Presently, U. S. Corporations and financial institutions present their financial statements in accordance with Generally Accepted Accounting Principles, or GAAP. Increased globalization in business and investing has created interest in creating one standard set of accounting principles that all corporations would follow. While the IFRS conversion to International Financial Reporting Standards has not yet taken place in the U. S., it is in the works.
While the IASB and FASB have been working together to produce the highest set of standards possible, they are each responsible for one individual set. The IASB, or International Accounting Standards Board, is responsible for creating and developing IFRS. The FASB, or Financial Accounting Standards Board, is responsible for U. S. GAAP. The only overlap is in making sure that both are particularly strict.
There are currently two proposals available for U. S.-based enterprises. If the SEC requires that all entities adopt the new set of standards, then the fear is that some of the strict regulatory requirements will be lost. Convergence, however, will ease the transition and allow for the more stringent principles in some areas.
The initial proposal by the Securities and Exchange Commission was that all companies would make the transition to report using the new financial standards by the year 2016. The majority of companies would begin converting or adopting in 2014, starting with the largest corporations that have revenues in excess of $700 million. Some companies will need to present newly transitioned statements for 2012 and 2013, as well, in accordance with SEC regulatory requirements.
The benefits of converting to IFRS include harmonization amongst different branches of an international entity, increased comparability for those entities which participate in mergers and acquisitions, and accessibility by more investors. One of the major drawbacks is the initial cost of making the transition. It will also have significant affects on both the balance sheets and income statements in the first several years of reporting.
Entities will need to closely examine the effects that conversions and adoption will have on their income taxes. Depending on the entity's debt-to-equity ratios, the affects could be positive or negative. Careful planning and examination can help to combat and plan for both scenarios.
All employees working within the accounting and financial fields of any major financial institution, accounting firm, auditing firm or corporation will need to be properly trained. The company will need to make sure that each person participates in one of the available training or certification programs. This should be done prior to the SEC declaring a final date for conversion or adoption.
Even though the decision-making process for IFRS conversion continue by the SEC, reporting entities are moving forward. They have a lot to plan for including the effects on taxes and financial statements. It is therefore imperative that they begin examining how they will make the transition. Companies must also anticipate the necessity of having highly-trained employees that understand the new principles. The time for a global set of accounting standards is upon the U. S. And corporations must take action.
While the IASB and FASB have been working together to produce the highest set of standards possible, they are each responsible for one individual set. The IASB, or International Accounting Standards Board, is responsible for creating and developing IFRS. The FASB, or Financial Accounting Standards Board, is responsible for U. S. GAAP. The only overlap is in making sure that both are particularly strict.
There are currently two proposals available for U. S.-based enterprises. If the SEC requires that all entities adopt the new set of standards, then the fear is that some of the strict regulatory requirements will be lost. Convergence, however, will ease the transition and allow for the more stringent principles in some areas.
The initial proposal by the Securities and Exchange Commission was that all companies would make the transition to report using the new financial standards by the year 2016. The majority of companies would begin converting or adopting in 2014, starting with the largest corporations that have revenues in excess of $700 million. Some companies will need to present newly transitioned statements for 2012 and 2013, as well, in accordance with SEC regulatory requirements.
The benefits of converting to IFRS include harmonization amongst different branches of an international entity, increased comparability for those entities which participate in mergers and acquisitions, and accessibility by more investors. One of the major drawbacks is the initial cost of making the transition. It will also have significant affects on both the balance sheets and income statements in the first several years of reporting.
Entities will need to closely examine the effects that conversions and adoption will have on their income taxes. Depending on the entity's debt-to-equity ratios, the affects could be positive or negative. Careful planning and examination can help to combat and plan for both scenarios.
All employees working within the accounting and financial fields of any major financial institution, accounting firm, auditing firm or corporation will need to be properly trained. The company will need to make sure that each person participates in one of the available training or certification programs. This should be done prior to the SEC declaring a final date for conversion or adoption.
Even though the decision-making process for IFRS conversion continue by the SEC, reporting entities are moving forward. They have a lot to plan for including the effects on taxes and financial statements. It is therefore imperative that they begin examining how they will make the transition. Companies must also anticipate the necessity of having highly-trained employees that understand the new principles. The time for a global set of accounting standards is upon the U. S. And corporations must take action.
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