The Financial Accounting Standards Board has undertaken several key initiatives to pursue the goal of convergence of International Financial Reporting Standards (IFRS) and U.S. Generally Accepted Accounting Principles (GAAP). Furthermore, the Board conducts several joint projects with the IASB, and it works with the IASB on the short-term convergence project.
Discuss the efforts made toward convergence of International Financial Reporting Standards (IFRS) and U.S. Generally Accepted Accounting Principles (GAAP) on the financial performance reporting by business enterprises.
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There have been multiple efforts made toward convergence of International Financial Reporting Standards (IFRS) and U.S. Generally Accepted Accounting Principles (GAAP) for financial performance reporting.
1) REF1: Deloitte & Touche (n.d.) reference that, "There is a need for a common reporting language; and the importance of the convergence of financial reporting standards on a global basis cannot be overstated. True convergence will make it easier for companies to compare competing securities investment opportunities, with little concern about geographical boundaries, and decide which offers the best potential return. Investors will drive the push towards convergence around a transparent system of accounting because the market will penalize investments whose features are not well understood.
National accounting standards that differed across political boundaries may have made sense when companies raised money in, and investors and lenders looked for investment opportunities in, their home country.
The world's capital markets began to globalize over thirty years ago, and are now so globalized that only a single set of global accounting standards can serve those who use financial statements to make investment, credit and other decisions.
To a large extent, national standards in most countries of the world have been based either on IFRS or US GAAP. Despite the tendencies of national standard setters to make small or large changes to those standards, they cannot and do not ignore them in developing their own national standards. Therefore, a sensible way to achieve a single set of global accounting standards in a reasonable time is to work towards convergence of IFRS and US GAAP - in turn causing a 'trickle down effect' in those countries that continue to maintain their national GAAP. That is the approach the IASB has adopted.
The US FASB and the IASB have formalized their commitment to standards convergence by issuing a ...
This solution discusses the convergence of IFRS and GAAP.