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IFRS and GAAP Convergence - Research Paper Example

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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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IFRS and GAAP Convergence

Download file to see previous pages... 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 ...Download file to see next pagesRead More
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