Ifrs Vs Gaap Essay Topics

IFRS to GAAP 2 IFRS to GAAP Essay The Financial Accounting Standards Board and the International Accounting Standards Board have taken steps over the past few years to integrate their policies into a uniform standard to overcome some of the accounting discrepancies sometimes seen in different regions of the world. While it is impractical to assume that the two bodies could operate under the exact same accounting standard they have begun to change some of the policies in order for a more uniform representation of a company’s financial position. “The Financial Accounting Standards Board and the International Accounting Standards Board have published new requirements for fair value measurement and disclosure” (Cohn, 2011). In response to the 2008 financial crisis the two accounting boards accelerated efforts to improve how fair value is measured for financial instruments in an attempt to prevent the wild swings we saw the market undertake during the banking crisis of 2008. “The requirements do not extend the use of fair value accounting, but provide guidance on how it should be applied where its use is already required or permitted by other standards within IFRS or U.S. GAAP, FASB and the IASB emphasized” (Cohn, 2011). “Both Board’s objectives for publishing the proposed IFRS were to establish a single source of guidance for all fair value measurements required or permitted by IFRS to reduce complexity and improve consistency in their application, clarify the definition of fair value and related guidance” (Metzger, n.d.). Under the new rules both U.S. GAAP and IFRS have established similar definitions for the components used in calculating fair value. Under both the definition of fair value is “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date” (Metzger, n.d.). The two boards have also adopted similar Valuation techniques under the new rules. Both the income approach, and the cost approach have been clearly defined within the new guidelines. The “income approach uses valuation techniques to convert future amounts (for example, cash flows or earnings) to a single present amount (discounted)” (Metzger, n.d.). The “cost approach is based on the amount that currently

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