Did the US Change the Metric System? Will there be a global currency ever? Have GAAP ever been supported by IFRS? All of these are a valid issue when we are talking about the globalization of the United States. It seems as if the United States holds the usual measurement methods. During the calculation, regardless of whether the units of measurement or financial reporting are required, it is often necessary to convert a measurement or to take into account the international adaptation of the given data to achieve the appropriate conformance. When discussing the financial aspect of globalization it is difficult to avoid the two main ways of financial reporting. GAAP (General Accounting Principles) is the US Financial Reporting Guidelines. On the other hand, IFRS (International Financial Reporting Standards) is a guideline that governs transactions and other events in international financial statements. Although there are many aspects that make the two similar, there are subtle differences that virtually separate each other.
One of the main differences between GAAP and IFRS is how each of them recognizes intangible assets. Intangible assets include advertising costs, research and development costs, copyrights, etc. GAAP applies a very straightforward approach and evaluates these assets at a fair market value. IFRS applies a descriptive approach and only recognizes this asset if it has reliable and future benefits for the company.
Another difference between GAAP and IFRS is how to handle the inventory. According to GAAP, LIFO (Last-In-First-Out) or First-In-Last-Out (FIFO) can be used to measure inventory costs. According to IFRS, the LIFO method does not exist and can not be used. As a result of the use of GAAP LIFO, accountants and analysts have to apply different approaches when comparing inventory data. An example of this is when a company uses LIFO for inventory measurement, and an analyst must convert the calculation to FIFO to analyze the exact comparison. This is an additional step that will stop if there is a standard for stock measurement.
There are some similarities between GAAP and IFRS. Each of these standards requires full reporting, including balance sheet, profit and loss account, and so on. As with GAAP, IFRS requires these statements to be prepared in accor- dance with accrual basis. This means that the statements should reflect the revenue and expenditure that arose during the same period when the business was incurred. Neither standards do not require these statements to be prepared for temporary external use.
Contrary to both GAAP and IFRS, there are advantages and disadvantages that question the standards that will be beneficial. One of the good reasons for continuing GAAP is that it is used by accountants and analysts. This makes it easier to work with reports because they are commonplace. Unfortunately, one of the bad things about GAAP is rule-based. This allows the accountant to open the interpretation rules and provide misleading information. Many companies have illegally manipulated GAAP rules to connect with new customers rather than investors. Needless to say, GAAP does not accurately depict the company's performance in the most accurate view of IFRS.
The good thing about IFRS is that it is more based. This means you are more interested in painting a clear picture of your company's performance, sustainability, and stability, especially if you look directly at another company. This is better for investors, employees, clients, and anyone with an interest in the company. It also helps to make the company sincere and transparent to less tempting illegal accounting methods.
One of the downsizing aspects of IFRS is that it is not what the US is using. Changes, though most are fine, may have an impact on corporate taxation and revenue retention. The magnitude of impact on the economy is such that it is open to interpretation
Although the FASB (Financial Accounting Standards Committee) has not yet determined the major transition to IFRS, GAAP signs are approaching convergence. As more than 100 countries adopt alternative standards, it may not be long before the US. The dates are set to how the FASB can change GAAP. Most of the US companies in the rest of the world used IFRS and GAAP for internal use. This is only a matter of time before companies have to comply with the application methods of IFRS for external use.
Source by sbobet