Harmonizing to Deloitte Touche Tohmatsu ( 2010. parity. 3 ) “International Financial Reporting Standards ( IFRS ) are Standards. Interpretations and the Framework adopted by the International Accounting Standards Board ( IASB ) ” . IFRS was established in 2001 and the transition of the International Accounting Standards ( IAS ) . The IAS had been functional since 1973 until it was converted to IFRS. More criterions and constituents were added to the new IFRS to heighten professionalism in accounting and to suit the altering accounting environment.
Many states have accepted the usage of IFRS since they are more comprehensive and cover a broad assortment of accounting systems. The alterations in engineerings cause the accommodations in the accounting criterions to guarantee no loopholes exist in the accounting profession ( Deloitte Touche Tohmatsu 2010 ) . Transition Issues Most of the criterions used in the IFRS were adopted from International Accounting Standards ( IAS ) . IAS has been operational between 1973 up to 2001. They were developed by the International accounting criterions Committee ( IASC ) . The undertaking of puting international accounting criterions was shifted to IASB in 2001.
IASB continues to do accounting criterions called the IFRS. IFRS is composed of the International Financial Reporting Standards ( IFRS ) – criterions issued after 2001. International Accounting Standards ( IAS ) – criterions issued before 2001. Interpretations originated from the International Financial Reporting Interpretations Committee ( IFRIC ) – issued after 2001. and Standing Interpretations Committee ( SIC ) – issued before 2001 and Framework for the Preparation and Presentation of Financial Statement ( Deloitte Touche Tohmatsu 2010. parity. 10 ) .
IFRS vs. . U. S. GAAP The Generally Accepted accounting Practices ( U. S. GAAP ) were developed to overlook accounting patterns in the economic system of the U. S. The U. S. GAAP differs somewhat from the IFRS and there has been debate to interchange the U. S. GAAP for the IFRS. The IFRS has been acceptable in the planetary market and has provided chances to the U. S. accounting profession since the U. S. GAAP has been limited within the U. S. More than 100 states in the universe are utilizing the IFRS in their accounting systems and there is concern about the adopting of the IFRS in the US.
Harmonizing to Epstein ( 2008 ) the deductions for the acceptance of the IFRS in US will be Training on the differences between IFRS and GAAP. Financial examination of international joint ventures. Merger & A ; acquisition ( M & A ; A ) international accounting reappraisals. Sarbanes-Oxley conformity on corporate administration affairs. Analysis of international recognition policies for multinationals. and Litigation hazard due to inappropriate usage of IFRS ( parity. 3 ) . The planetary investors will hold advantages after the acceptance of the IFRS in the US accounting systems.
This will supply a better environment for cross-border investing every bit good as incorporating capital markets. Global organisations in the US will salvage the costs of accounting by the usage of a individual fiscal describing criterion. The bing system requires conformity with the domestic accounting criterions every bit good as accounting criterions of other states. This is making more costs to international houses since they must put in all accounting systems and employ forces from diversified accounting backgrounds.
The usage of the GAAP has limited the growing and enlargement of many companies in the U. S. Multinational companies and their investors will profit a batch from the acceptance of the IFRS ( Malriat. 2009 ) . Accounting for grosss under IFRS IFRS adopted some criterions used by the IAS but some extra criterions were included. This was done to guarantee more answerability in the accounting systems and to guarantee grosss are safeguarded within the entity. The premises of IFRS are ; foremost. accrual footing. this means that minutess are accounted for when they occur but non when hard currency is received or paid.
Second. the traveling concern ; the entity is assumed to go on operating in the foreseeable hereafter. Third. stable mensurating unit ; nominal pecuniary units are used in accounting to guarantee stableness of the buying power. The qualitative belongingss of the fiscal statements are: “Understandability. Reliability. Comparability. Relevance and True and Fair View/Fair Presentation” ( Deloitte Touche Tohmatsu 2010. parity. 14 ) . The elements of fiscal statements are assets. liabilities and equity. IFRS uses discretion in developing decision about the accounting systems of an organisation.
Estimates and ratings are non accurate and discretion is required when pulling decisions about the fiscal position of an organisation. Strict enforcement of accounting criterions will supply a better system that will supervise the concerns in the international markets ( Deloitte Touche Tohmatsu 2010 ) . Conclusion IFRS developed from IAS to include the altering professional demands and engineerings in accounting. The US GAAP has been criticized for its restriction to the US economic system and many comptrollers require the acceptance of the IFRS in the accounting systems.
The displacement from the usage of IFRS to the US GAAP will hold several deductions on the US fiscal comptrollers every bit good as other users of the accounting criterions. Even though there are few differences between IFRS and the US GAAP. there are many restrictions accompanied with the usage of the US GAAP. Adopting the IFRS will open up the market and cut down accounting costs to many-sided houses in the US. Amendments in the IFRS continue to be made to update the criterions harmonizing to the alterations in engineering and the planetary legal systems.
