Question

International Financial Reporting Standards (IFRS) are being used in over 100 countries worldwide. A news article states that generally accepted accounting principles in the United States have worked well for more than 100 years. The article says that when something is not broken, do not fix it. Is U.S. GAAP broken? How would U.S. companies benefit if the United States adopts International Financial Reporting Standards? Search the Internet for news articles to support your answer.

Answer 1

GAAP is a set of rules or standard adopted for the preparetion of accounts.GAAP have it's own advantages and disadvantages like consistency,reduce risk ect.IASB develop a new set of principles called IFRS,due to certain benefits over GAAP, like

1IFRS enables companies to show a stronger balancesheet. That is fair market value of assets less accumulated depreciation.GAAP shows assets cost less accumulated depreciation

2 GAAP is rule based and consist complex guidelines.IFRS is a principle based system support better reporting

3IFRS provides more accurate timely and comprehensive data.It helps to. become the investors more informed about business.

4 It helps the business to prepare standardized reports,so reduced report analysis cost

5 It helps to recognise losses immediately, so it helps the lenders and shareholders

Increased transperancy and loss recognition leads to better efficiency

6 Supports comparability all over the world

7 Better access to foriegn investment because it specifies risk and opportunity cost accross the world

8 Helps to increase competitive market over the world

Major Issues in IFRS

Extra ordinary loss or gains are not considered under new IFRS system,companies incure huge transitional cost.

These are the benefits of IFRS over GAAP.