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ACC 310 Case #1

ACC 310 Case #1 - Nathan C Davie CEO AUW Corporation 199...

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October 12, 2010 Nathan C. Davie, CEO AUW Corporation 199 Sanders Street Greensboro, NC 20090 Dear Mr. Davie, Over the past three years the Securities and Exchange Commission (SEC) has been pushing to converge the US general accepted accounting principles (GAAP) with the nation’s international financial reporting standards (IFRS). These set of rules and regulations hold a different value in the accounting world. The IFRS have a more broad impact on a company’s infrastructure (PWC.com/usifrs) while the GAAP is stricter within their accounting principles. The SEC has set a date of adoption no earlier than 2015 but has chosen to converge the different accounting principles in 2011 (Stice, and Stice). The SEC has published a work plan at the beginning of this year and has also planned to send another work plan no later than October 2010 (AICPA IFRS.com 1-15). The intentions of the SEC is that by the time convergence is made, all major differences will be resolved (AICPA IFRS.com 1-15). The reality is the differences are shrinking but very similar principles are not the same as identical principles. There are various ways in which the GAAP and the IFRS are different. “These differences result from small details such as variances in definitions or implementation guidance” (Forgeas). The accounts which are impacted include reported revenue, expenses, assets, liabilities, equities, entities and many more (PWC.com/usifrs). GAAP has far more specific rules and regulations for determining far values and revenue recognition (PWC.com/usifrs) . The IFRS is less extensive
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than GAAP regarding revenues recognition (“AICPA IFRS Resources”). The IFRS does not permit the last in first out method (LIFO) which decreases our inventory cost in an economy with inflation present (AICPA IFRS.com 1-15). The IFRS also requires a single-step method for impairments rather than a two-step method with GAAP resulting in more write-downs of assets (AICPA IFRS.com 1-15). The bottom line that I am however particularly worried about it the fact that with the IFRS process there are very few rules and guidelines that will help accountants prepare financial statements, which allows more room for error and inconsistency in comparing financial statements (www. nysscpa.org). The IFRS provides less overall detail and it contains relatively little industry-specific instructions (“AICPA IFRS Resources”). This is important for stakeholders and investors who invest in our company. Losing investors and stockholders could possible cause a major setback to this company effecting potential investors as well. “The US standard setters and the US Securities Exchange Commission are moving American
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ACC 310 Case #1 - Nathan C Davie CEO AUW Corporation 199...

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