Content area
Full Text
Abstract: The article begins by looking at the differences and similarities between different accounting systems, namely IFRS and GAAP. After this, the article moves on to talk about why it may be beneficial to the international investment community to have a singular account system as opposed to multiple different systems that have small, but weighty and significant differences. From here, the article discusses why convergence between the accounting systems may not be likely due to IFRS 's goal of independence from influence by the United States. The article also walks through each amendment proposed to the IFRS Constitution and discusses how each of these changes will impact the convergence effort.
I. INTRODUCTION
When evaluating a company's performance, evaluators look at many aspects of the business, including free cash flow, net assets, outstanding debt, revenue, and equity. One way to holistically evaluate a company's performance is to look at a company's financial statements and accounting books. Though this may be one of the best ways to learn about a company's financial health, it can be misleading due to differences in the accounting standards a company follows. Companies within one nation may conform to one set of accounting standards, but other companies in other nations may use other standards. Two of the most widely accepted accounting standards used in the international business community are Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS).
It is important to note that both GAAP and IFRS represent two of the most basic templates for accounting standards that countries adapt, with many countries promulgating their own versions of either accounting standard, albeit with small variations from country to country. Different variations of GAAP are used in different countries.1 However, while each country's version of GAAP may be different, every country that uses GAAP has accounting standards which are substantially similar to one another. In spite of the nuanced differences in each of the accounting standards of each particular country, we will refer to the basic template as GAAP. Similarly, while each version of IFRS may be different, every country that uses IFRS has accounting standards substantially similar to one another. Because of the similarities in the accounting standards of the countries that use IFRS, we will refer to...