International Financial Reporting Standards (IFRS)
Generally Accepted Accounting Principles (U.S. GAAP)
US GAAP is the general accounting principles, standard, and procedures that the U.S. companies follow to prepare their financial statements. GAAP has combination of accepted standards that the companies should follow when recording and reporting their accounting information. For example, GAAP has set up the rules that companies should follow when preparing the financial data such as balance sheet, revenue recognition, and outstanding shares recognition.
GAAP also mandates the companies to have consistence, relevance, reliable, and comparable accounting standards. One of the main objectives for setting up GAAP is to assist the investors to have minimum level of consistency when analyzing the financial statement of a company.
The basic four accounting principles that GAAP lays down are as follows:
Historical Cost Principle: GAAP makes it mandatory for companies to consider the acquisition of costs.
Revenue Recognition Principle: This refers to accrual basis accounting.
Matching Principle: This allows evaluation of actual profitability and performance.
Principle of Full Disclosure: Companies should keep the costs minimum when disclosing their financial statements.
Accounting statement not following the U.S. GAAP accounting principles may not be a genuine accounting standards .(Thornton, 2007).
"International Financial Reporting Standards" (IFRS)
"International Financial Reporting Standards (IFRS)" is the accepted international accounting standard that the public traded companies implement when preparing their financial statements. The aim of IFRS is to create accounting standards that could be applied in both developing and advanced countries. In the contemporary business environment where companies cross borders to transact businesses, recognized accounting standard in one country may not be applicable in another country because different countries have set of rules that the companies must follow when preparing their financial statements. Since different countries have different interpretations of business transactions, the difficulties often arise on the analysis and interpretation of financial statements across nations.
With difficulties facing organizations in the analysis and interpretation of financial statement across nations, the investors, business organizations, and regulators are now realizing the importance of common international accounting standard in the financial reporting chain. (Chakrabarty, 2011). Many countries now believe that incorporating IFRS standard in preparing company financial statement promotes economic growth. With importance of IFRS in preparing financial statement, countries have started allowing business organizations to make use of IFRS to prepare their consolidated financial statements. For example, the European Union has mandated all companies incorporated in the member countries to prepare their financial statements in accordance with the IFRS. In addition, Australia, New Zealand, and Israel have mandated the incorporated companies in their territories to prepare their financial statements in accordance with the IFRS. (AICPA, 2011).
Norwalk Agreement (October 2002)
"Norwalk Agreement is a memorandum of understanding signed on October 2002 between the Financial Accounting Standards Board (FASB). This agreement, concluded in Norwalk, CT, established a joint commitment to develop compatible accounting standards that could be used for both domestic and cross-border financial reporting" (AICPA, P 3).
Following the meeting of the FASB and IASB in October 2002 in Norwalk, the agreement is to formalize the convergence of general accepted accounting principles in the United States (U.S. GAAP) and International Financial Reporting Standards (IFRSs). In the memorandum of understanding issued in the Norwalk agreement, the FASB and IASB pledge to:
Make existing financial accounting reporting standards compatible as soon as it is practicable.
Coordinate their future programs to enhance compatibility.
Ensure that there is no significant difference in the two sets of financial reporting standards. (Wild, 2007).
Generally Accepted Auditing Standards
General Accepted Auditing Standards (GAAS) is a systematic guideline that an auditor must follow when conducting auditing for a company. GAAS pledges an auditor to maintain accuracy and consistence in the auditing report. Auditing provides the standard measure by which an independent auditor conducts plans and reports the results of an audit in accordance with the accepted auditing standards.
By following the GAAS principles, an auditor is likely to minimize the missing material information when auditing the financial statement of a company. GAAS provides the auditing procedures in which independent auditors must follow when implementing their auditing professions. One of the standard procedures that an auditor must follow is the standard of reporting by which "the auditor must state in the auditor's report whether the financial statements are presented in accordance with generally accepted accounting principles." (AICPA 2006). According to GAAS, an auditor must also state in his opinion the reliability of the financial statement of a company as whole. The entire scenario is to enhance the integrity...
S. GAAP," 2012). In other circumstances, IFRS requires the combination of two or more transactions when they are linked in a manner that the commercial impact can only be understood through referring to the transactions as a whole. Customer Loyalty Programs: Under IFRS accounting standards, loyalty or award programs in which a customer earns credit depending on their purchase of goods and/or services should be accounted for as multiple-element arrangements. Therefore, these
For the layperson who is likely to be invested in a stock, a company or a mutual fund, this does reflect a core obstacle to effective decision-making. Indeed, as with many aspects of globalization, the implications of international accounting standards as a concept would only arrive at many of its conflicting points after a period of unencumbered idealism. Again, as the more general discussion on globalization denotes, the implications
Dole and Nestle Generally Accepted Accounting Principles (U.S. GAAP) When it comes to the preparation as well as presentation of financial statements in the United States, there are a number of accounting procedures and rules used by entities in an attempt to enhance a certain level of consistency. These rules and procedures are referred to as U.S. GAAP. Essentially, U.S. GAAP contributes towards the enhancement of the legitimacy and truthfulness of an
For example, there are many SEC registered companies, and they are not all American companies. Many of them are actually headquartered in foreign countries. In the past they had to change their accounting and financial information over to GAAP requirements, but changes are allowing companies to continue to use IFRS instead. Some of the U.S. based companies are also going to be allowed to use IFRS in order to
Financial Standards Reporting standards for financial transactions have been varied with regard to countries and companies across the globe for many years. This fact has made it difficult for transactions to be reported with any great degree of accuracy. This was especially true in Germany where there was no true German GAAP. What the rest of the world has considered the German GAAP, the GoB, was actually comprised of here say
" (Camfferman & Zeff, 2) Indeed, the purpose which seems to stand above many others as specific Standards are examined is the improvement of financial reports as informative documents inbuilt with the capacity to educate users as to the financial disposition and outlook of reporting entities. The declared purpose of the IFRS is to improve the comparability, clarity, relevance and reliability of accounting processes and the resultant financial reporting across a
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