financial statement challenges using IFRS and GAAP

financial statement challenges using IFRS and GAAP -...

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In the past, a foreign entity filing with the SEC that used accounting standards other than US GAAP had to file form 20-F which reconciled certain amounts reported in its financial statements with the amounts which would have been reported under US GAAP. However, in 2007, the SEC rescinded this rule for foreign companies that use IFRS. This has caused more foreign entities that are required to file with the SEC to start using IFRS. This movement has caused two potential problems for US companies filing with the SEC that use US GAAP and operate globally: first, their financial statements are likely to be different from the foreign
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Unformatted text preview: companies whom they are competing with for capital which creates difficulties for investors who are endeavoring to compare companies; and if US companies have subsidiaries operating in foreign countries, they may be required to prepare their subsidiaries’ financial statements according to local IFRS. Since the two reporting standards differ, this could result in costly inefficiencies. Investors, creditors, and financial analysts will have to retrain in order to evaluate the financial statements of companies using IFRS and analysts who have more resources are at a competitive advantage over analysts newly learning IFRS....
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