Question

Agree or Disagree? Explain your thoughts and add any new

It is surprising to me that the US GAAP is so different from IFRS in regard to costing concepts. If an analyst was to look at financial statements from other parts of the world and wishes to compare them to US financial statements, it is not a straightforward comparison. To me, the need for convergence is obvious -- but which way should we go and why?

Answer 1

answer-

This is the age of Globalisation. Businesses have crossed bundaries and geographies. Hence it has become all the more important to have uniform accounting policies and standards

As far as costing concepts are concerned there are major disparities between US GAAP and IFRS.Under IFRS the LIFO method for accounting for inventory costs is not allowed. Under US GAAP either LIFO or FIFO inventory estimates can be used. The move to have a single method of inventory costing could lead to enhanced comparability between countries and remove the need for analysts to adjust LIFO inventories in their comparison analysis..Hence it becommes all the more important to have harmonisation and convergence between US GAAP and IFRS.

There should be a systematic and meaningful analysis of various components/concepts which are different under both systems and disparities need to be removed so as to ensure better comparison and uniformity so that financials sattements need no major changes under US GAAP and IFRS