IFRS and GAAP Convergence Name of Instructor Institution’s Name IFRS and GAAP Convergence 1.0 Introduction The General Motors Corporation (GM) is an American multinational automobile manufacturer. Its headquarters are in Detroit, Michigan…
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The company has two main investments in Shanghai, China, and its Onstar branch gives the company safety, information services and security (Chandler, 1964). 2.0 The SEC’s Position on Convergence of GAAP and IFRS The main purpose of the Security Exchange Commission (SEC) is to safeguard the investors and sustain the integrity of the securities markets. The SEC stipulates that publicly traded firms in the United States should report important financial and other facts to the general public, which gives a universal set of information, on the basis of which investors can make decisions whether the securities of the firm are a viable source of venture. The firms must follow the IFRS procedures of accounting, which are beneficial to different firms in unique ways. Even though the schedule for the US firms to shift from GAAP to IFRS is not yet set, such a move, through convergence or conversion, is largely appreciated and accepted by majority of the multinational corporations. General Motors has made some steps in relation to the convergence of GAAP to IFRS though other firms hesitated. International Financial Reporting Standards as they are commonly known are beneficial to the General Motors Company given that they provide principles for financial reporting. IFRS ensures the requirements and provisions under them are followed to the letter by the firm and its subsidiaries to ensure uniformity in reporting and production of financial statements. IFRS were adopted by the International Accounting Standard Boards to ensure transparency in the manner in which the financial statements are prepared and presented to the stakeholders. IFRS replicates a dominantly regulation-based approach to building accounting standards as opposed to the GAAP, which was based principally on rules approach. 3.0 IFRS for the financial statements Balance sheet After the IFRS in the balance sheet are adopted, the guidelines stipulated under the standards will enable General Motors to have a uniform method of reporting the assets, liabilities and the equities of the firm in all the subsidiaries and the parent company. Notably the guidelines are provided by the International Accounting Standards Committee, which is currently known as the International Accounting Standards Board. According to the guidelines, the balance sheet names and utilization rely upon the US policies and the type of organization. General Motors follows the standards set by the board, which enables the business to provide a summary of values for all the items included in the balance sheet. Cash Flow Statement There are various differences that come out under the US GAAP and IAS 7 principles for the cash flow statements. The IAS 7 stipulates that the cash flow statement must comprise of both cash and cash equivalents. The United States GAAP allows use of only cash or cash equivalents. IAS 7 allows bank overdraft in particular nations to be put in the cash equivalents as opposed to being taken as a section of financing activities. IAS 7 permits interests paid to be considered as an operating activity or financing activity. The United States GAAP stipulates that interest paid be considered as operating activity. Moreover, the US GAAP (FAS 95) provides that when the direct method is applied to project the operating activities of the statement of cash flow, an additional schedule must also project the statement of
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The International Financial Reporting Standards (IFRS) are a set of guidelines that are sued to guide accountants and financial professionals in preparation and reporting financial information. This paper will discuss the IFRS in terms of its basic information; by discussing its foundation, and how it was formed.
This study aims at scrutinizing the impact of the anticipated convergence of the US GAAP to the International Financial Reporting Standards (IFRS). The study mainly focuses on accounting for goodwill and intangibles as espoused in the new rules propagated by the IASB/IFRS whereby goodwill gained from busi¬ness combi¬nations ceases to be amortized but is rather tested for impair¬ment costs annually.
Recently, in May 2011, the Securities Exchange Commission had proposed a ‘condorsement’ concept, where in addition to the endorsement approach for the amalgamation, the convergence approach would also be employed in the transitional phase to address the existing differences amid the IFRS and the US GAAP.
Eventually, the Financial Accounting Standards Board (FASB), which was established in 1973, codified the accounting standards which became widely acceptable accounting rules that used to prepare, present, and report financial statements for organizations, ranging from government institutions and private profit and not for profit organizations (Ball, 2006).
U.S. GAAP vs. IFRS Research & Presentation “Revenue Recognition – Goods and Services”
From a critical perspective, it has often been argued that the GAAP policies currently followed in the US are quite distinct (Simlogic, 2012). Based on this understanding, accounting practices that are followed under the International Financial Reporting Standards (IFRS) system, will also be critically evaluated in contrast with US GAAP in treating revenue recognition transactions related to both goods and services.
With the passage of time, many accounting standers developed which brought certain degree of uniformity in the way of presenting the accounting information. But with the further development in industrial sector,
It can well be argued that there is nothing new about “International Accounting”; indeed accounting has always been international. It has been international from the time it was originated.
International accounting can be
In addition, revenue recognition only takes place at the time when the company will receive flow of future economic benefits. Another aspect of revenue recognition in IFRS is that when determining the nature of activities in long-term
The purpose of GAAP is to offer common and accepted standard for assessing and comparing the financial health of businesses. But now a day’s U.S Securities and Exchange Commission has started to convert U.S Corporation from GAAP to International Financial Reporting
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