GAAP Vs IFRS
One of the main challenges faced when expanding globally is the language and culture difference. Different …show more content…
GAAP and IFRS. For example, under IFRS LIFO cannot be used, while companies can chose between FIFO and LIFO under U.S. GAAP when recording inventory. Another example would be the fact that IFRS favors a control model, whereas U.S. GAAP uses a risk and rewards model.
Many countries are moving toward convergence and adopting IFRS, approximately 120 countries have already gone through adopting the international standards. The U.S. has already gone through a plethora of initiatives in order to get closer toward convergence. Joint projects conducted with the IASB, short-term convergence project, FASB monitoring of IASB projects, and Convergence Projects are just a few examples of the progress and the measures the U.S. have taken in the name of convergence. As time passes, globalization has risen in importance due to the ongoing interactions between people and countries from all around the world. This has increased the importance of convergence and uniting the world’s trade and business under one set of common accounting principles. One of the problems of achieving convergence is the complexity of the different rules set in different countries and the amount of detail one has to go through in order to cover all important aspects. Also, when achieving convergence, a problem would be the strictness of implementing different rules on different people and being able to maintain consistency. Not having convergence can result in confusion and lack of trade between countries due to varying rules and principles. The SEC has tried to facilitate convergence by removing “the requirement for non-US companies registered in the United States to reconcile their financial reports with US GAAP if their accounts complied with IFRSs as issued by the IASB” (ifrs.org). Also, the SEC has published a roadmap on adopting IFRSs for domestic U.S. companies, to guide any company to