Question

What set of standards does a company use when it operates in multiple countries? For example, for a US company, can they use both GAAP and IFRS? Do they need to choose one?

Answer 1

As we know that there are two set of standards to be completed by companies.

Those are :-

1. Generally accepted accounting principles

2. International financial reporting standards.

In past years all the companies in domestic countries followed generally accepted accounting principles for financial reporting purposes.

But to bring uniformity in the financial reporting throughout the world we came to known the value of of international financial reporting standards.

So in present situation every organisation may choose which set of rules to be complied by them.

If the organisation wants the uniformity and comparability between the world market and that particular organisation then the company will use international financial reporting standards. If a company decides to limit their market into domestic market only then it can use generally accepted accounting principles.

But most of the Nations have given a strong instructions to all the companies that based on the turnover of the companies, all the companies has to follow international financial reporting standards and if it all the books of accounts are prepared as per generally accepted accounting principles they have to convert their financial statements and financial reporting into the financial statements prepared by completing international financial reporting standards.

So by all the above discussion we can say that the usage of international financial reporting framework will give us better benefits than usage of generally accepted accounting principles. Some of the advantages are

1. Comparability between in our organisation and any other an organisation throughout the world.

2. Accounting work make easy to enter into world market for any another domestic market.

3. provides a better understanding to the investors in another domestic market or in world market about our organisation.

But it company has to choose any one of them only either generally accepted accounting principles or international financial reporting standards. Both set of standards cannot be followed at a same time.

Given case we have taken a US based company, that US based company also have to decide that whether they have to use generally accepted accounting principles or international financial reporting standards. One single company cannot follow both of them.

As per above asked question a company operates in multiple countries, international financial reporting standards only.

A single company cannot use both generally accepted accounting principles and international financial reporting standards at a same time. Show that the company has to decide whether they have to use any one of them only.

Buy all the airport discussion we can say that companies operating in multiple countries better to use international financial reporting standards and a single company cannot use both generally accepted accounting principles and international financial reporting standards at the same time. If it all any company wants to use both of them then they have to convert their financial statements and books of accounts from one set of standards to another set of standards.

these are all the information and explanation required to solve the above given question.

I hope, all the above given explanations and information are useful and helpful to you.

Thank you.