Foreign Exchange Accounting Standard
Though we have known for centuries of the globes spherical dimensions, the last few decades have proven that the earth might be "flat" after all. People communicate all over the world like never before, allowing transactions to flow freely from country to country. Because this is a first time occurrence as never seen in history, people are adapting rapidly to new types of problems or ways that we could make these interactions more efficient.
One problem is that because of the free flow of business transactions through different countries and different law enforcements, one set of accounting standards needs to be put in place to have easier access to financial information. International Financial Reporting Standards are one set of accounting standards, put in place by the International Accounting Standards Board, which is becoming the global standard for the preparation of public company financial statements.
The current lack of a uniform set of accounting standards creates problems for companies preparers and users. Many multinational companies, creditors, and investors support the idea for a global set of accounting standards, which would make it easier to compare the financial statements of a foreign competitor, to better understand opportunities, and to cut cost by using one accounting procedure company-wide. Foreign Exchange Accounting Standard
Currently over 12, 000 companies in 113 countries have adopted international financial reporting standards as their new accounting standards. The SEC believes that this number will continue to increase. Japan, Brazil, Canada and Indian countries plan to start using IFRS in 2010 & 2011. Mexico will adopt IFRS in 2012. This same year the U.S. will include IFRS questions on their CPA exams.
President Obama released the financial regulatory reform proposals, on June 17, 2009, which called for accounting standard setters to "make substantial progress toward development of a single set of high-quality global accounting standards" by the end of 2009. The United States are expected to converge and/or adopt the international standards, IFRS and cease to use their current generally accepted accounting principals, as early as 2012. The proposed deadline, which requires U.S. public companies to use IFRS, has been postponed to 2015. In order to do this, differences between GAAP and IFRS need to be recognized and eliminated.
There are several main differences between GAAP and IFRS, which are causing substantial delays in their convergence. Some major distinctions between these two standards are that the IFRS does not permit LIFO, it uses a single step method for impairment write-downs, it has different rules for curing debt covenants, reports business segments differently, has different consolidating requirements, and is less extensive guidance regarding revenue recognition than GAAP. These variations at a minimum, have to be intensely studied by FASB to conclude extensive impacts on United States companies. Foreign Exchange Accounting Standard
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