Future of Accounting Systems

If corporations want to stop successful, they need to get original ways of expanding their market. Lots of substantial corporations have already globalized, and many more will follow. If these companies are globalizing, it would get sense to have globalized accounting systems.



Currently, companies in the US employ generally popular accounting principles (GAAP) to characterize their financial statements; while the rest of the world employ international financial reporting standards (IFRS) . The U.S. Securities and Exchange Commission plans to switch from GAAP to IFRS in the advance future.



While the transfer from GAAP to IFRS will acquire some time, the SEC is optimistic that most of the major US companies will follow IFRS by 2014. The European Union, which is made up of twenty seven countries in Europe, has already moved to IFRS from 2002 to 2005 with a fairly genuine and level-headed transition. US companies can learn from the problems their EU competitor's had to deal with when they made their transition, to earn their change even easier. There is also a dissimilarity between adopting IFRS and converging to IFRS. Adopting IFRS means that companies are required to expend IFRS to file their financial reports, while converging IFRS means that the International Accounting Standards Board (IASB) would work with Financial Accounting Standards Board (FASB) to compose a situation of compatible accounting standards over a period of time.



This switch is valuable because consistency and comparability are some of the qualitative characteristics of accounting information. It's easier to compare different companies from around the world if everyone decided to consume the same reporting standards. Benchmarking with global competitions is an significant portion in making the business grow. Investors also serve from this, since they are able to compare apples to apples on financial statements.



With this grand change in reporting standards, there are some criticisms. One of the biggest concerns about the IFRS is that there are very itsy-bitsy to no enforcement. While GAAP is enforced by the US SEC, there is no international securities and exchange commission to recognize over IFRS. People argue that the modern standards are conventional without administration to control it. Another criticism is that many companies that proclaim they follow IFRS are not totally compliance with IFRS. Some countries modify their standards from the IFRS to accommodate their interests, companies who are using IFRS range from thirteen to one hundred percent compliance to IFRS. Some companies position that the cost of switching from GAAP to IFRS doesn't outweigh the benefits of IFRS. The costs advance down to retraining accountants as well as investors to win comfortable with IFRS. The change will also affect college level courses, if there isn't enough time to reform the curriculum, there may be a shortage in accountants that are failure with IFRS. They peruse no reason to switch because many calm peek GAAP as the golden standard in accounting reporting.



No matter what people consider, it seems like the US SEC has made up their mind to gain the IFRS mandatory for spacious, global companies. It is sure that many of the disadvantages of IFRS are fair short term, for example the costs of transition; while the advantages are long term. Whether they are able to enact it in the novel deadline of 2014 is another thing.