International Accounting Report Standards And International Financial Reports Standards

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Recommended: Importance of international accounting standards

Guidelines are necessary in today’s society as well as in today’s business. There are currently two sets of guidelines by which the accounting world is governed. The first, used primarily by the United States, is the Generally Accepted Accounting Principles, or GAAP. The second, the International Financial Reports Standards, or IFRS, is used primarily in other countries. In terms of their basic foundation, the key difference is that GAAP is more focused on rules, while IFRS is more oriented around principle. Dictionary.com defines “rules” as codes, regulations, or principles governing the conduct, action, procedure or arrangement of an entity or organization. Rules are set to provide participating parties with information on what is and is not allowed. Business have the option of adopting one of the two accounting methods. Though some of the methods may be comparable, there are many significant differences. Because of these differences in reporting procedures and accounting …show more content…

GAAP regulations are intended to make accounting more understandable, reliable, and relevant (Kemp & Waybright, p. 257). These standards are presently handed out by the Financial Accounting Standards Board (FASB) with the approval given by the Securities and Exchange Commission (SEC). One challenge faced by the FASB is the constant change in the business world. Because of this, GAAP has to be continually reviewed and updated. In an effort to minimize the overstatement of asset values and the understatement of liability values, the GAAP uses historical costs as the primary method of valuation. This is contrary to the fair market valuation used by IFRS. In May 2011, IFRS 13 was issued by IASB, and FASB issued ASU 2011-04. As a result, the requirement for disclosure of fair value and the framework for measuring fair value were significantly converged. As of January 1, 2013, IFRS 13 became effective (Strouhal etal., p.

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