Financial Reporting Standards - Essay Example

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IFRS is the International Financial Reporting Standards. It provides the whole body of accounting standards and disclosure requirements. It has been in existence since mid 1970s. GAAP is the Generally Accepted accounting Principles, which encompasses accounting and reporting standards, applied in the United States but not universally…
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Financial Reporting Standards
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Download file "Financial Reporting Standards" to see previous pages... There has been progress towards the development of single, globally accepted accounting standards. The goal is however yet to be realized. The United States is currently working towards the convergence of Generally Accepted Accounting Principles with International Financial Reporting Standards (IFRS).
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Crucial convergence projects from the International Accounting Standards Board (IASB) and the U.S Financial Accounting Standards Board (FASB) have continued to produce good results in an effort to converge the two Accounting and Financial reporting standards. This process of dissecting and eliminating the possible difference between that may the two standards is however costly and consumes a lot of time. The alignment of the underlying principles and the overall methodologies is an effective approach. A significant difference continues to arise though the underlying principles and the overall methodology regarding these standards are harmonized. As the FASB and the IASB continues on their convergence work, the U.S Securities and Exchange Commission (SEC) continues to make significant progress aimed at increasing the acceptance of the IFRSs and abolishing the US GAAPs .Also, PWC has helped companies' to successfully understand the IFRS. It has developed a clear IFRS conversion methodology which is aimed at providing lasting solutions (Vincent C. Ross and Institute of Accounting 23).
The Association of Chattered Certified Accountants (ACCA) argues that the convergence of US GAAP and IFRS is crucial because the harmonization of the two standards will help to raise the investors confidence around the world .This is because the same accounting policies and procedures will be used world wide for same events.
The harmonization is also believed to have a cost reduction impact as far as individual companies are concerned .This is due to the high level of confidence in timely and reliable information.
The harmonization is also essential for companies that have joint listings with America and other countries. The preparation costs thus will be minimized. In addition, the convergent of the two standards will enhance worldwide mobility of labor in that professional and in particular, the accountants will be eligible to work in other countries as the same reporting standards apply elsewhere.
The IFRS framework states that the ultimate aim of financial statements is to give information in relation to an entity to users for decision-making. The users of the information in the financial statement include the consumers, employees, management, government, competitors, among other users.
The assumptions underlying in the International Financial Reporting Standards are that the entity is a going concern one and that the entity uses the accrual accounting concept in preparing the financial statements except cash flow preparation. In accrual, concept revenues and expenses are recognized once they occur and not that cash is paid or gained. In going concern, the company is deemed to continue in its operations even in the future neither does it have intentions to close down or curtail its operations. The company directors are thus bound to evaluate whether the going concern hypothesis is appropriate during the actual reporting of financial stat ...Download file "Financial Reporting Standards" to see next pagesRead More
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