Significant changes in international financial reporting standards

As recently as 2008, the Financial Accounting Standards Board (FASB) amended the Generally Approved Accounting Principles (GAAP) standards. GAAP is currently used to prepare financial statements for public, private, non-profit, and government organizations. However, businesses are now preparing for a notable change. They will need to be converted from GAAP to international financial reporting services.

IFRS are standards that are used internationally. In December 2007, the US Securities and Exchange Commission (SEC) decided to change the IFRS to unify business under a list of standards for all companies to reduce financial statement differences. The SEC, headed by former chairman Christopher Cox, set initial dates for all publicly traded companies to begin converting in early 2014 and completed by the end of 2016. The switch will require a lot of work, and the business will not be easy to accomplish. It is expected that each company will take about two years to complete the transformation.

The SEC said foreign companies are allowed to implement IFRS immediately without compromising the US GAAP. However, many companies already use IFRS, meaning that many businesses need to change soon, such as US firms with offices abroad and US businesses in foreign ownership. Quick switching is a crucial step for companies to avoid using two different standards in the long run.

Dwayne Cook, Tetum LLC's Mid-Atlantic Area Partner and Practice Leader points out ways to influence companies, explaining that "companies need to change the way they record and report their financial data because IFRS and US GAAP rules differ in terms of tax identification, compensation, fixed assets, and inventory, for example "(p. 2). The most important difference between IFRS and GAAP is that IFRS provides very little detail. In comparison, IFRS has 2,500 pages, while GAAP has 17,000 pages. Currently, around the world, more than a hundred companies are already using IFRS, and it is expected that by 2011 it will be one hundred and fifty.

There are many benefits to switching to IFRS. The change will make the economic reporting process more comprehensive. Companies with global operations or the use of foreign reporting will be able to use streamline reporting and reduce related costs by creating a general reporting system that will create consistency in legal reporting. Mr. Jamil Khatri, executive director, head of accounting advisory services, KPMG (one of the world's largest professional services companies), said the new guidelines would clear the air on issues such as What should be in the timeline for calculating eligibility. Standards, standards applied to change to new standards "(Update 2). These companies can also set up regional financial centers connected with the restoration of financial resources where they are needed and can coordinate training and development efforts.

Other companies participating in the exchange will be able to compare financial reporting with international competitors. IFRS will enable many businesses to access foreign capital markets and investments. IFRS standards are more flexible because they are principled and will help eliminate conflicting systems between companies, meaning less confusion in comparing financial results. This will help facilitate cross-border acquisitions, projects, and spin-offs. Countries that have not been able to sustain the evolution of financial reporting, such as Canada, will level the playing field for this change. Marine Crush, a chief accountant, reports that "the use of IFRS is expected to lead to even greater fluctuations in the reported financial results of companies, as the new standards enable companies to report reasonable prices for higher estimates." Will have to" (Harmain 1). Businesses that initially adopt IFRS will be more critical than others before the SEC requires it. These businesses will gain experience before they can compete with their competitors.

Along with the benefits that come with changing IFRS, there are also many challenges. Companies have to implement their financial knowledge with entirely new policies. This will be a significant change in the way many accounting professionals think. They have been trained to work in completely different ways and are now placed in an environment where more available and industry guidance applications are available. Each organization will likely need to include financial personnel in its teams who are more familiar with IFRS reporting.

Another concern is that companies will have to upgrade their information technology (IT) to adhere to the changing systems. There are many things that they will have to renegotiate due to the switch to IFRS, such as current business contracts and debt agreements. These organizations will also have to be sure to one-time budget costs associated with the conversion, such as auditing and external adviser costs. Finally, they should be aware to seek to manage stakeholder expectations, such as budgeting and planning, throughout all the changes. "As companies and investors adapt to the new standards over time, however, Kirsh expects the challenges to subside" (Harman 1).

The steps needed to make the switch to IFRS will affect many branches of companies. Specifically, it will significantly affect internal systems and controls, financing and contractual agreements, operations, and internal and external communications. The larger the company, the longer the process of switching from GAAP to IFRS will take, meaning strong management will be needed to succeed during the transition. Nevertheless, the most crucial step during this process is to perform an in-depth assessment of the impact the conversion could have on the finance and people in the business. According to KPMG, "the goal to create a detailed plan for completing the conversion; such an assessment would encompass the following:

• Gap Analysis - accounting and disclosure

• Initial adoption alternatives - IFRS 1

• Financial statement assessment -quantifying differences and directional impact

• Availability of information

• Process and controls requirements

• IT systems changes

• Existing resource capabilities

• External audit impact

• Training requirement

• Competitor assessment

• Foreign subsidiaries and planned acquisitions

• Evaluation of contractual agreements

• Investor and analyst communications

• Summary of conversion benefits

• Project team and work plan (IFRS in the US 3)

If all the essential steps above are taken, the company is on its way to a successful conversion process. The average projected time for each company to complete the transformation is about two years. Each business must come up with a conversion plan before they begin any of the processes. During the conversion, all other changes should be synchronized together. In the first phases, the global approach and policies should be laid out. During the second phase, the international business should begin to be converted by sending local teams to the global basis of the company. Participation by the personnel is an essential key to the business's success while making significant changes. After the financial reporting and IT have been converted, a team should develop a way to communicate and explain the differences. The effort will require highly experienced personnel who are well educated on the issues and hold problem-solving solid qualities.

For companies to operate globally in conjunction with other companies efficiently, there must be a universal method of accounting procedures. The switch that the SEC has made necessary from GAAP to IFRS will benefit businesses worldwide. It may seem to be more of a burden to many companies rather than a fundamental shift in the operations at first. However, most will find that once the switch has been made, the universal methods make many conversions that were necessary for the past unnecessary. Although it may take a while to develop the right IFRS system, once it has all been said and done, accountants will no longer have to worry about discrepancies between various accounting methods. The shift that will occur in the next few years, although business-related, is just another way our world is coming closer to a unified society. Another concern is that companies will have to upgrade their information technology (IT) to adapt to changing systems. Many things will have to be renegotiated due to changes in the IFRS, such as existing business agreements and loan agreements. These organizations will also have to budget for one-time conversion costs, such as audit and external consultant costs. Finally, throughout all changes, they should be aware of stakeholder expectations, such as managing budgets and plans. "As companies and investors adopt new standards over time, however, Crush expects the challenges to be eliminated" (Harman 1).

The steps required to convert to IFRS will affect many branches of companies. In particular, it will have a significant impact on internal systems and controls, financing and contract agreements, operations, and internal and external communications. The larger the company, the longer the transition from GAAP to IFRS will take, which means that the change will require substantial management to succeed. However, the most crucial step in this process is to look at the impact that conversions can have on people financially and business-related. According to KPMG, "the goal is to develop a detailed plan for the completion of the transformation; such an assessment will include the following:

Gap Analysis - Accounting and Disclosure

Early Options - IFRS 1

statement Financial statement assessment - explanation of the difference and directional effect

information Availability of information

Controls processes and requirements

* The IT system changes

Current resource capabilities

audit External audit effect

Training required

* Competitor evaluation

• Foreign affiliates and planned acquisitions

contract Evaluation of contract agreements

or Investor and Analyst Communications

Summary of the benefits of ion conversion

Project Team and Work Plan (IFRS in USA 3)

If all of the above essential steps are taken, the company is on a successful conversion process. The average expected time for each company to complete the transformation is approximately two years. It is essential to plan for the exchange before starting any business. During the conversion, all other changes must be synchronized together. In the first phase, global practices and policies should be formulated. During the second phase, the international business should begin to transform by sending local teams to the company's global base. Entrepreneurship is a key to business success while making a big difference. After changing financial reporting and IT, a couple should come together and come up with a way to discuss and explain the changes that have taken place. This effort will require highly experienced personnel who are well-educated and have strong problem-solving skills.

There must be a universal method of accounting for companies to work globally with other companies efficiently. Businesses around the world will benefit from the SEC's need to switch from GAAP to IFRS. This can be a burden for many companies instead of making a significant difference in their work. However, most will find that once switched on. Many changes are made in universal ways that were unnecessary in the past. Although it may take some time to develop the right IFRS system, once all this is said and done, the accountant will not have to worry about differentiating between different accounting methods. This business, which will take place in the next few years, although business-related, is another way our world moves closer to a cohesive society. Read about the specialty services