International Financial Reporting Standards Essay

According to Deloitte Touche Tohmatsu (2010, para. 3) International pecuniary describe Standards (IFRS) ar Standards, Interpretations and the Framework adopt by the International Accounting Standards climb on (IASB). IFRS was established in 2001 and the conversion of the International Accounting Standards (IAS). The IAS had been functional since 1973 until it was born-again to IFRS. more standards and components were added to the new IFRS to enhance originalism in be and to accommodate the ever-changing accountancy environment.Many countries have accepted the use of IFRS since they are more(prenominal) comprehensive and cover a wide variety of score systems. The changes in technologies cause the adjustments in the report standards to ensure no loopholes exist in the story profession (Deloitte Touche Tohmatsu 2010). Transition Issues Most of the standards used in the IFRS were adopted from International Accounting Standards (IAS). IAS has been operational between 1973 u p to 2001. They were developed by the International news report standards Committee (IASC). The task of setting international accounting standards was shifted to IASB in 2001.IASB continues to make accounting standards called the IFRS. IFRS is composed of the International Financial report Standards (IFRS) standards issued after 2001, International Accounting Standards (IAS) standards issued before 2001, Interpretations originated from the International Financial insurance coverage Interpretations Committee (IFRIC) issued after 2001, and Standing Interpretations Committee (SIC) issued before 2001 and Framework for the supply and Presentation of Financial Statement (Deloitte Touche Tohmatsu 2010, para. 10).IFRS vs. , U. S.GAAP The Generally Accepted accounting Practices (U. S. GAAP) were developed to overlook accounting practices in the economy of the U. S. The U. S. GAAP differs about from the IFRS and there has been debate to exchange the U. S. GAAP for the IFRS. The IFRS has been acceptable in the globular market and has provided opportunities to the U. S. accounting profession since the U. S. GAAP has been limited within the U. S. More than 100 countries in the world are using the IFRS in their accounting systems and there is concern about the adopting of the IFRS in the US.According to Epstein (2008) the implications for the adoption of the IFRS in US pass on be Training on the differences between IFRS and GAAP, Financial scrutiny of international joint ventures, Merger & acquisition (M&A) international accounting reviews, Sarbanes-Oxley compliance on corporate governance matters, Analysis of international realisation policies for multinationals, and Litigation risk due to inappropriate use of IFRS (para. 3). The global investors volition have advantages after the adoption of the IFRS in the US accounting systems.This pass on provide a better environment for cross-border investment as hearty as integrating capital markets. Global organizatio ns in the US will save the be of accounting by the use of a sensation financial reporting standard. The existing system requires compliance with the domestic accounting standards as well as accounting standards of other countries. This is creating more costs to international firms since they must install all accounting systems and employ force out from diversified accounting backgrounds.The use of the GAAP has limited the growth and enlargement of many an(prenominal) companies in the U.S. Multinational companies and their investors will benefit a circumstances from the adoption of the IFRS (Malriat, 2009). Accounting for revenues under IFRS IFRS adopted some standards used by the IAS but some additional standards were included. This was done to ensure more accountability in the accounting systems and to ensure revenues are safeguarded within the entity. The assumptions of IFRS are first, collection basis, this means that transactions are accounted for when they occur but not when interchange is received or paid.Secondly, the going concern the entity is assumed to continue operate in the foreseeable future. Thirdly, stable measuring unit nominal fiscal units are used in accounting to ensure stability of the buy power. The qualitative properties of the financial statements are Understandability, Reliability, Comparability, Relevance and True and Fair discern/Fair Presentation (Deloitte Touche Tohmatsu 2010, para. 14). The elements of financial statements are assets, liabilities and equity. IFRS uses savvy in underdeveloped conclusion about the accounting systems of an organization.Approximations and evaluations are not accurate and discretion is required when drawing conclusions about the financial status of an organization. Strict enforcement of accounting standards will provide a better system that will monitor the businesses in the international markets (Deloitte Touche Tohmatsu 2010). Conclusion IFRS developed from IAS to include the changing professional requirements and technologies in accounting. The US GAAP has been criticized for its limitation to the US economy and many accountants require the adoption of the IFRS in the accounting systems.The shift from the use of IFRS to the US GAAP will have several implications on the US financial accountants as well as other users of the accounting standards. Even though there are few differences between IFRS and the US GAAP, there are many limitations accompanied with the use of the US GAAP. Adopting the IFRS will open up the market and reduce accounting costs to multilateral firms in the US. Amendments in the IFRS continue to be made to update the standards according to the changes in engineering and the global legal systems.