If you are a CPA degree holder, (Certified Public Accountant) it can not get bigger than this in your lifetime. SEC is in close talks to allow the foreign organizations listed on US Exchanges to report their financial statement using international accounting standard and IFRS instead of US GAAP. Does this means that US GAAP, the God of all Accounting Standards will die?
The likelihood of saying good bye to US GAAP is very minuscule but let us explore the pros and cons if anything of such kind happens.
This could be a great move by SEC towards recognizing IFRS and saving the foreign institution from preparing the financial statement in US GAAP. It is definitely going to bring down the cost and hassles for the foreign firms. It will also attract new companies from European nation for a listing on US Stock Exchange which at present are not listed on US Stock Exchange just to avoid the pain of preparing the financial statements in US GAAP.
The companies which have their origin in US are also demanding the liberty of option of filing the accounts in IFRS. Their demand stands valid as to have different regulations for two companies listed on the same stock exchange is unjust and if foreign firms are allowed to follow IFRS, US companies should be no exception to it. As an effect of it, financial analyst will have a tough time analyzing the accounts of two companies following different standards. This will create a strong uniformity concern and comparability of financial statements will be in question. Secondly, there are chances of misstatement if different standards are followed by two companies on a single platform.
In such a situation SEC is left with two options, either to make it compulsory for all the companies listed on US Stock Exchanges to follow IFRS and International Standards instead of US GAAP or to allow all the foreign firms to follow IFRS and simultaneously give the same option to companies originating from US. The chances of first option are very bleak as it will lead to a complete death of US GAAP. If second option is being allowed, transparency and uniformity will give a tough time to SEC.
Let us wait and watch till SEC comes out with a final decision.
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Calling US GAAP’s as the god of all accounting standards is not merely an exaggeration but a little more than that. If one could rely on wikepedia, the hostory dates back to sumerian’s of mesopotamia, and GAAP’s as we all know are nothing but generally accepted norms or procedures. Hence though there may be a difference in the languages in which they are drafted but mostly all including indian GAAP’s aim at making the financial’s of an organisation simple and more transaparent to those whom they are of primary concern i.e. stakeholder’s and govt. agencies. In that aspect only IFRS can be rightly called “baap” of all accounting standard’s since the committee that drafts them essentially is derived from amongst the experts from different feilds and essentially accountant with enormous experience.
Hence, i think the writer shoudl rethink on praphrases used in the article.
lastly, if one could read between the lines, and going by the recent updates availableon ICAI web field, one can easily find reasopns to such consonance and synchronicity, and that is more transperency and simplicity in presentation of Financial’s!!