Should GAAP and IFRS converge?

U.S. GAAP preparers have an option to slow the recognition of stock compensation expense that IFRS preparers do not. Despite their best efforts, full convergence appears unlikely in the near term. Therefore, it is important for preparers and investors to understand the differences between the two frameworks.

Why the US should not converge with IFRS?

As the SEC’s purpose is to protect investors in US companies, especially US investors, they have shown some resistance to the adoption of IFRS. The SEC cites IFRS’s lack of consistency and believes IFRS is underdeveloped when it comes to small-scope issues in reporting.

What is the difference and similarity between GAAP and IFRS PDF?

US GAAP requires that fixed assets are measured at their initial cost; their value can decrease via depreciation or impairments, but it cannot increase. IFRS allows companies to elect fair value treatment of fixed assets, meaning their reported value can increase or decrease as their fair value changes.

What are some potential conflicts between US GAAP and IFRS?

One major difference between GAAP and IFRS is their methodology, with GAAP being rules-based and the latter being principles-based. This difference has posed a challenge in areas such as consolidation, the income statement, inventory, the earnings-per-share (EPS) calculation, and development costs.

What is IFRS convergence?

Convergence means that the U.S. Financial Accounting Standards Board (FASB) and the IASB would continue working together to develop high quality, compatible accounting standards over time. More convergence will make adoption easier and less costly and may even make adoption of IFRS unnecessary.

What are the challenges to converge the financial statements with IFRS?

Therefore there are several challenges that will be faced on the way of IFRS convergence. These are:

  • Difference in GAAP and IFRS:
  • Training and Education:
  • Legal Consideration:
  • Taxation EFFECT :
  • Fair value Measurement:

What is the biggest difference between IFRS and US GAAP quizlet?

This is a significant difference between the two methods. The lower of cost or market rules differ between U.S. GAAP and IFRS. Inventory can be written down under U.S. GAAP to market value, but not revalued upward. Under IFRS, inventory can be written down, but also written up (but only to cost).