Accounting Principles

Acct 217 paper

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Institution

Introduction

International Financial Reporting Standards constitutes a set of generally accepted accounting principles, which are adopted, by companies, and employed to assist in preparation of interim, and end-of-year financial statements. They are a vital source of information, useful to the shareholders, employees, customers, debtors, suppliers and many others.

The importance of IFRS is enabling these individual entities to learn and understand the financial position and financial performance of the company. They also indicate if the management is using the company’s resources to the best interest of the company. These standards are formulated by the International Accounting Standards Board (IASB). The set of accounting standards is adopted and followed by more than 100 countries. The member countries of the European Union (EU) use these standards.

In the United States, the accounting rules and procedures applied in the preparation, presentation and reporting of the financial performance of a company is the Generally Accepted Accounting Principles (US GAAP). These principles are widely used by various entities, which include; government, public and private corporations and also by non-profit making organisations.

The government, in the United States, does not set accounting standards directly. Financial Accounting Standards Board (FASB) is the highest body that sets the accounting standards for the private and public firms and the non-profit making organisations. Government Accounting Standards Board (GASB), on the other hand, sets the generally accepted accounting principles for the local and the state government.

The convergence process is not similar to conversion. Today, there are several differences between US GAAP and IFRS accounting policies. The FASB will collaborate with the IASB so as to improve the existing US GAAP and IFRS and get rid of the differences. They will work together through joint projects and...