Question

What is the impact of some businesses using International Financial Reporting Standards (IFRS) instead of generally accepted accounting principles (GAAP)? In your opinion, should there be a worldwide convergence of accounting standards? Why or why not? Explain.

Answer 1

The major difference that arises because of some businesses using IFRS instead of GAAP is that there will be non-uniformity of the reporting between the companies within the same Industry and between different Industries. For a stakeholder like an Investor, regulatory authority, it will be really tough to compare the results / performance of one company with that of another company because they have followed different accounting standards. The valuation methods are different. The disclosures requirements are different.

Yes, In my opinion, there should be a worldwide convergence of accounting standards which will promote the idea of the world being a global village. Also, it will become easier to compare reports of any company in the world with any other company in the world because they will be made of same accounting standards. This will also create a uniform reporting standard for all the companies which reduce dilemma and doubts of reporting a certain type of expenditure in a certain form.

Having a uniform reporting structure will also help regulatory authorities, to compare and contrast the results of different companies and detect any mischievous activity done by any company.