Relevant and reliable financial information is a necessity for viable
capital markets. Unfortunately, companies outside the United States
often prepare financial state-ments using
standards different from U.S. GAAP (or simply GAAP). As a result,
international companies, such as Coca-Cola, Microsoft, and IBM, have to
develop financial information in different ways. Beyond the additional
costs these companies incur, users of the financial statements often
must understand at least two sets of accounting standards (understanding
one set is hard enough!). It is not surprising, therefore, that there
is a growing demand for one set of high-quality international standards.
Presently, there are two sets of rules accepted for international
use—GAAP and the International Financial Reporting Standards (IFRS),
issued by the London-based International Accounting Standards Board
(IASB). U.S. companies that list overseas are still permitted to use
GAAP, and foreign companies listed on U.S. exchanges are permitted to
use IFRS. As you will learn, there are many similarities between GAAP
and IFRS.
Already, over 115 countries have adopted IFRS, plus the
European Union now requires all listed companies in Europe (over 7,000
companies) to use it. The SEC laid out a roadmap, shown below, by which
all U.S. companies might be required to use IFRS by 2015.
ref: Intermediate Accounting 14 Edition
Kiso - Weygandt - Warfiled
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