Dominic Chan WRIT 340 Professor Weinberg Section 66794 Ã¯Â¿Â½PAGE Ã¯Â¿Â½ Chan Ã¯Â¿Â½ PAGE Ã¯Â¿Â½3Ã¯Â¿Â½ of Ã¯Â¿Â½ NUMPAGES Ã¯Â¿Â½6Ã¯Â¿Â½
AN ACCOUNTING REVOLUTION
For decades the US financial market has adhered to "if you want to play, you have to play by our rules". The rules are the Generally Accepted Accounting Principles, commonly abbreviated as U.S. GAAP, or simply GAAP. Just less than a year ago, there was the groundbreaking elimination of GAAP requirement for International Financial Reporting Standards (IFRS) reporting foreign issuers, due to a strong global support for IFRS. Then on August 27th 2008, the Securities Exchange Commission released the following on its website:
The Securities and Exchange Commission today voted to publish for public comment a proposed Roadmap that could lead to the use of International Financial Reporting Standards (IFRS) by U.S. issuers beginning in 2014. Currently, U.S. issuers use U.S. Generally Accepted Accounting Principles (U.S. GAAP). The Commission would make a decision in 2011 on whether adoption of IFRS is in the public interest and would benefit investors.
The proposed multi-year plan sets out several milestones that, if achieved, could lead to the use of IFRS by U.S. issuers in their filings with the Commission.
The transition from U.S. GAAP to IFRS reporting will have a huge impact for investors and businesses in the U.S. Although only a roadmap was issued and no conversion dates were announced, it is speculated that IFRS reporting will more than likely become mandatory. As one expert Dr. Barry Jay Epstein predicted more than ten years ago, "maintaining two sets of accounting standards would be unsustainable in a truly global economy" (IFRS GAAP). Both stakeholders and management are getting tired of multiple GAAP reporting and reconciliations.
GAAP VS IFRS
First, what is the major distinction between GAAP and IFRS? GAAP has been...