Accounting Paper
Will there be one set of accounting standards in use throughout the world in the next five years?
Accounting around the world has become a huge focus in recent years due to the diversity of methods used in accounting and the difficulty of comparing US based firms and international firms. In the United States the guidelines that govern accounting are US Generally Accepted Accounting Principles or GAAP. Recently the Securities Exchange Commission or SEC has begun the process of switching to the International Financial Reporting Standards or IFRS.(SEC 2010) By doing this it will allow international companies the convenience of not switching their financial reports to US Generally Accepted Accounting Principles but rather leave the reports in their current International Financial Reporting Standards form; another benefit will be improved transparency and ability to compare companies globally and this will also improve the quality of earnings of all firms. (SEC 2010) By adopting a method of accounting more in line with IFRS the US will have a more rules based methodology rather that a principle based method of accounting. (SEC 2010) (PWC 2009)
As stated by my fellow classmate Sisy Orobitg “Notwithstanding, the disadvantages of establishing a global framework exists and the cost to convert can be highly significant and time-consuming (i.e. re-training personnel, software).” I fully agree with her statement, and through all of the readings found on this subject this one issue has had a devastating effect on the conversion to the IFRS method of accounting.
The United States has and will continue to be active in the transition to a single standardized method of accounting. As recent as 2010 the SEC has expressed its desire to transition to the IFRS method of accounting.(SEC 2010) (PWC 2009) I am unsure that all of this will happen within the next five years but I do expect to see changes in the next five years but a full transition will take longer due to the difficulty
Accounting around the world has become a huge focus in recent years due to the diversity of methods used in accounting and the difficulty of comparing US based firms and international firms. In the United States the guidelines that govern accounting are US Generally Accepted Accounting Principles or GAAP. Recently the Securities Exchange Commission or SEC has begun the process of switching to the International Financial Reporting Standards or IFRS.(SEC 2010) By doing this it will allow international companies the convenience of not switching their financial reports to US Generally Accepted Accounting Principles but rather leave the reports in their current International Financial Reporting Standards form; another benefit will be improved transparency and ability to compare companies globally and this will also improve the quality of earnings of all firms. (SEC 2010) By adopting a method of accounting more in line with IFRS the US will have a more rules based methodology rather that a principle based method of accounting. (SEC 2010) (PWC 2009)
As stated by my fellow classmate Sisy Orobitg “Notwithstanding, the disadvantages of establishing a global framework exists and the cost to convert can be highly significant and time-consuming (i.e. re-training personnel, software).” I fully agree with her statement, and through all of the readings found on this subject this one issue has had a devastating effect on the conversion to the IFRS method of accounting.
The United States has and will continue to be active in the transition to a single standardized method of accounting. As recent as 2010 the SEC has expressed its desire to transition to the IFRS method of accounting.(SEC 2010) (PWC 2009) I am unsure that all of this will happen within the next five years but I do expect to see changes in the next five years but a full transition will take longer due to the difficulty
References: Price Wterhouse Cooper April, 2009 Rethinking the path to global accounting standards retrieved on June 24, 2012 from http://www.pwc.com/us/en/point-of-view/assets/pwc_pointofview_ifrsroadmap.pdf Securities and Exchange Commission February 24,2010 SEC Approves Statement on Global Accounting Standards retrieved on June 24, 2012 from http://www.sec.gov/news/press/2010/2010-27.htm