Convergence of US GAAP and IFRS

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Table of Contents

CHAPTER 01: INTRODUCTION1

1.1 Research Background1

1.3 Research Questions3

1.4 Rationale of the Study3

1.5 Limitations of the Study4

1.6 Significance of the Research4

CHAPTER 02: LITERATURE REARVIEW6

2.1 Background to Convergence7

2.3 Presentation of Financial Statements10

2.4 Regulatory Status under U.S. GAAP and FASB11

2.5 Prerequisites for Convergence12

2.6 Consequences to the IASB13

2. 7 Benefits of Convergence14

2.8 The Codification of GAAP15

2.9 Rules of financial reporting16

2.10 Differences liabilities and equity17

2.11 Insurance products18

2.12 Fair Score18

2.13 Convergence of Two Systems20

2.14 The Strategy of Convergence21

2.14 Benefits to EU Continues22

REFERENCES25

CHAPTER 01: INTRODUCTION

1.1 Research Background

This is the era of globalization in which the number of multinational corporations is increasing at a higher rate than ever before. Most of the organizations are striving to expand their operations globally in order to cater the international market, and to have presence in all major areas of the world. When the aim of corporations is to operate in more than one country, there arises a strong need for the interconnection of accounting policies, for the harmonization of business operations, and for calculating profits. Thus, in such globalized era, the need of harmonized and standardized accounting regulations is crucial in order to allow entrepreneurs to spread their businesses other than the home country.

For this reason, a number of accounting professionals have worked closely for the development of harmonized accounting standards, so that there could be a single legitimate frame for accounting regulations. Accounting is considered as the language of business. The role of accountants is to communicate and collect economic information about business enterprises, as well as, other such entities to a wide variety of persons. Thus, in order make financial statements of different corporations useful, it must be ensured that these statements must be comparable and clearly understandable so that users may compare and evaluate the performance of one corporation with its prior period's performance or with the performance of other similar businesses. Therefore, all general purpose kind of financial statements need to be prepared in accordance with the same uniform guidelines. This research report's aim is to examine the recent change which is expected to come in the global corporate financial reporting. The International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) are pursuing a number of joint projects with the aim of improving and converging U.S GAAP (Generally Accepted Accounting Principles) and International Financial Reporting Standards (IFRS) (White, 1980, 817).

1.2 Problem Statement of the Research

One of the most difficult things is bringing change when most of the people resist it because of the fear of the unknown. However, change can turn out to be good and eventually it has the potential to become a norm. Over the past decade, the world of financial and accounting reporting has witnessed a rapidly changing environment, and great progress has been made in the area of establishing a single set of globally accepted, high quality accounting standards. However, most of the people still believe that we have not yet accomplished that goal. Thus, the problem statement of this piece of study ...