Convergence of us gaap and ifrs accounting standards
In today’s financial reporting we are almost in a world where two accounting standards are commonly used. These are the US GAAP and IFRS. Many accounting professionals all over the world have echoed the need for convergence of these two accounting standard citing it as of an integral part of economic development. With economies becoming global each day convergence of International Finance Reporting Standards and US GAAP will lead to more liquid and fair capital markets worldwide. For an effective global capital market the investor has to be provided with adequate information which will help him make an informed investment decision. Despite the fact that US GAAP has been upholding high quality standard in financial reporting, the reporting standards must converge with other International Financial Reporting Standards in order to enable investors and corporations who look beyond their country’s boundary for capital make a more informed investment decision. Even though it is not easy to reach a high quality standard which will be applicable in all countries the convergence will be a step forward towards a single global reporting standard.
The process of convergence has started and is at advanced stages. The process has to be seen as a long one which may take some time before realizing a single set of standards to be applied in financial reporting. In 2006 the US FASB signed a memorandum of understanding with IASB that laid the foundation for convergence. The memorandum was revised in 2008 and later in 2009 the two boards jointly released a statement outlining how to complete the convergence by 2011.
It is every stakeholder’s wish that the process will come to pass. This will enable them compare different investment options in various capital markets for maximum returns.
Www.pwc.com. Ed. Edward Smith. PricewaterhouseCoopers, 7 Apr. 2007. View Point: Convergence of IRFS and US GAAP. Retrieved May 18, 2010 http://www.pwc.com/en_GX/gx/ifrs-reporting-services/pdf/viewpoint_convergence.pdf