Question

1. Parker is considering adopting IFRS for financial reporting. What are some of the key differences between IFRS and US GAAP that might impact Parker? What are some of the advantages and disadvantages that might accrue to Parker if it adopted IFRS for all of its operations?  

2. Would adoption of IFRS require additional reporting requirements for the SEC? What role does the IASB, FASB, PCAOB and SEC play in promoting high-quality accounting information for US and global businesses? Does the retention of a separate US GAAP in an otherwise IFRS world environment present any challenges for US based companies?

Answer 1

Answers : -

1) Difference between IFRS and US GAAP

A. The IFRS is principles based, it means that there are more potential for different interpretation for similar transactions. US GAAP is rule based, it means that the rules prescribed by the US GAAP has to be followed for recording of transactions.

B. The IFRS is globally accepted standards for accounting on the other hand US GAAP is is used within United States only.

C. Under IFRS LIFO method for i ventory valuation is not allowed wheraas in GAAP LIFO method is allowed.

Advantages and disadvantages of IFRS

1) ADVANTAGES. A. Allows for greater comparability : - Business using similar methods for preparing the financial statements can easily compare their financial statements.

B. More flexibility : - Using a philosophy that is based on principles instead of rules gives more flexibility to the company.

C. Beneficial to new and small investors : - IFRS helps new and small investors by preparing reporting standards to have better quality and simpler financial statements. IFRS is accepted globally.

2) DISADVANTAGES

A. It requires high cost : - whether large or small all business would feel the impact if a country adopts IFRS. The small companies will bear more financial burden as compared to large companies.

B. It is prone to manipulation : - As companies can use the methods that they wish like LIFO for inventory valuation this will lead to desired results and manipulation.

C. Not accepted in US : - The IFRS is not accepted in US and other countries may not accept it due to their financial relations with US.

2. No, the adoption of IFRS does not require additional reporting requirements for the SEC.

ROLES

A. IASB : - The role of the IASB is to issue international accounting standards.

B. FASB : - The role of the FASB is to improve GAAP within the US.

C. PCAOB : - The role of the PCAOB is to oversee the auditors of the public companies and to protect the interest of investors.

D. SEC : - The role of SEC is to protect investors, maintain fair orderly and efficient market.