A Comparison and Contrast Analysis of United States Generally Accepted Accounting Principles (Gaap) and International Financial Reporting Standards (Ifrs)

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A Comparison and Contrast Analysis of United States Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS)

This paper examined the relationship between United States Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS) and found merging both accounting standards into a worldwide standard is ideal for investors. Corporate financial statement requirements depend on location. The two accepted accounting standard systems are GAAP and IFRS. The differences between GAAP and IFRS are GAAP is rules-based and IFRS is principle-based. How can a worldwide accounting standard benefit the world economy? The answer depends on political will, culture, countries history, and business structure. Research indicated there are only slight differences between GAAP and IFRS. These slight differences must be explored further to predict the impact on companies, economic, and financial markets. GAAP and IFRS have to be reconciled as a worldwide accounting standard to efficiently allow investors to compare foreign companies.
GAAP set the accounting standard for the United States since its inception in 1929. GAAP evolved over the last 60 years (Măciucă, Ursache, Moroşan, & Apetri, 2014). IFRS was established in 1973 (Smith, 2012). IFRS used GAAP as a source document for its standards, either to imitate, modify, or omit (Chevis, 2014). The European Union established IFRS as the standard in 2005 (Smith, 2012). In 2007, the United States allowed foreign companies trading in United States markets to use IFRS, thus establishing two sets of accounting principles accepted in the United States (Măciucă, et al, 2014). As of 2014, 113 countries and over 12,000 companies use IFRS (Smith, 2012). As Figure 1 shows, countries are accepting IFRS globally. Advances in technologies and globalization of…...

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