The United States Move to IFRS Essay Example | Topics and Well Written Essays - 750 words

The United States Move to IFRS - Essay Example One positive aspect of the IFRS is it allows the management of companies to have more desertion when it comes to asset valuation, which in turn can increase company income. In fact European companies, who made the switch from the GAAP to the IFRS in 2002, reported that eighty two percent of their companies had higher income under the IFRS than under the GAAP (Briginshaw, 2008). Due to this fact most would assume that investors would be for the switch, there are some other aspects to consider, however. One aspect is that the reports of higher incomes of these European companies came from the same year. So the companies actually had the same profits and expenditures, yet the IFRS reported a higher income yield than that of the GAAP which leaves some investors wondering how accurate the IFRS reports really are. This means that a dollar profit calculated under the IFRS will hold less meaning that one calculated under the GAAP so investors will have to change there way of thinking as far as profits are concerned. Also because the IFRS reports are not quiet as current as the GAAP are they will show less association between reported earnings and stock prices. Overall this means that investors are going to have to relearn and rethink how they read the reports they are given. This knowledge will in turn, however, give them more expertise in investing in companies outside the U.S. Multinational Companies For multinational companies who have long been dealing with converging the two sets of standards, this is a long awaited change. The switch to IFRS will allow them to coordinate all of their accounting systems under one set of guidelines whether the branch is located in the U.S. or another country. This will also be of use... The United States’ Move to IFRS The United States’ Move to IFRS The world of accounting seems to be on the precipice of undergoing a dramatic change in the United States. For more than seventy years the United States accounting system has relied on a set of generally accepted accounting principles known as the GAAP. These principles set out by the Financial Accounting Standards Board (FASB), guide accountants in preparing, presenting, and reporting financial statements for various entities, including: publicly-traded and privately-held companies, non-profit organizations, and governments. They are implemented by the Securities and Exchange Commission (SEC). The globalization of business and finance has led to over twelve thousand companies in more than one hundred nations to adopt an internationally recognized set of accounting principles known as the International Financial Reporting System (IFRS) (â€Å"International Financial Reporting,† 2010). With many of the United States’ companies expan ding overseas, and foreign corporations now purchasing companies in the United States, there has been a huge push for the United States to forgo there use of the GAAP and adopt the new IFRS standards. So on August 27, 2008 the SEC set out a road map for all U.S. companies to adopt the IFRS by 2014 and some of the large companies started adopting them as early as 2009. If the SEC calls for a higher standard in the IFRS before and while adapting it, then it seems to be a win for all countries and companies involved.