Disadvantages of the International Financial Reporting Standards (Ifrs) to U.S. Companies

Disadvantages of the International Financial Reporting Standards (IFRS) to U.S. Companies

Disadvantages of the International Financial Reporting Standards (IFRS) to U.S. Companies

In this assignment Team C will examine the disadvantages of the International Financial Reporting Standards (IFRS) as the standards apply to U.S. companies. The disadvantages that will be examined are not globally accepted, manipulation, cost of implementation, and training.

No Global Acceptance

International Financial Reporting Standards (IFRS) is not globally accepted that makes the transition from General Accepted Accounting Principles (GAAP) reporting to IFRS reporting difficult. The United States is one country that has not implemented IFRS. Foreign countries that conduct business within the United States are forced to have two sets of financial statements, one set according to IFRS and one set according to GAAP.

U. S. small business owners have no reason to adapt to IFRS reporting principles unless IFRS were to be mandated here in the United States. If IFRS is mandated in the United States small and large business owners would be required to keep two sets of records, one set according to GAAP and one set according to IFRS for the current year and as well as three years back. Mandating IFRS would not only affect the acceptance of the standard but also the cost of implementing the change.

Manipulation in IFRS

One downside to IFRS is manipulation. Companies can use manipulation in IFRS is that they can use only methods they choose to, allowing the financial statements to only showed what results the companies desires. This is called profit manipulation. The biggest issue with manipulation is that it could be hiding bad financial results for the company. Costs are capitalized as an asset and not expensed as incurred in IFRS (Albrecht, 2008). This could cause the net income to be overstated by a large amount. "Supporters of IFRS say that by capitalizing these costs,...