Accounting methods - Research Paper Example

“Implications of IFRS Conversion on US Tax Accounting Methods” is an article written by Christine Turgeon.This paper discusses the impacts of conversion of Generally Accepted Accounting Principles to International Financial Reporting Standards In the view of Turgeon, Rabinowitz, and Wong (2008), IFRS conversion causes a change in book and tax accounting methods which will have a direct effect on the company’s income tax reporting, cash taxes payable, and tax compliance. Many scholars are of the opinion that IFRS conversion would lead to hundreds of book accounting method changes.

In contrast, some experts argue that most of these book changes would not result changes in tax accounting methods. However, it has been observed that IFRS conversion mandatorily requires certain changes with tax accounting methods. For instance, IFRS does not allow the use of GAAP and hence it necessitates the mandatory replacement of some old practices such as LIFO method. The tax accounting method issues associated with IFRS conversion may cause difficulties to companies’ cash taxes. The IFRS system does not permit the application of LIFO inventory method and this situation may cause the recapture of the tax LIFO reserve over four taxable years even though longer spread periods have been suggested.

The structural difference between GAAP and IFRS also creates problems in the leasing process. Accounting practitioners opine that IFRS conversion would hasten the recognition of advance payments.. The IFRS has designed more liberal terms for private companies regarding income tax reporting. On the other hand, it is mandatory for the publicly held companies to adopt IFRS as they issues publicly traded debt securities. Hence, the difficulties related to income tax reporting hurt the public companies more.

As discussed earlier, IFRS conversion and thereby the tax accounting method troubles raise a series of complications to companies’ cash taxes. Sometimes, it adversely affects the computation of book tax differences; and such conditions will impede income tax reporting process also. Precisely, public companies are more affected by income tax issues than private firms. 3. Impact of IFRS on college students/professors The IFRS conversion will largely affect professors as well as student groups.

To illustrate, as this system’s complete structure has not been framed yet, the IFRS and its features are not included in the academic curriculum. Educational institutions would not include IFRS topic in their academic syllabus until there is a precise assistance from the SEC for large companies and some evidences on what may happen with private companies. Even the accounting professors have no precise idea regarding this concept. Therefore, students do not get an opportunity to assess different strengths and weaknesses of this new idea to distinguish between GAAP and IFRS.

It is noticed that even experienced accounting professionals possess little knowledge about the complex features of the IFRS. Since students do not get the basic ideas of IFRS from their primary classes, they will face further difficulties in understanding this method in