ACC 502 GCU International Financial Reporting Standards Discussion – Description
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As mentioned in Chapter 3 of the textbook, International Financial Reporting Standards (IFRS) are generally utilized by non-U.S.-based companies. Both IFRS and GAAP standards follow core principles such as asset valuation, revenue recognition, and the matching principle. However, the standards may approach financial reporting differently. Review the resource “Why Global Accounting Standards?” and provide an opinion on whether U.S. companies should convert to the global standards based on the information you gathered from the IFRS readings. Participate in follow-up discussion by trying to professionally persuade classmates who have a different opinion on convergence, addressing why your logic is more appropriate for U.S. businesses. While companies within the US do not currently work under the International Financial Reporting Standards, US companies should consider converting to meet the global standards. The IFRS is more flexible in ways that the GAAP standards are not. For example, in terms of valuation of nonmonetary assets, companies that work under the IFRS have the ability to use a “fair value, which is the price that would be received for an asset in an arm’s?length (i.e., genuine market) transaction (Young et al., 2018). If a company has a non-monetary asset such as land that was purchased at $10,000,000 dollars, however now if that land was purchased, it would be worth $15,000,00 dollars, the company has the flexibility to place the present purchase value on the financial sheet.
There is also the ever-growing global economy throughout the world where many non-US companies are under the IFRS. Modern economies rely on cross-border transactions and the free flow of international capital. More than a third of all financial transactions occur across borders, and that number is expected to grow (IFRS, n.d.). With that being said, it would certainly be more beneficial for the US to consider conversion as they would have the same standards as companies throughout the world. There have also been documented positive effects of companies switching to the IFRS, such as lower cost of capital for some companies and increased investment that comes with having similar standards to other global companies. In the nation of Japen, where use of IFRS has been voluntary since 2010 have marked business efficiency, enhanced comparability and better communications with international investors as the main reasons why many Japanese companies had chosen to adopt IFRS Accounting Standards (IFRS, n.d.). With all of that to consider, as well as more than a third of financial transactions happening outside of the US boarders and growing, it is most certainly a very valuable option for US companies to utilize.
Young, S. D., Cohen, J., & Bens, D. A. (2018). Corporate financial reporting and analysis (4th ed.). Wiley.
IFRS (n.d.) Why Global Standards? https://www.ifrs.org/use-around-the-world/why-global-accounting-standards/.
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https://www.ifrs.org/use-around-the-world/why-global-accounting-standards/.
https://investor.starbucks.com/financial-data/sec-…
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