medina 2011) In order for America to compete, trade, invest and protect investors in the world market, the adoption of International Financial Reporting needed for the country. High quality policy and standards are important for investors to make investment decisions.

In 2000 the SEC mentioned that for the development of the high quality global financial reporting structure, high quality accounting standards are important. Due to varied need of the users for whom the financial information is prepared, many different accounting traditions have been developed all over the world. In some countries of the world, the accounting standards have been shaped even according to the ...