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Conversion from GAAP to IFRS

Does Converting from GAAP to IFRS offer a Global Platform for Providing, Accessing and Managing Consistent Financial Information?

An outline of a proposed study

I. Introduction

• Background: Since 2002, the International Financial Reporting Standards (IFRS) has increasingly becoming an important financial framework for many financial markets throughout the world.

• Most countries have appreciated the new platform and are actively involving it in their financial reporting (Ernest & Young, 2012). However, financial markets in the United States are still undecided on whether to switch from the old method, the GAAP, to the relatively new and globalized IFRS platform.

• Most proponents of the conversion believe that the US will continue to lose if it does not switch to the new standards.

• Critics of the switch cite a number of issues related to the conversion from GAAP to IFRS. For instance, a lot of resources, time and expertise are required for a complete switch to the new system. Players in the corporate world find it difficult to switch to the new platform due to the costs involved.

• A number of advantages associated with IFRS prove the conversion a major step towards placing the US market in its right position in a globalized economy.

• Lack of sufficient knowledge to prove that GAAP will be relevant in a globalized world and be compatible with the new IFRS platform indicates that additional research is needed to determine the worthiness of both systems in a globalized financial system.

• Research problem: There is little empirical evidence to support the notion that GAAP will survive as an isolated framework when other world markets switch to the new standard.
• Purpose statement: To describe this notion, empirical studies are needed, yet the current body of knowledge proves that GAAP must be abandoned.

• Objectives/aims
o To develop an in-depth analysis of a future situation in which the US will retain its GAAP while the rest of the world adopts IFRS.

o The research will examine the inherent advantages and disadvantage of each standard.
o To make a comparison between the two platforms to determine whether GAAP will continue to exists and be effective as an isolated set of standards used in a single nation.

• Research question: Does Converting from GAAP to IFRS offer a Global Platform for Providing, Accessing and Managing Consistent Financial Information?

• Thesis statement: Logically, a switch is needed because America is the largest economy in the modern world and the dollar is the largest and official currency in the international monetary system (KPMG, 2012).
• Arguably, there is need for the US to invest in the process of effective conversion from GAAP to IFRS due to the advantages involved. In addition, GAAP will be rendered worthless in a globalized economy.
A. Main Body
• Empirical studies have shown that conversion to the new system has more advantages to all the involved parties than the disadvantages.

• IFRS allows organizations to provide financial information with a high degree of consistency and quality in their reporting (IFRS, 2012).

• To market controllers, governments, investors and scholars, such information will provide an easy way of comparing different companies, industries and economies across the world.

• IFRS platform has a high potential to offer corporate and governments a method of achieving transparency and trustworthiness in the financial statements from the corporate world.

• GAAP is an old model that cannot future demands for globalised world of finance
• GAAP will be obsolete within the ext few decades
• GAAP and IFRS are incompatible
• American financial market may find herself isolated

B. Conclusion

• Conversion from GAAP to IFRS is a critical initiative in the modern world, an in-depth analysis of a wide area of research is necessary.
• It is necessary to consider a number of areas such as advantages and disadvantages of each method, the possible scenario if there is not switch and the long-term impacts of each method.
 
References

Ernest & Young. (2012). US GAAP versus IFRS: The basics. Retrieved from http://www.ey.com/Publication/vwLUAssets/US_GAAP_versus_IFRS:_The_basics_November_2012/$FILE/US_GAAP_v_IFRS_The_Basics_Nov2012.pdf
IFRS. (2012). A Comprehensive Case Study: US GAAP Conversion to IFRS. Retrieved from http://www.ifrs.org/Use-around-the-world/Global-convergence/Convergence-with-US-GAAP/Pages/Convergence-with-US-GAAP.aspx
KPMG. (2012). IFRS compared to GAAP: An overview. Retrieved from http://www.kpmg.com/Global/en/IssuesAndInsights/ArticlesPublications/IFRS-GAAP-comparisons/Documents/IFRS-compared-to-US-GAAP-2012.pdf

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