Question

US GAAP vs IFRS Express your opinion on the the issue of whether the US should adopt IFRS and supporty your opinion with reasons and pros and cons of adoption. If you like, please read the first two sections of "IFRS 2018 Interpretation and application of International financial reporting standards" in order to answer the question. Thank you

Answer 1

• What is IFRS?
  
  International Financial Reporting Standards (IFRS) are a set of accounting standards developed by the International Accounting Standards Board (IASB) that is becoming the global standard for the preparation of public company financial statements.
  
• What is the IASB?
  
  The IASB is an independent accounting standard-setting body, based in London. It consists of 15 members from nine countries, including the United States. The IASB began operations in 2001 when it succeeded the International Accounting Standards Committee. It is funded by contributions from major accounting firms, private financial institutions and industrial companies, central and development banks, national funding regimes, and other international and professional organizations throughout the world. While the AICPA was a founding member of the International Accounting Standards Committee, the IASB's predecessor organization, it is not affiliated with the IASB.
  
• What are the advantages of converting to IFRS?
  
  By receiving IFRS, a business can display its monetary articulations on indistinguishable premise from its remote rivals, making correlations less demanding. Besides, organizations with backups in nations that require or allow IFRS might have the capacity to utilize one bookkeeping dialect extensive. Organizations additionally may need to change over to IFRS on the off chance that they are a backup of a remote organization that must utilize IFRS, or in the event that they have an outside financial specialist that must utilize IFRS. Organizations may likewise profit by utilizing IFRS in the event that they wish to raise capital abroad.
  
• What could be the disadvantages of converting to IFRS?
  
  Notwithstanding a conviction by a portion of the certainty of the worldwide acknowledgment of IFRS, others trust that U.S. GAAP is the best quality level, and that a specific dimension of value will be lost with full acknowledgment of IFRS. Further, certain U.S. backers without huge clients or tasks outside the United States may oppose IFRS in light of the fact that they might not have a market motivator to get ready IFRS budgetary articulations. They may trust that the huge expenses related with receiving IFRS exceed the advantages.
  
• Who are the key players in the United States regarding the development and adoption of IFRS?
  
  The key players are the Securities and Exchange Commission, which is responsible for the supervision and regulation of the securities industry and has oversight responsibility for the FASB; the Financial Accounting Standards Board, an independent body that establishes and interprets U.S. GAAP; and the IASB, which is working with the FASB on the convergence of U.S. GAAP and IFRS. The AICPA has provided thought leadership to the IASB and the FASB on financial reporting topics.
  
• Have any major U.S. companies begun transitioning to IFRS?
  
  Until the Securities and Exchange Commission issues a rule allowing or requiring U.S. public companies to adopt IFRS, they must continue to prepare their financial statements under U.S. GAAP. Several large multinational corporations, however, have started using IFRS for their foreign subsidiaries where allowed by local law. Also, some U.S. subsidiaries of foreign-owned companies are also using IFRS.
• What are some of the most important specific differences between IFRS and U.S. GAAP?
  
  Because of longstanding convergence projects between the IASB and the FASB, the extent of the specific differences between IFRS and GAAP has been shrinking. Yet significant differences do remain, most any one of which can result in significantly different reported results, depending on a company's industry and individual facts and circumstances. For example:
  • IFRS does not permit Last In, First Out (LIFO).
  • IFRS uses a single-step method for impairment write-downs rather than the two-step method used in U.S. GAAP, making write-downs more likely.
  • IFRS does not permit debt for which a covenant violation has occurred to be classified as non-current unless a lender waiver is obtained before the balance sheet date.
  
• What are the likely costs of converting to IFRS?
  
  The costs would be determined largely by the size and nature of the respective company. While the initial cost to identify and quantify the differences between U.S. GAAP and IFRS, staff training and implementing IT support could be significant, the conversion also could result in an ultimate reduction of costs for capital and financial reporting related to operations. In its proposed roadmap to move all U.S. publicly traded companies to the global standards issued in November 2008, the Securities and Exchange Commission estimated that the largest U.S. registrants that adopt IFRS early would incur about $32 million per company in additional costs for their first IFRS-prepared annual reports, and that the average U.S. company would incur costs of between 0.125% to 0.13% of revenue.
• If the United States mandates IFRS for publicly traded companies, will private companies and not-for-profit organizations be required to adopt IFRS?
  
  The simple answer is no. All the discussion thus far about the possibility of the Securities and Exchange Commission designating a future date for voluntary, or even mandatory, adoption of IFRS has been for U.S. public companies only.
  
  That said, many privately held companies adopted provisions of the Sarbanes-Oxley Act, such as the formation of independent audit committees. Many might take similar action regarding IFRS, even if they are not mandated to do so.
  
  On December 17, 2009, the AICPA, the Financial Accounting Foundation (FAF) and the National Association of State Boards of Accountancy (NASBA) announced the establishment of a blue-ribbon panel to address how U.S. accounting standards can best meet the needs of users of private company financial statements. The panel will provide recommendations on the future of standard setting for private companies, including whether separate, standalone accounting standards for private companies are needed. A report is expected in the early part of 2011.
  
• What might make some private companies in the United States adopt IFRS?
  The eventual adoption of IFRS by small businesses and not-for-profit organizations is likely to be market driven. The IASB has developed a version of IFRS for small and medium-size entities that would minimize complexity and reduce the cost of financial statement preparation, yet allow users of those entities' financial statements to assess financial position, cash flows, and performance. IFRS for Small and Medium Entities (SME) was released on July 9, 2009