FIX ASSIGNMENT (2)
Beast8484
milestone_2.pptxMilestone Two
Geoff Brown
Professor Duhn
ACC 680
February 16, 2017
Introduction
I have worked as an accountant specialist for Whitlock Company for the past three years. I have gained a lot of experience that has shaped my accounting skills and knowledge. I have received promotions based on my good work to the position of heading accounting department. The company offers accounting services such as public accounting, bookkeeping and auditing. The company has developed a work plan. The work plan purpose is to consider particular factors and areas important to a commission determination as to how, when and whether the current financial reporting system in the company should be changed to a system integrating International Financial Reporting Standards (IFRS). The work plan showed that application of IFRS and sufficient development evaluation involve inventorying fields in which IFRS does not provide guidance than the GAAP.
Different reporting requirements for IFRS and GAAP
In GAAP, it presents a comparative financial statement and requires public organizations to follow SEC rules that need two-recent year’s balance sheets and the other statements should cover a three-year period ended on the balance sheet date. Nevertheless, one year can be presented in a specific condition. For IFRS, there must be disclosure of comparative information with respect to past period for all amounts reported in the present time financial statement.
Cont.
There is no general requirement to prepare income statements and balance sheets in accordance with particular layout in GAAP. But, public organizations are required to follow the detailed Regulation S-X requirements. However, IFRS does not recommend a customary layout. It involves a list minimum line items which are less prescriptive when compared to the Regulation S-X requirements.
There are no general requirements that solve the disclosure of performance measures for GAAP. Certain major measures are defined in SEC regulations and require the provision of certain subtotals and headings. For IFRS, there is presentation of certain traditional concepts such as subtotals and headings, and line items diversity in the income statements. It allows the presentation of additional headings and subtotals and line items in the comprehensive income statement.
Cont.
GAAP requires presentation of Debt which has covenant violation as a non-present if the creditor contract to waive the right to demand repayment for more than a year exists before the financial statement issuance. IFRS requires presentation of Debt associated with covenant violation as present unless the creditor contract was reached prior to the balance sheet date.
In GAAP, third balance sheet is not required. In IFRS, a third balance sheet should be presented at the beginning of comparative period when there is reclassifications that have a material effect, a retrospective restatement or a retrospective application of new accounting policies that have material impacts on the balancing of the third balance sheet. It does not require related notes to the third balance sheet.
Cont.
GAAP requires current and non-current division to be based on asset or liability nature. There is no general requirement for GAAP for classification of income statement items by nature or function. But, it requires SEC registrants to present expense based on function. For income statement, extra-ordinary items restricted are both infrequent and unusual for GAAP. It also requires discontinued operations classification to be held for disposed or sale components as longer as there is no disposed component involvement or significant continuing cash flows. IFRS on the other hand requires that all amount to be classified as non-current in the balance sheet and entities to be provided as either nature or function. However, certain disclosures about expense nature must be included in the notes if function is selected. In IFRS, Income statement for extraordinary items are prohibited. Discontinued operation division is for disposed or sale components that are either a distinct geographical area or a major business line.
Best reporting standard for a company
The best reporting standard for a company is GAAP. GAAP is the generally accepted accounting principle as it allows businesses to issue stock or participate in acquisitions and mergers. It helps companies to employ excellent financial services hence affecting company’s long-term stock valuation potential and sales. Some of important disclosure statements includes statement of financial position, income statement, cash flows statements, stakeholder’s equity statement, comprehensive income statement, and securities based income statement.
Convergence of IFRS and GAAP
The SEC adoption of global standards, globalization and the financial and economic meltdown in the past forced states to converge the GAAP and IFRS reporting system. Such actions impacts on the accounting diversity and the company standard convergence. IFRS and GAAP affects organization management, accounting standards setters, accounting specialists, stock markets and investors. The accounting standard convergence changes the CFOs and CPAs attitudes towards the international accounting harmonization affecting the international standards quality and the efforts made towards GAAP and IFRS standards convergence goals.
Cont.
The IASB seeks for a workable solution to ease the existing confusion, conflict and complexity created by lack of streamlined accounting standard and inconsistency in financial reporting. The major differences between the IFRS and the GAAP is the approach each takes to the standards. The IFRS is based on principle methodology while the GAAP is based on rules. the IFRS starts with the good reporting objectives providing guidelines on how the particular relates to a given condition, while the GAAP consists of complicated guidelines sets trying to develop criteria and rules for any contingency.
Effects of IASB to the company
The implementation of global accounting and reporting standards affects a number of constituents including accounting specialists, accounting standards setters and agencies, stock markets, investors and corporate management.
IASB will ensure that corporate management benefits from simple and streamlined rules, standards and practices that apply to all states globally. This allows corporate management to be able to raise capital through low interest rates while lowering risk and the cost of operating businesses.
IASB will increase the global capital flow. It also will provide information that is more credible to investors. There will be reduction in the costs accompanying entering foreign exchanges in stock markets. All markets will have to adhere to the same standards and rules that will further allow companies to compete globally for investment opportunities.
Cont.
The IASB will force company accounting professionals to change the methods of classifying large number of current or long-term expenses, assets, and liabilities. This will lead to consistency and effectiveness in accounting practices.
IASB results to changes in ways of recognizing and reporting sales, services and deferred income that affects the net revenue and a broad range of financial ratios that leads to huge changes in a business’s performance measures. This will require business to change its payment terms, pricing structure and business model to protect existing ratio analysis.
References
Rayman, R. A. (2013). Accounting Standards. Hoboken: Taylor and Francis.
Siegel, J. G., Shim, J. K., Dauber, N. A., & Qureshi, A. A. (2015). Accounting handbook.
Tiffin, R. (2010). The complete guide to international financial reporting standards: Including IAS and interpretation. London: Thorogood.
