Recently the following Wall Street Journal article came out with this semi- “sho
ID: 2478077 • Letter: R
Question
Recently the following Wall Street Journal article came out with this semi- “shocking” headline: SEC to Consider Letting U.S. Companies Use Global Accounting Rules as Add-On by: Michael Rapoport Dec 10, 2015 http://www.wsj.com/articles/sec-to-consider-letting-u-s-companies-use-global-accounting-rules-as-add-on-1449673126 The link might get you to a site where you have to pay…don’t pay but see if you can find any commentary on this compromise alternative to full-frontal IFRS adoption. Please provide a quick summary of YOUR opinion on whether this is realistic option or not. In fact, pretend you are going up an elevator to the tenth floor with your boss and she asked you what this article is about. Give her the key “take away” based on what you learned. Remember you only have a few floors so it’s more of a sound bite than a dissertation; in other words just an “elevator pitch”!Explanation / Answer
By Global Accounting Rules, the article focuses on the adoption of IFRS (International Financial Reporting Standards) by companies operating in U.S.A. IFRS have already been adopted by many countries throughout the world. However, these standards are yet to be adopted by U.S. companies. The reason given for continued use of U.S.GAAP is the costs and complexities associated with the implementation of IFRS. The article also highlights the fact the some of the companies use their own devised/formulated financial measures making the adoption of IFRS more complex.
With globalization, it is a must for every company having operations in multiple countries to ensure compliance with the relevant accounting standards applicable to that country. Use of IFRS throughout the world will help in bringing uniformity in the financial reporting process and in ensuring that the most relevant and current accounting practices, procedures and standards are followed by companies irrespective of the country (ies) in which they have operations.
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