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Wednesday, 31 July 2013

What Is IFRS? - International Financial Reporting Standards

IFRS, or International Financial Reporting Standards, is quickly becoming the global standard for business financial reporting. It is up for constant debate in the United States as to whether businesses should adopt IFRS or stick with the US standard of GAAP. IFRS has fewer rules than GAAP and is less structured, though it is at least as effective if not more so. The major benefit is that it is global, meaning that it allows for a connection between international businesses that the GAAP does not. For many people change is a scary thing and seems unnecessary, though in the case of switching to IFRS change is not only a good thing, but potentially incredibly beneficial for the US.

IFRS offers the US, and other countries, the opportunity to adopt a program which is sophisticated, easy to follow, and simplified from other programs such as the GAAP. With IFRS all businesses will be able to compare financial documents, businesses will become more efficient in all areas of productivity, and the percentage of reporting errors will decrease significantly. If the US mandates a conversion to IFRS, which will almost certainly happen in the very near future, the major barrier between the US and other countries will be broken down and the market will become more competitive and thus more profitable for the US economy.

A huge benefit for domestic companies is that IFRS is not GAAP. GAAP is very rigid, regimented, specific, and rule-based; it is complicated to follow correctly, nearly impossible for foreign competitors to decipher, and difficult for even US companies to adhere to. There is a huge margin of error for domestic businesses when it comes to reporting with GAAP and the switch to IFRS would greatly reduce these errors. IFRS offers US businesses the opportunity to put the worries of GAAP behind them and start fresh with a new concept and easier platform.

Financially, IFRS will cost a fair amount of money to switch over to initially though the potential for future earnings will make it well worth the investment. Many US companies have subsidiaries which have already switched to IFRS so it is imperative for these businesses to switch, though other businesses need to consider the benefits as well. Adopting a global reporting standard allows for the opportunity to partner with other businesses around the world thus creating a global brand, rather than simply a domestic one. The earning potential from partnerships which can be created because of the switch to IFRS is limitless. Not only will domestic revenue and the economy benefit, but US businesses will achieve a higher ranking in the global economy.

Some people are wary of making the switch because they feel they are placing a huge investment in something that they are unfamiliar with, but just because International Financial Reporting Standards is unfamiliar to them does not make it new; IFRS is already widely used and with great success outside of the United States. The ease of use, potential for earnings and partnerships, and global recognition should be enough to make US corporations feel secure in their decision to adopt IFRS.

Saturday, 27 July 2013

several differences between the two and a few differences at framework level

What is GAAP (Generally Accepted Accounting Priciples)? Best answer known to this is that it is the accounting standard used by the US. Infact the only reason GAAP still exists today is because of the US. Most countries in the world have already moved on. And with the US its only a matter of time. And when you talk about GAAP it is inevitable to talk about IFRS (International Financial Reporting Standards). IFRS is something that is used by over 120 countries the most widely accepted accounting standard and pretty much for the right reasons. It is a 'Priciples based' accounting system compared to GAAP which is a 'Rule Based' accounting system.

There are several differences between the two and a few differences at framework level are explained below.

1) Performance: Gaap actually takes performance elements like gains, losses and comprehensive income into consideration unlike IFRS.

2) Documents: GAAP requires income of comprehensive statement along with the usual Balance sheets, cash flow, changes in equity, income etc.

3) Inventory Estimates: GAAP allows LIFO as well where as IFRS only allows FIFO method.

4) Write Downs: With IFRS write down can be reversed in future periods where as with US GAAP it is completely prohibited.

5) Deferred Taxes: They are shown seperately in IFRS where as in the US Gaap they are included with assets and liabilities.

6) Unusual items: Any extraordinary items are prohibited in the IFRS where as US Gaap allows them even if they are unusual and infrequent.

Basically a company with great results in GAAP will not look bad in IFRS unless the results are due to an extraordrinary item. But again since it would be disclosed
some one making the comparison can understand easily.

So to conclude though there are quite a few differences in both the standards a person looking at the statements would not feel tremendous statements. Now the question is when will the US give a go to IFRS Convergence.

Friday, 28 June 2013

How Would IFRS Benefit the United States?

International Financial Reporting Standards (IFRS) are becoming the new accepted accounting standard worldwide, slowly replacing the US GAAP in the United States. Basically the IFRS are a new way of preparing public financial records for companies; the IFRS are less regimented, specific, and strict than the US GAAP. There is a reason that so many countries, currently about 100, are switching over to IFRS – there are tremendous benefits involved in making the change.

Specifically for the United States, what are the advantages?

Wednesday, 10 April 2013

The IASB has launched Opinions Statement

The IASB has released Reviews Statement: Strategy Assessment 2011, reviewing the outcomes of its opinion-gathering work out on what should represent its main concerns from here. The procedure produced “five obvious information,” described as follows by IASB Chair Hendes Hoogervorst in his foreword:

 Ifrs Convergence

“First, participants requested that a several years of ongoing modify should be followed by a interval of comparative relaxed, to let the dirt negotiate and to allow everyone to get used to the new Requirements. Second, there was almost single assistance for the IASB to concentrate on perform on the Conceptual Structure to offer a regular and realistic foundation for our standard-setting. Third, we were requested to make some focused upgrades to our Requirements so that we can reply to the needs of new adopters of IFRS.

“Fourth, we were requested to pay higher interest to the execution and servicing of the Requirements, such as the Post-implementation Evaluation procedure for Requirements that are lately released. Lastly, we were requested to enhance the way we create the Requirements themselves—to frontload the research stage of our perform by performing more extensive cost-benefit research and issue meaning, which, in addition to our perform on the Conceptual Structure, should outcome in less incorrect begins and more regimented perform programs and schedules for our tasks.

” This seems reliable with what one choices up in the Canada atmosphere. The CICA a while back released The Move to IFRS: Preparers’ and Auditors’ First Opinions of the Canada Encounter, dependent on a number of discussions with mature associates of publicly-listed organizations and review companies. This review involved the following passage: “The bulk of interviewees had restricted passion for further changes to standards later on. Even when interviewees showed an enterprise for which a particular venture might in some feeling be valuable, these advantages were usually outweighed for them by a feeling of “IFRS exhaustion.” Interviewees absolutely sensed the combined concentrate should be on keeping and helping the factors as they currently take a situation .” This aspect was apparently enhanced by particularly low passion for the IASB’s present tasks on renting and income recognition; the new review says though that the IASB continues to be dedicated to finishing these tasks (even declaring “broad and powerful support” for this course).

 Gaap vs ifrs

I think it’s not just the raw content of those tasks that people are unenthusiastic about, but the point that they seem to have been with us permanently, littering the scenery with incorrect changes and skipped objectives. The IASB understands this by choosing later on to undertaking more extensive research before releasing an formal project: “Projects will only become standards stage tasks when the IASB is assured that the issue is determined effectively and that the employees have determined alternatives that are of top high quality and are implementable. If this procedure performs successfully, once a venture is officially included to the IASB’s standards stage perform plan the time taken to create an Visibility Set up and thereafter a Conventional would be significantly smaller in present.

Thursday, 21 March 2013

IASB Would Make New Modifications between IFRS and GAAP

On Jan 5, 2010, the Worldwide Bookkeeping Requirements Panel re-exposed suggestions on calculating obligations for resource decommissioning, lawful conflicts and identical products. This visibility set up follows a 2005 visibility set up which involved changes to IAS 37 Conditions, Broker Liabilities and Broker Sources.
Gaap vs ifrs
The 2010 suggestions were released to explain assistance in the unique visibility set up. The new offer would require an enterprise to evaluate a responsibility at the amount that it would rationally pay at the end of the confirming interval to be treated of the existing responsibility.
An critical facet of this years visibility set up is that it concentrates on statistic assistance, and not identification assistance for a responsibility. Changes to identification requirements were involved in the 2005 visibility set up and were not re-exposed for opinion.
Currently, IAS 37 declares that provisions should be identified if it is potential that an output of resources embodying financial benefits will be needed to negotiate an responsibility. The phrase potential in IAS 37 is determined as likely than not. This is just like recognition under US GAAP for acknowledging conditional obligations. However, potential under US GAAP is determined as “likely”, a higher limit than needed under IFRS.
Ifrs Convergence
The unique 2005 visibility set up suggestions would fall the identification need that upcoming outflows had to be “probable” before producing a supply. This means that products that fulfill the meaning of a responsibility are identified. The offer to fall the possibility limit for identification is a important change to how accounting firms are used to analyzing when to identify a supply for conditional obligations.
The route the IASB is going with this conventional will result in essential changes to current assistance and make new variations between IFRS and U.S. GAAP. This venture is one that the IASB considers is needed to enhance the factors, but is not part of the unity program with the U.S. Despite targeted unity initiatives between the IASB and FASB, this is an example that demonstrates how full unity will be difficult to accomplish.
Concerns have been indicated about the IASB’s route on this conventional and some have inquired why any changes are needed – especially given other main issues. (See Conflict looms over making up lawful expenses, Accounting Age, Apr 1, 2010.) The IASB lately prolonged its opinion interval to May 19, but is focusing on issuance of an revised conventional in the second one fourth of this year.
Financial Reporting

Tuesday, 19 March 2013


Most Chinese suppliers organizations that use the VIE framework have selected to record on U.S. inventory markets and use U.S. Usually Approved Bookkeeping Ideas (U.S. GAAP). Some Chinese suppliers organizations using the VIE framework have detailed on other transactions, most considerably in London, uk, Greater, Hong Kong and Singapore. While North America just transformed to IFRS, London, uk, Hong Kong, and Singapore have been using it for a while.
Ifrs Convergence
U.S. GAAP, has particular guidelines for varying interest organizations (the phrase VIE actually comes from U.S. GAAP). These have been enhanced eventually and need comprehensive reports about the VIE and the conclusions made in determining to negotiate the VIE in the fiscal reports. IFRS did not particularly cope with the idea of VIEs, yet the guidelines were generally enough published that some organizations determined that they could negotiate VIEs under IFRS. Disclosures are often missing, and it is almost always challenging to figure out whether the company actually operates what it statements to be subsidiaries.
There has been a long venture ongoing to enhance IFRS to better cope with concerns of whether an enterprise should be combined. Recently there has been an make an effort to fulfill IFRS with U.S. GAAP to accomplish full unity in the long run. The IASB launched IFRS 10, Consolidated Economical Claims on May 12, 2011 that presented new assistance on merging. The new strategy brings together concepts of energy, visibility, and energy over varying profits to figure out whether an trader has management of an investee. The new guidelines take impact from Jan 1, 2013 with previously adopting allowed.
International Financial Reporting Standards
The guidelines are complicated and like the U.S. guidelines, do not particularly cope with the way VIEs are organized in Chinese suppliers. PwC just launched a 75-page guide on the new guidelines in both British and Chinese suppliers. I hurried to study it, determining that if they would go through all the make an effort to convert something this complicated they would spare enough a chance to create at least one example of a Chinese suppliers VIE, but they did not. There is a significant process looking forward to someone to figure out whether the existing VIE preparations will fulfill the new requirements. This looks like a great venture for one of my student’s master’s dissertation.
The great information is that the new requirements need considerably enhanced reports of combined VIEs. PwC’s guide has a three-page disclosure guidelines. These reports may provide some real excitement to traders who were unacquainted with the architectural threats in their investment strategies. Unfortunately, the new reports are not needed until times starting on or after Jan 1, 2013, which indicates that we will not be seeing them until 2014 unless organizations select to starting embrace. Authorities should stress organizations using VIEs to starting embrace those requirements, particularly for those that make an effort to IPO in the next two decades.
Financial Reporting

Monday, 18 February 2013

The Effect of the U.S. GAAP And IFRS Convergence On Their Constituents

Globalization, the Sarbanes-Oxley Act, the SEC adopting of international standards, and the financial and economical disaster recently have been applying stress on a variety of nations, such as the U. s. Declares, to remove the gap between the International Financial Reporting Standards (IFRS) and the United States Generally Accepted Accounting Principles (GAAP). Such projects have repercussions on the globe of accounting variety, and the factors unity of the United States GAAP along with the IFRS mostly effects business control, traders, inventory marketplaces, accounting experts and accounting requirements setters. Furthermore, the unity of accounting requirements is modifying the behaviour of CPAs and CFOs toward the harmonization of worldwide accounting, impacting the excellent of the International Bookkeeping Standards and the initiatives created toward the objective of convergence of GAAP and IFRS requirements.

Financial Reporting

International Financial reporting standards and specifications differ by nation, which makes variance in financial reporting. This problem becomes more frequent for traders trying to recognize ifrs accounting confirming variations when they are considering offering financing to capital-seeking companies that follow the Accounting standards and financial confirming of the nation in which they are doing business. The International Accounting Standards Board (IASB) looks for a usable solution to relieve the current complexness, issue and misunderstandings created by inconsistency and the lack of structured accounting specifications in financial confirming. The real difference between the IFRS vs GAAP is the approach each takes to the factors. The GAAP is rules-based while the IFRS is a principles-based technique. The GAAP includes a complicated set of recommendations trying to recognize recommendations and specifications for any concurrent, while the IFRS starts with the goals of good confirming and then provides assistance on how the specific purpose is applicable to a given situation.

The Consequences of Initiatives on Worldwide Accounting Diversity

The IFRS convergence and following change of reporting and accounting requirements at the worldwide level impact a number of elements, such as business management, traders, stock markets, bookkeeping professionals and accounting requirements setters and organizations.

Impact on Corporate Management

Business control will benefit from simpler, structured requirements, guidelines and methods that apply to all nations and are followed globally. The change will afford corporate control the opportunity to increase investment capital via lower rates while decreasing risk and the cost of doing business.

Impact on Investors

Traders will have to re-educate themselves in studying and knowing accounting reports and financial statements following the new internationally approved requirements. At the same time, the procedure will offer for more reliable information and will be simple without the need for transformation to the factors of the nation. Further, the new requirements will improve the worldwide circulation of investment.

Impact on Stock Markets

Stock marketplaces will see a decrease in the costs that include coming into foreign transactions, and all marketplaces sticking to the same guidelines and requirements will further allow marketplaces to contend worldwide for international investment possibilities.

Impact on Accounting Professionals

The move and unity of the current requirements to worldwide approved ones will power accounting experts to learn the new conventional, and will lead to reliability in bookkeeping methods.

Impact on Accounting Standards Setters

The growth of requirements includes a number of forums and organizations that make the procedure longer, more time intensive and annoying for everyone concerned. Once requirements have incorporated, the actual procedure of creating and applying new International Financial Reporting Standards will be easier and will remove the dependency on organizations to create and ratify a decision on any specific standard.

Arguments for and Against the Convergence of International Accounting Standards

Justifications for the IFRS convergence are (a) restored quality, (b) possible generality, (c) visibility and (d) assessment between different nations on accounting and financial reporting. This will result in an increase of investment circulation and worldwide investment strategies, which will further reduce rates and lead to economical growth for a specific nation and the companies with which the nation performs business. Timeliness and the accessibility to consistent information to all involved stakeholders will also conceptually make for a better and more time-efficient process. Additionally, new shields will be in place to avoid another nationwide or international economical and economical disaster.

Justifications against accounting standards ifrs convergence are (a) the disinclination of the different nations engaged in the process to work together based on different societies, values, requirements, values, types of financial systems, governmental techniques, and preconditioned thoughts for specific nations, techniques and religions; and (b) the time it will take to apply a new system of accounting guidelines and requirements across the panel.

The Quality of International Accounting Standards

The The Securities and Exchange Commission’s (SEC) objectives and initiatives both locally and worldwide have been to continually engage in the accomplishment of reasonable, fluid and effective investment marketplaces, thus offering traders with information that is precise, appropriate, similar and effective. One of the ways the SEC has followed these objectives is by maintaining the household quality of financial confirming as well as motivating the unity of the united states and IFRS standards.

Research indicates that companies that apply the international standards show the following: a greater difference of net income changes, a greater change in money moves, a significantly reduced adverse connection between accruals and money moves, a reduced regularity of small positive income, a you can hear of large adverse income and a greater value importance in accounting volumes. Additionally, these companies have less income management, more appropriate loss identification and more value importance in accounting volumes compared to domestic (U.S.) companies following the GAAP. Therefore, companies sticking to the IFRS generally display greater accounting quality than when they previously followed the GAAP.

FASB’s unique objective has always been to identify the U.S. GAAP and standards for accounting and financial reporting; however, the objective has been improved to consist of the unity and harmonization of U.S. standards with international ones (IFRS). There is some level of ability to resist the unity from all stakeholders engaged, such as accounting experts (CPAs, auditors etc.) and corporations’ top control (CFOs, CEOs). There are various factors for such level of ability to resist modify, and some are relevant to the bookkeeping career, some to business control and some are distributed by both. The new set of requirements that will be tailored will need to offer visibility and complete disclosure just like the U.S. Standards, and it should also make sure wide approval.

CPAs’ Attitudes Toward Harmonization of International Accounting

Some reasons for the U.S. not adopting the factors unity are: U.S. companies are already acquainted with the current standards; the deficiency of capability or low capability to culturally connect with other countries’ accounting systems; and a deficiency of good knowing of the international principles.

Lifestyle in this perspective is determined by the FASB as “the combined development of the mind which differentiates the associates of one human team from another.” Each country and culture stocks its own social standards made up of common features, such as a value program – a wide propensity to choose certain declares of matters over others – which is ifrs Implementation by the majority of elements. The accounting value measurements used to determine a nation's accounting program are based on the nation's culture; they involve the following:

Professionalism versus statutory control

Uniformity versus conformity

Conservatism versus optimism

Secrecy versus transparency

The first two connect with power and administration of accounting practice at a nation stage, while the last two connect with the statistic and disclosure of accounting information at a nation stage. Analyzing those dimensions and factors that affect an accounting system, it becomes obvious that social variations have a strong effect on the accounting requirements of another nation, thus further complicating the factors unity.

The GAAP have been honored for decades, and this is the information that accounting experts are acquainted with. The Ifrs convergence would need studying a new program, which most individuals would be immune to. Another purpose why U.S. organizations are immune to converging the GAAP vs IFRS is that there is an existing viewpoint that the IFRS does not have assistance as opposed to U.S. Requirements because the U.S. Requirements are rules-based while the IFRS technique is principles-based. U.S. accounting experts and business control understand the IFRS to be reduced excellent than the GAAP. With all of this said, the incorporated worldwide accounting standards should offer for less complexness, issue and misunderstandings, which is designed by the inconsistency and deficiency of optimizing that prevails with two different techniques.

CFOs’ Attitudes Toward Harmonization of International Accounting

CFOs are not adopting this modify because of the expenses engaged. There are particularly two places that are straight impacted: a business's financial ifrs reporting and its inner management techniques. Another price engaged in the conversion and modify to the IFRS is the public’s understanding of the reliability of the new incorporated set of specifications. The SEC confirming specifications will also have to be modified to indicate changes of the incorporated program.

The ifrs convergence is centered is on the following beliefs: (a) the convergence of accounting standards can best be obtained over time through the growth of top excellent, typical requirements and (b) removing requirements on either part is unproductive, and, instead, new typical requirements that enhance the economical information revealed to stakeholders should be designed. Company forums, in an attempt to best provide their investors’ needs, should give rise to the unity procedure by changing old standards with the new mutually designed ones.

As earlier described, the significant distinction between GAAP and IFRS comes down to one being rules- centered and the other being principles-based; this has presented a task in places such as merging, the income declaration, stock, the earnings-per-share computation and growth costs. In merging, IFRS prefers a management design whereas the U.S. GAAP wants a risks-and-reward design. IFRS does not separate outstanding products in the income declaration, but U.S. GAAP reveals them as net income. IFRS does not allow LIFO for stock assessment whereas the U.S. GAAP provides the choice of either LIFO, regular price or FIFO. Under the IFRS the EPS computation does not regular the person temporary interval computations, but the U.S. GAAP does. Regarding developing costs, IFRS capitalizes them if certain requirements are met while the U.S. GAAP views them costs.

It has been agreed to “(a) to get a short-term venture targeted at eliminating a wide range of individual variations between U.S. GAAP and International Financial Reporting Standards’ (IFRS), such as International Accounting Standards, IASs), (b) eliminate other variations between IFRSs and U.S. GAAP through synchronization of their upcoming work applications, (c) proceed improvement on the combined tasks that they are challenge, and (d) motivate their specific interpretative systems to organize their activities” (“When Bookkeeping Lastly Becomes International,” The CPA Publication 78(9) 11-12).

FASB 3 declares that the Sarbanes Oxley Act’s need of the SEC to examine the practicality of applying a more principles-based strategy to accounting indicates that the U.S. needs to proceed its conformity with the SOX as aspect of the procedure of the unity of the GAAP and IFRS standards. Both FASB and IFRS have determined short- and long-term unity tasks, such as 20 confirming places where variations have been settled and finished. Further, the FASB provides explanation on the GAAP by categorizing in climbing down purchase of power as proven in FASB No 5.

The Bottom Line
Despite recorded analysis showing a greater accounting excellent knowledgeable by companies that either adhere to the IFRS or turned to the IFRS from the GAAP, there is a question and issue from the FASB regarding the program and execution of principle-based requirements in the U.S. A remedy may be that the IFRS should agree to some FASB requirements to provide the needs of the U.S. elements and stakeholders.

Despite the convergence initiatives made on financial performance reporting, this indicates that the primary problems lie with the distinction in the strategy of the U.S. GAAP and IFRS. The IFRS is more powerful and is consistently being improved in reaction to an ever-changing economical atmosphere.

It’s anybody's think how this ifrs convergence will progress and effect the accounting career in the U.S. From a lawful viewpoint, organizations will be needed to reveal qualitative and quantitative information about agreements with clients, along with a adulthood research for agreements increasing beyond a year, as well as the addition of any important conclusions and changes in conclusions made in implementing the suggested conventional to those agreements. Maybe the response can be found in the need to consider a more in-depth research and an evaluation of the aspects impacting the creating or growth of a nation's bookkeeping system.