International Accounting

Portfolio

ACT420 – International Accounting

November 23, 2014

PART I

1. Provide a detailed history of the convergence project between US GAAP and IFRS.

An agreement was reach in October 2002 to converge IFRS and FASB to cut down on the differences in accounting standards. The two most important projects are:

* The US Securities and Exchange Commission (SEC) was considering whether to adopt, or allow, IFRS for use by domestic issuers in the United States, and gave consideration to the success of the convergence process as part of this assessment. 

* The Leaders of the Group of 20 (G20) issued a statement in 2009 calling for the convergence of accounting standards in the member nations by 2011.  Whilst the original June 2011 deadline has not been met, subsequent G20 meetings in 2012 and 2013 reaffirmed the commitment to achieve convergence of accounting standards.

The current status of the major joint projects between the IASB and FASB vary depending on the individual project. The convergences that have been completed are Business combination, Consolidation, and Fair value measurement. Financial instruments, Leases, and Revenue recognition are all a work in progress. Joint work has been discontinued on Financial statement presentation, Liabilities and equity, and Post-employment benefits. In 2007 it was decided that Intangible assets would not be on the agenda for convergence. Conceptual Framework had been partially completed and additional work on other phases was discontinued. Insurance contracts were also discontinued but “IASB and FASB continued to liaise on some issues”. (IASB. 2014).

2. Discuss in detail the major differences between US GAAP and IFRS applications.

Though there are a significant number of differences between US GAAP and IFRS, the major differences are:

Asset Impairment – US GAAP uses two-step impairment; IFRS uses single step.

Asset Valuation – Under US GAAP, assets can be written in the books for a lower value,...