Pros And Cons Of GAAP

Pros and cons of GAAPs The diversity of world’s industrial sector has necessitated the adoption of common accounting policies and principles. Firms especially those operating at multinational levels largely require to embrace common set of financial reporting frameworks in a bid to enhance uniformity and consistency in financial reports. Different countries all over the world have been evident to adopt varying standard that govern the presentation and recognition of the items in financial reports. However, with the current trends towards globalization, companies in the US have grown interests in embracing standards that govern MNCs and global firms. It is however worth noting that, despite the overwhelming advantages associated with this …show more content…
First, rigidity in the accounting profession has been linked to stringent accounting principles. Notably, rigidity continues to characterize the accounting profession due to the adoption of common accepted accounting policies and standards. This highly limits creativity and innovation in the accounting profession. In addition, most of the firms especially those operating at local levels find it cost ineffective to embrace most of the accounting principles. Arguably, GAAPs the interests of large organizations at the expense of SMEs. This explains the recent trends towards the adoption of standards relating to such …show more content…
However, over the recent past, heated debates have sprung to forester the shift toward use of international standards. The proponents of this move suggest that, owing to the rampant trend of global marketing and international business transactions, there is a need to embrace standards that govern the presentation of financials internationally. The benefits that accrue to firms from adopting international financial reporting standards include; increased consistency and hence comparability of financial statements and reports. Common financial reporting standards help in ensuring uniformity in format and elements contained in financial statements.