Globalization has led most countries to follow and teach the principles of IFRS. US companies follow GAAP rules, which can cause complications for US companies that want to do business internationally. Both accounting practices provide a useful and accurate explanation of the company's financial situation. However, comparing financial statements after GAAP with statements following IFRS may lead to meaningful differences.
The United States uses GAAP or generally accepted accounting principles for financial reporting. GAAP is a rule that financial statements must follow and is acceptable only in the United States. Unlike GAAP, IFRS or IFRS is based on principal. This means that when a business transaction occurs, GAAP must follow a certain step to record it. There are several ways in which IFRS can explain transactions. Another difference in IFRS is that the principles based on generally accepted accounting principles are based on the fact that you cannot find flaws in principle as easily as rules. Because principles are more vague than specific rules, it covers more potential threats to unfaithful reporting. An example of this is the historical cost used in GAAP and the "real value" that IFRS uses for fixed assets. Historical cost uses the price paid for the asset, while "actual value" uses the estimated value of the current asset. "Real value" is very useful for companies that invest in something for future economic benefits.
Another US company is facing double accounting work. For financial information reporting and auditing, US companies need to provide us with GAPP, which is useful when comparing financial statements with other US companies or managing them internally. However, for international reporting, IFRS has been used in more than 110 countries. [Banister] Double accounting work is also very intensive. An example is that IFRS does not consider LIFO as an acceptable inventory system. If the cost of the product is increasing, using LIFO can save the company's funds because higher costs will result in a reduction in taxable income compared to total revenue. If a company using LIFO needs to report internationally now, it must re-evaluate any financial statements involving income inventories to meet IFRS. [Intuit team] In addition to doing more work for American accountants, this double accounting will bring additional disadvantages.
Accountants studying in the United States are taught how to meet GAAP when conducting financial reports, and the CPA exam proves that they do so. They are not even taught to meet the IFRS principles, so they may not be prepared to best meet the IFRS financial statements. This is not good for companies reporting information because it may not be the best report the company may have. This is also harmful to all US professors' accountants. In an increasingly globalized world economy, accountants can only meet the accounting rules of a country, rather than accountants who can meet accounting principles in more than 100 countries.
Orignal From: How Globalization Affects American Accounting
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