Patricia Gonzales
April 16, 2014
Intermediate Accounting II
and criteria for any contingency, while the IFRS begins with the objectives of good reporting and
then provides guidance on how the specific objective relates to a given situation. (Pologeorgis,
2013). The AICPA also states that IFRS offers less descriptive rules than GAAP, prohibits the
use of Last in first out method, and lastly only using a one- step impairment write-down method.
The switch to IFRS is not all about the financial reporting aspect but will also affect other
parts of the countrys operations as well. Information technology systems, tax reporting, and
performance metrics are just a few examples mentioned.
Advantages of Converting to IFRS
There are several advantages for the United States by converting from GAAP to IFRS.
The AICPA states that businesses involved in corporate management can compare their financial
statements much simpler and clearer if they are using the same standards as their foreign
competitors. Also, different businesses that have subsidiaries in varying countries whom allows
and requires the use of IFRS, can result in having just a single accounting language for the whole
company. Subsidiary businesses of foreign companies may not have a choice in converting
because it is required. It is also stated that the flow of capital internationally will escalate higher.
Disadvantages of Converting to IFRS
As much as there are people for IFRS, there is also a lot that are against it and dont see
the need in converting. Some people believe that GAAP is the best of the best and that switching
will result in decline of quality standards by changing. (AICPA). Certain business that only
operate inside the United States stated that they dont feel the need to because they dont have an
abundant amount of customers or target markets in other countries. Therefore, they feel that it is
burdensome to have to prepare IFRS financial statements and would be majorly costly at the
same time too.
Other Impact of Converting to IFRS
Aside from financial reporting, the switch to IFRS will also affect various other areas
such as impacting investors, accounting professionals, stock markets, training, and the CPA
Board Exam.
Investors/ Accounting Professionals
The new accounting reports and financial statements will be completely different and
investors will need to re-learn everything pertaining to that in order to be able to understand
them. Apart from investors, other accounting professionals such as auditors and preparers will
also not have a choice but to accept and learn the new standards whether they are in favor of it or
not. (Pologeorgis).
According to Pologeorgis, this process will no longer have the need for conversions
because the standards used are the same. With the use of the same standards, consistency in
accounting practices will also be created which is very important. No conversions needed and
better consistency will result in saving time and money.
Stock Markets
Stock markets will see a reduction in the costs that accompany entering foreign
exchanges, and all markets adhering to the same rules and standards will further allow markets to
compete internationally for global investment opportunities. (Pologeorgis).
Training
The AICPA states that different associations and groups have already started to
incorporate IFRS into their programs. For example, programs such as testing and publications.
They also said that plenty of college institutions and universities have started to incorporate IFRS
in their curriculum.
CPA Board Exam/ CPAS Opinion
From 2011 onwards, IFRS is available for testing in the Uniform CPA Exam after the test
has been updated and revised. It was declared in May of 2009 by the AICPA Board of
Examiners. (AICPA).
Pologeorgis states that the United States is not favorably looking into converting to IFRS
because businesses are already accustomed with the current GAAP Standards and feel that they
cant culturally relate to the other nations systems.
Opinion
I personally am 50/50 for and against the conversion. After reading all of that
information, I do see all of the different advantages and disadvantages that converting will result
in. It will be a lot to digest because the changes are very significant and a lot of training and
learning is required to be done. But, it seems there are also a lot of good things that can come out
of it, and so I think that if the positive outweighs the negatives then why not switch to IFRS.
Works Cited
International Financial Reporting Standards . (n.d.). AICPA . Retrieved , from
http://www.ifrs.com/ifrs_faqs.html
Facts About Fasb . (2014, January 1). fasb.org. Retrieved , from http://www.fasb.org/facts/
Pologeorgis, N. (2013, January 21). . Investopedia . Retrieved , from
http://www.investopedia.com/articles/economics/12/impact-gaap-ifrs-convergence.asp
What We Do: FASB. (n.d.). Financial Accounting Foundation . Retrieved , from
http://www.accountingfoundation.org/jsp/Foundation/Page/FAFSectionPage&cid=13510
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