Should US adopt IFRS essay

Should US adopt IFRS essay - Convergence not Adoption is...

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Convergence, not Adoption is Key to IFRS vs. U.S. GAAP Issue By: Jasmine McElroy The United States has been one of the most highly regarded countries in the world for many years. People from various other countries put the United States on a pedestal and Americans do not take that lightly. Americans are often seen as arrogant people who think they are the world’s elite, so is the United States too good to adhere to the standards that most other countries in the world follow? In many areas, the United States is an exception to the rules. However, when it comes to accounting, there is a debate as to whether or not the United States should decide to adhere to the standards adopted by the majority of developed countries in the world. These standards are the International Financial Reporting Standards, which has many similarities to and differences from the United States Generally Accepted Accounting Principles (GAAP). In order to understand how to address the question: Should the USA adopt the International Financial Reporting Standards (IFRS)? , one needs to first understand what the standards the U.S. currently follows, GAAP, and what the worldwide standards, IFRS, are and what adoption means. The financial accounting practices of the United States are governed by the rules and concepts called the Generally Accepted Accounting Principles. According to the ACCT 201: Financial and Managerial Accounting text book, GAAP “aims to make information in financial statements relevant, reliable, and comparable”, which is important because these components allow users to trust the information and use it to make wise decisions 1 . 1 Wild, Shaw, & Chiappetta. (2011). ACCT 201: Financial and Managerial Accounting. United States: McGraw- Hill Companies, Inc.
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According to ifrs.com, the International Financial Reporting Standards (IFRS) are “a set of accounting standards developed by the International Accounting Standards Board (IASB) that is becoming the global standard for the preparation of public company financial statements” 2 . The biggest differences between U.S. GAAP and IFRS is that IFRS reporting is much less detailed than GAAP overall and GAAP contains more industry-specific instructions. Some specific differences between the two sets of standards are that IFRS does not permit Last In, First Out (LIFO), GAAP uses two steps when completing impairment write-downs, while IFRS uses one step, and IFRS does not allow covenant violation debt to be classified as non-current unless a lender waiver is received prior to the balance sheet date 3 . According to the IFRS, if the U.S. adopted the IFRS, that would mean that the SEC would set a specific timetable when publicly listed companies would be required to use IFRS as issued by the IASB 2 . It is important to realize that the United States is not completely out of the ‘international
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Should US adopt IFRS essay - Convergence not Adoption is...

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