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Unformatted text preview: 1 M A N A G E M E N T A C C O U N T I N G Q U A R T E R L Y S U M M E R 2 0 0 7 , V O L . 8 , N O . 4 A ccountants know that financial reporting standards differ by country or region. In the United States, financial accountants, auditors, and analysts are very familiar with U.S. GAAP. Accountants and auditors in other countries may be well-versed in their home- country GAAP, or they may be familiar with the requirements of International Financial Reporting Stan- dards (IFRS) developed by the International Account- ing Standards Board (IASB). The European Commis- sions adoption of IFRS for EU public company consoli- dated reports in 2005 required many preparers, auditors, and analysts to become familiar with the content and application of IFRS. Standards similar to IFRS were required in Australia for the first time in 2005 as well. It has been estimated that, during that year, 8,000 addi- tional financial statements were based on IFRS. This number will continue to grow as more countries adopt A U.S. Managers Guide to Differences Between IFRS and U.S. GAAP W ITH THE GREATER LIKELIHOOD THAT YOU WILL FACE SITUATIONS THAT REQUIRE AN UNDERSTANDING OF THE DIFFERENCES BETWEEN U.S. GAAP AND IFRS, THE ODDS INCREASE THAT YOU WILL ALSO HAVE TO BE ABLE TO ESTIMATE THE IMPACT OF THESE DIFFERENCES . B Y S U S A N B . H U G H E S , P H . D . , C P A , A N D J A M E S F. S A N D E R , P H . D . , C P A EXECUTIVE SUMMARY International Financial Reporting Standards (IFRS) are now required for consolidated finan- cial reports for all European Union exchange-listed companies. Officials estimated that for 2005, the initial year of EU adoption, 8,000 financial statements were prepared in accordance with IFRS for the first time. Other countries have also adopted IFRS or IFRS-equivalent financial reporting standards. IFRS differ from U.S. Generally Accepted Accounting Principles (GAAP) in many key areas. The International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) are working on various convergence projects designed to reduce or eliminate differences between the two sets of reporting standards. But existing differences will likely continue for at least the next two years, and, for many accounting topics, differences are likely to last much longer. This article high- lights the 20 convergence projects and summarizes the differences between the two sets of standards. In addition, dif- ferences in three topics that are not included in the convergence efforts are identified. Differences between IFRS and U.S. GAAP found in actual EU company Form 20-F filings are used to illustrate the impact of the reporting-standard differences. 2 M A N A G E M E N T A C C O U N T I N G Q U A R T E R L Y S U M M E R 2 0 0 7 , V O L . 8 , N O . 4 IFRS or IFRS-equivalent financial reporting standards....
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- Spring '11