GAAP versus IFRS - Research Paper Example

IFRS stands for International Financial Reporting Standards. It includes the accounting standards proposed by International Accounting Standards Board (IASB) and International Accounting Standards (IAS). IFRS is becoming the international standard for the preparation of financial statements especially of public corporations (Haris, 2013). Now the question is why corporations are conversion new standards of IFRS from GAAP? There are some benefits which IFRS is offering to corporations. Some of the benefits are as follow: According to Julie (2013), IFRS enable corporations to present its financial statements on the same basis as its international competitors are adopting, it makes the comparison easier.

To facilitate more accurate comparisons to foreign competitors, some U.S. companies may view IFRS as an opportunity to supplement their current reporting with reporting or commentary based on IFRS. Most of the U.S. Corporation’s glance at new markets therefore they have to take on with IFRS in order to secure licenses, raise capital, or comply with requirements of local regulators. Overseas clients, merchants, or lessors might too involve IFRS financial statements. IFRS is beneficial for the firm who want to raise the capital abroad or it is most beneficial for the corporations who have international investors.

Corporations having subsidiaries in countries require having IFRS in order to use one accounting language company-wide. Haris (2013) stated that the International Financial Reporting Standards (IFRS) is using in more than 110 countries. Majority of the countries among these 110 countries are developed. So IFRs must have some key distinction from the U.S. Generally Accepted Accounting Principles (GAAP) which are as follow: IFRS is more of a principle based accounting standards where as GAAP has more rule based accounting standards.

Principle based accounting standard has the capability to effectively corresponds and detain the economic