Within accounting, there are various types of forms that can be followed, each abiding to a different guide or set of rules or principals to follow. As follows, each is explained in detail and discussed.
GAAP and IFRS are two accounting systems that have been the most used throughout the last era in which accounting has been more than important throughout worldwide corporations. GAAP (generally accepted accounting principles) is a common set of rules to follow used for worldwide financial systems. These specifications include many industry rules to follow. The point at the end of the day of the use of accounting principles included within the range of GAAP principles is to make operations transparent and consistent between operating organizations and corporations. GAAP does dance specific rules; it varies in geographic locations as well as varying on other aspects such as religion or specific cultures. On the other hand comma, there exist another set of principles for accounting systems known as the IFRS (international financial reporting standards). The principles of the IFRS are set out to achieve various goals, especially in order to provide a framework in order to demonstrate how to prepare and disclose their financial statements. IFRS users rely on the fact that they believe that adopting a worldwide framework for accounting principles would be the easiest form, as well as the most efficient and effective. This system also gives its users the ability to simplify accounting procedures between international organizations working overseas as well as being able to provide auditors, directors and investors with transparent and comprehensive information on the organizations transactions. The main and most important difference between these two principles of accounting, is that the GAAP system provides specific rules for reporting back, IFRS is more of a structured guide towards a more efficient way of working accounting between international organizations.
The similarities and differences that exist in US GAAP and IFRS (IFRS) are very distinctive. In addition, when comparing US GAAP and IFRS we can determine that the basis of one is determined by rules and the other is based on principles. On the other hand, with respect to the treatment of the transition under IFRS, the rule based on principles, provides less information and contains fewer details compared to rules-based rules. In addition, we can mention that US GAAP relies on three aspects and these are: (1) Legal, (2) Economic and (3) Social Accounting System. By contrast, IFRS (IFRS) is an accounting standard based on principle and as such meets the economic and social needs of a country. As a result, the main differences and objectives that exist between US GAAP and IFRS (IFRS) are under the economic, legal, political and social aspects. For example, when Germany decided to adopt IFRS standards, the central bank suggested that IFRS was a great accounting system to follow. Another example that we could mention would be the one from the Netherlands, because the Netherlands following IFRS (IFRS) had to clearly identify equity outside of its financial system. The technical differences that are established between US GAAP and IFRS are indicated as follows: (1) The way in which the financial statements are presented in each of the accounting standards, (2) Position evaluation. Financial Statement in the Balance Sheet, and (3) Record of accounting differences in accounting books. Therefore, the IFRS (IFRS) offers a more accurate judgment and provides an extensive requirements report unlike the US GAAP standards.
One of the main projects both the IASB and the FASB are working o now is the convergence between the both of them. The idea of the project is to get rid of some of the variety differences between the International Financial Reporting Standards and the US GAAP. The project, which is being done jointly by FASB and IASB, grew out of an agreement reached by the two boards in October 2002. This convergence is of relative importance because it will enable worldwide organizations to use a similar practically equal system of accounting principles in order to allow
Transactions between organizations, especially overseas, to fluctuate more efficiently, effectively and most important with the upmost transparency. The whole convergence project between the IFRS and the GAAP is evolving over time although it is presently coming to its end. There exist various cases in which projects have been closed down but the IASB has continued these projects on their own in an independent fashion to the convergence treaty, these projects are considered on a long-term basis by the IASB treaty.
The conversion of the USA from the FASB to the IASB accounting principles will be extremely hard. The USA has been used to not only using these principles of accounting but for so long, but also that their population is educated from the start to do accounting in this form, a change would mean a subsequent amount of work for something that already functions with enough ease for them to continue calmly. On the other hand, it is also true to say that if the USA adopted a new form of accounting principles that abided themselves more to those of the rest of the world, then it is very complicated that they would not benefit from it. With this, it is deferrable to the case that if the USA did decide to change its principles of accounting from one branch to another, then it is most probable that it would benefit them on the long-term hand. It is also true that many companies still believe in following the short term projects, because it is easier to control than a long term one.
In conclusion, seeing the two different branches of accounting it is hard wither to decide which one is preferable for organizations. On the first side, some are quicker and more effective while other are more transparent therefore stronger overseas, making the decision between each relatively complicated. Companies should always depend on which is more favorable tot them, depending on what is used in their country as well as their control overseas.