International Financial Reporting Standards

1132 Words 5 Pages
According to the IFRS website, International Financial Reporting Standards (IFRS Standards) are accounting standards developed by the International Accounting Standards Board (IASB). This enables organisations to compare financial performance with international peers. The following essay will compare and contrast the progress of the US and China as they advanced upon their convergence with the IFRS.
Initially, the US progressed through conversion of the IASB and the FASB. The FASB is the US financial accounting standards board, the IFRS website conveys that FASB provides a plan for the board’s standards setting activities. ICAEW’s website mentions that FASB is the only authoritative for the US generally accepted accounting principles (GAAP).
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Although both countries have different approaches, sources state that their method and outcomes were for the same purpose. Moser (2014) contrast the convergence of the IFRS with these countries in his journal. Here the history of the country with the IFRS, the action of convergence with the IFRS and the future with the IFRS are discussed. Firstly the history towards the convergence in the US is described. The IASB was a standard regulation which was trying to harmonise the US accounting standards so only one set of standards are followed. The progress report for the US (2010) states that “The Staff’s comparison of U.S. GAAP to IFRS is expected to provide insight …show more content…
They do this by investigating factors such as earnings persistence and the contrast between future cash flows and accounting earnings. These factors are observed for firms which use IFRS and firms which undertake GAAP. They’re findings suggested that the IFRS convergence was beneficial to the US and that it had an overall positive outcome. 33 countries were measured for these elements with different firms from 2002 until 2008. Atwood et Al (2011) discovered that positive earnings persistence was the same for firms under IFRS and firms under GAAP. However, firms under IFRS proposed less persistence than firms under GAAP when loss was measured. This demonstrates that in the US the IFRS convergence was favourable and an advantageous action for the state as when firms are more profitable the business cycle becomes wealthier and the economy is aided. The writer’s findings further revealed that earnings were more related to upcoming cash flows in firms under the US GAAP rather than firms under the IFRS. This is a downfall of the IFRS convergence as it is essential that companies have an idea of the cash flows approaching so predictions about potential profits or loss can be made and identified. This would allow the enhancement of profits and prevention of loss, the fact that there is little association in IFRS regulated firms presents issues for the

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