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Advantages and disadvantages of adopting IFRS for GM

- Briefly describe GM (in one (1) short paragraph).
- Given the SEC's current position on requiring U.S. publicly traded companies to report using the IFRS method of accounting, discuss whether or not it would be beneficial or punitive to the company when adopting IFRS. Explain your rationale.
- Determine the differences that would occur (or have occurred) by using IFRS for the income statement, balance sheet, and statement of cash flows, and how these differences may attract investors to the company.
- Compare and contrast the differences in the financial statements, and the advantages and disadvantages of using IFRS versus GAAP reporting.
- Make recommendations as to whether the company you researched should use IFRS or GAAP as its reporting standard. Explain your rationale.

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I gave you some of the main differences between the two methods. Given the other material you've worked on, GMs interest is clearly on the side of GAAP. But that is just my opinion. Please see the attached document for the solution. Thank you for asking BrainMass!

You realize I cannot write the paper. What I normally do is give a detailed outline. Essentially, I give you the Lincoln Logs, you build the cabin. But this is what we've been doing all along.
In general, the Ernst and Young book is far more useful than the SEC. They say the same thing regardless.

Everyone knows what GM does.

In simple terms, the SEC holds that domestic business reports according to GAAP. Foreign firms, or US firms doing lots of business abroad use IFRS as laid out by the IASB. Yet, when a foreign business reports to the US government, it must translate the IFRS into GAAP. Any reporting to the federal government must be in GAAP form.

In reporting, GAAP normally permits a 1 or 2 year gap between comprehensive reports. It deals with the profile of the firm for that period of time. IFRS demands that any yearly report be connected with the previous years. IFRS wants to see dynamic reports, GAAP is just interested in the present snapshot.

When one company buys a piece of another, GAAP and IFRS have two different methods of reporting. GAAP, does not exclude the value of assets that will remain with the buying company (the carrying value). It takes the full cost of the acquired entity.
IFRS deals with the cost of the business as a combined unit. Hence, IFRS will see the acquisition as more expensive than GAAP.

The IFRS is not concerned with current values of assets. It cares about their change over time. GAAP's approach is that assets differ, so current or dynamic reports will be attached to different kinds of assets (i.e. the latter for those assets that are volatile in the market or which depreciate rapidly).

The function of assets are not needed in either form. However, for IFRS, if firm decides to delineate assets by function, this brings in a whole slew of new regulations. So if you separate salaries from productive assets, the origin of each must be presented in IFRS. GAAP does not want form and function of asset categories.

In neither form are income statements specified to be laid out in any way. In general, IFRS would like to see (but does not require) specific performance measures per capital asset ...

Solution Summary

The following posting discusses the advantages and disadvantaging of adopting IFRS for GM.