GAAP Rules to IFRS Principles
Should the U.S. Switch?
Financial reporting has experienced one of the biggest revolutions in history with the introduction of the International Financial Reporting Standards (IFRS). The IFRS is a set of accounting standards developed by the International Accounting Standards Board (IASB). IFRS has already been adopted by more than 12,000 companies in over 100 nations and is becoming the global standard for preparation of financial statements for public companies. The IFRS has brought about some questions as to whether the U.S. Securities and Exchange Commission (SEC) should switch from their traditional General Accepted Accounting Principles (GAAP) to a less regulated financial reporting system, such as International Financial Reporting Standards (IFRS).
History of the IASB and Development of the IFRS
The IASB began operations in 2001 replacing the International Accounting Standards Committee (IASC). The IASB is an independent, private-sector body that develops and approves IFRS. It operates under the oversight of the IFRS Foundation. According to Deloitte Global Services Limited (2010), the objectives of the ISAB under the IFRS Foundation are:
• (a) To develop, in the public interest, a single set of high quality, understandable and enforceable global accounting standards that require high quality, transparent and comparable information in financial statements and other financial reporting to help participants in the world’s capital markets and other users make economic decisions.
• (b) To promote the use and rigorous application of those standards.
• (c) In fulfilling the objective associated with (a) and (b), to take account of, as appropriate, the special needs of small and medium sized entities and emerging economies, and
• (d) To bring about convergence of national accounting standards and International Accounting Standards and International Financial Reporting Standards to high quality...