Impact of the Adoption of Ifrs on Accounting in Usa

Impacts of the adoption of IFRS on accounting in US.

As globalization becomes popular in the world, the global accounting standard for the business enterprises which are globally operating should have to be developed. International Financial Reporting Standards, IFRS, would solve this issue for the global businesses to have a clear, accurate and consistent common set of accounting reporting standards. There are more than 100 countries that have adopted the IFRS including the European Union. The convergence of IFRS on accounting in the US would have several impacts from various points of view ranging from the technology system to tax reporting. Computerized accounting systems, accounting professions, audit report preparers, management personnel, business owners, investors, tax authorities, and litigation and regulatory issues are the main concerns of this convergence process.

IFRS is principles-based approach while the US GAAP is rule-based. IFRS focuses on the economic substance of the transaction over form. This leads to the subjective approach rather than the objective approach. There are many differences regarding accounting recording transactions. For example, financial instruments, revenue recognition, treatment of research and development cost, evaluation of fixed assets, depreciation of fixed assets, treatment of stock (FIFO), impairment of assets, treatment of leases, and so on. Assets are measured at fair value rather than book value. This impact would be affected by fair and equitable experts.

Furthermore, financial statement presentation has a huge impact on preparers such as accounting personnel and auditors. Audit firms must be educated prior to providing training and consulting service to their clients. This factor has an impact on financial statement users such as management, board of directors, internal audit personnel, shareholders, investors and government authorities. The interpretation of the IFRS financial statements is critical to the...