IFRS: Rules Governing Preparation of Financial Statements (Essay Sample)

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IFRS
IFRS is a collection of international accounting rules established by the International Financial Accounting Standards (IASB) in emerging global standards when preparing financial statements of a given public company. Its foundation is on principles rather than rules, unlike GAAP. It permits management to incorporate more flexibility when setting company's objectives. A country can use IFRS to develop standards that demand transparency and basis for comparison in financial statements (Oppermann, H. R. B). Secondly, the country can use it to boost universal accounting standards, to consider demands of future markets and finally the country can use this system to merge national with the global accounting standards.
The IASB- FASB convergence aimed at eliminating the differences between GAAP and IFRS. The project was done in Norwalk agreement in October 2002. The significance of the project was that: the US Security Exchange Commission was undecided on whether to allow or adopt the IFRS standards for newly issuing firms and also G20 leaders called for the merging of the accounting standards. (Oppermann, H. R. B)
‘Adoption’ implies that Security Exchange Commission establish a specific schedule when registered companies are required to apply IFRS as stipulated by IASB whereas convergence meant that FASB and IASB continue the corporation and improve accounting standards. The most significant differences bet...