US not adopt IAS
“Discuss why the US have not adopted International Accounting Standards”
Accounting standards was factually established by the American Institute of Certified Public Accountants (AICPA) business to Securities and Exchange Commission regulations. The AICPA produced and managed the Committee on Accounting Procedure in year 1939 and substituted the committee with the Accounting Principles Board in the year 1959. In 1973, the Accounting Principles Board was substituted by the Financial Accounting Standards Board (FASB) in common under the administration of the Financial Accounting Foundation in year 1959, whose undertaking was to cultivate an inclusive theoretical framework. After the formation of the FASB, the AICPA established the Accounting Standards Executive Committee (ASEC). International Financial Reporting Standards (IFRS) are becoming the global standard for the preparation of public corporation annual financial statements. The IASB is an autonomous accounting standard modification board which is based in London and it is consists of 15 members those are from multiple countries also including from the United States. Almost 120 nations jurisdictions authorization or require IFRS for home listed companies, while 90 countries have fully adapted with IFRS as broadcasted by the IASB and comprise a statement admitting such conformism in audit reports
In the United States significance of GAAP originates from a commanding body nominated by the American Institute of Certified Public Accountants (AICPA) other AICPA. It is commonly we understand that transferring to IFRS and leave behind GAAP is not the accurate track for the U.S. Many details provision this, such as the high expensive costs supplementary with altering from GAAP to IFRS, where is the less possibility of comparability among their financial statements. The genuineness that IFRS is second-rate to GAAP and furthermost significantly the fact that there is lacks the extent of regulations in IFRS and also lacks bright line rules that are necessary in the U.S. Converting to IFRS would be an all-embracing and costly evolution and it will outweigh the benefits. Many individuals insistent for IFRS execution in the U.S. just because execution it their own self-interests. There is undesirable conclusions in the near future which leads to divert from need to not right direction for financial reporting in the U.S. It is accurately said that GAAP is the superlative system for the U.S., and it will not compatible with IFRS and nor in the U.S. national interest to instrument this system. GAAP is not more flexible to support all unrelated demands but IFRS is more flexible established accounting standards. This in outcomes for IFRS have many other options available to its users in which there is overt and precisely permit its users to use their own preference in smearing the standards. Others are more secret and ascend from vague conditions within IFRS and different clarifications of the. However, the options in case within IFRS itself stance a concern for accurate comparability in financial statements.
When bearing in mind a shift from U.S. GAAP to IFRS there is thinking for manipulation. We required to consider the intensification of management discretion in creation of financial judgments. Many studies privilege that IFRS contributes more freedom for financial creators and for the reason that the presentation of many standards obliges for judgment. There is an example for this situation include financial records of allowances and reserves. A firm normally sets aside how much exclusively based on the managers' secretive evidence and judgment. So it is understanding that these reserves leave opportunity for managers to manipulate netting. So that they could merely change the amount by reserves for yearly smooth earnings. While there is no change in GAAP by Codification and it announces a new structure to organize in an easily manageable and user-friendly research system which is online. The FASB supposes that there will new system lessen the amount of time use and effort mandatory to research an accounting issue of noncompliance with standards in mitigating the risk through enhanced usability of provided exact information new standards. It is really strange I catch that after almost 13 years of world’s superlative accounting minds hard work but there is stagnant no sign of convergence the IFRS-US Generally Accepted Accounting Principles (GAAP) take place. Staff articulating the view that there should be a single set of international accounting standards develop and accepted by one and all. SEC continue to stimulate the formation of high-quality accounting standards by developing more strong measures in order to meet the needs of stakeholders. Increase in global nature of capital market place due to the agency work to endorse higher feature financial reporting worldwide enhance need for a single set of higher quality global accounting standards is achievable.
FASB’s Own Primacies continues to work on many non-convergence and technical issues on its new technical guidance diverges from IFRS. The latest US GAAP standards are the following and no one has a matching IFRS as; Employee Benefit Plan Simplifications, disclosures for Investments in Assured Bodies That Determine Net Asset Value per Share and Effects on Historical Earnings per Unit of Limited Partnership Dropdown Transactions. A possibly main intention for the deficiency of appetite convergence lies in the political accounting area. It gives the mostly impression of that the US is unwilling to give up the GAAP for domestic issuers and standard-setting right over to a foreign, their main goal is to protect US investor interests and rights. It is denoted by SEC that IFRS absences consistent application which allows with judgment and is unfledged in many specific areas for US GAAP guidance on the demonstration of costs associated to turning lines of credit. By approving IFRS there are the advantages of converting to IFRS a business can present its financial statements on similar extent basis for foreign competitors. It will make judgments easier and companies with divisions in countries that entail or authorization of IFRS may be capable to practice one accounting language. Companies also may need to adapt IFRS if they are a supplementary of a foreign business that must use IFRS, or if they have an overseas investor that essential for use IFRS. It may also benefit the companies by using IFRS if they aspiration to increase capital overseas. Even with a belief by inevitability of the worldwide acceptance of IFRS, others believe that U.S. GAAP is the main standard. And a certain glassy of value will be vanished with full acceptance of IFRS when certain U.S. issuers deprived of substantial customers or procedures separate from United States may resist IFRS because they do not have a market encouragement to formulate IFRS financial statements. They may in trust that the momentous costs accompanying with approving IFRS balance the benefits.
Because of venerable convergence ventures concerning the IASB and the FASB, the level of the exact differences between IFRS and GAAP has been dwindling. Significant modifications do persist, which can result in significantly dissimilar stated results, conditional on a company's diligence and individual evidences and positions. For example: IFRS does not authorization for Last In, First Out (LIFO) and IFRS procedures a single-step method for weakening write-downs somewhat than the two-step technique used in U.S. GAAP, making write-downs more possible. IFRS entails capitalization of growth costs certain succeeding standards are met. U.S. GAAP normally requires growth charges to be expensed as acquired. The eventual acceptance of IFRS by small industries and not-for-profit governments is likely to be market motivated. The IASB has industrialized a version of IFRS for small and medium-size units that would diminish density and reduce the charge of financial statement preparation, allow the users of those units for financial statements to evaluate financial situation, cash flows, and enactment. Another significant step in the expansion of international accounting was the formation of the International Federation of Accountants, which was designed in 1977 at the 11th International World House of Accountants. They were developed with the goal of developing high class international standards in auditing, public division accounting, ethics, and instruction for professional accountants and associate their acceptance and use facilitating partnership and cooperation between its member bodies with other international organizations and allocation as the international representative for the accountancy profession. The global financial leaders since the early 1960s have been functioning towards union with international accounting standards. Because of the augmented economic amalgamation and cross- border capital streams began to grow. In 1962, the American Institute of Certified
Public Accountants ("AICPA") presented the 8th International House of Accountants, where much of the debate focused on the world economy in respects to accounting. Many attendees supposed that phases should be taken to inspire expansion of auditing, accounting, and reporting principles at an international level. On this conference, the harmony of a need for a solitary set of international accounting principles was a major turning opinion in the discussion for the requirement of conformance. Adoption of IFRS would callous that the SEC sets a definite timetable when publicly listed companies would be obligatory to use IFRS as issued by the IASB. Union means that the U.S. Financial Accounting Standards Board (FASB) and the IASB would endure working organized to develop high quality, well-matched accounting principles over time.
References:
Cox, C. and LLP, B.M. (2014) How America’s participation in international financial reporting standards was lost. Available at: https://corpgov.law.harvard.edu/2014/06/11/how-americas-participation-in-international-financial-reporting-standards-was-lost/ (Accessed: 13 June 2016).
International financial reporting standards - questions and answers, 2008.
International accounting standards (2000) Available at: https://www.sec.gov/rules/concept/-.htm (Accessed: 13 June 2016)
Investments, T. (2016) News & commentary market commentary position papers archive will the U.S. Rather fight than switch to international accounting standards? At Turner investments. Available at: http://www.turnerinvestments.com/will-the-us-rather-fight-than-switch-to-international-accounting-standards/ (Accessed: 13 June 2016).
Claremont McKenna College, H.L. (2015) why does the U.S. Continue to Use GAAP and will it ever converge to IFRS?