Financial Accounting Standards Board and International Financial Reporting Standards

According to the idea represented in the first board, both the Financial Accounting Standards Board (FASB) and the International Financial Reporting Standards (IFRS) standards are efficient and aimed to keep company financials transparent for investors. The differences are that IFRS standards are considered to be more structured and detailed, consequently, this can have an impact on methods of financial reporting. I agree on this thesis and can illustrate my position with several examples.

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First, in terms of detailed issues, such as liabilities or equity, IFRS applies for a more structured strategy with shares always classified as liabilities, even if the put cannot be exercised for an extended period of time. Meanwhile, as claimed by Financial Accounting Standards Board (2021), guidance for FASB is not applicable for many situations with cases to be individually investigated (p. 10). Second, as Bragg (2016) shows, being an international standard and developed to be understandable, IFRS is aimed to be structured in a simplified way (p. 6). Consequently, I think that global switching IFRS will influence the system with stricter requirements formed, and new strategies for their overcoming shaped.

Comprehensive Income

According to the second discussion board, Generally Accepted Accounting Principles (GAAP) system enables its users to cover the so-called ‘‘dirty surplus item’’ under the term of comprehensive income. Contrary to this, FASB and IFRS seek more transparency. I agree with this statement, especially considering that comprehensive income does not flow through profit and losses. Consequently, it can be kept unseen and bypass the terms of GAAP system. Meanwhile, FASB and IFRS have more gradual approaches to the standards of transparency.

To illustrate my idea, I compare impairment principles of GAAP and IFRS. For example, GAAP losses are not to be recognized before it is probable that they have been incurred. Current receivables do not generally have a reserve. Contrary to this, as noted by PricewaterhouseCoopers (2020), IFRS has a three-staged loss model for financial assets with impairment losses to be measured according to the changes in credit quality (p. 11). Consequently, compared to FASB and IFRS, GAAP is a complicated system that lacks clarity and encourages the coverage of ‘‘dirty surplus items’’.

References

Bragg, S. (2016). IFRS guidebook: 2017 edition. Accounting Tools.

Financial Accounting Standards Board. (2021). Income statement – Reporting comprehensive income. FASB Accounting Standards Codification. Web.

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PricewaterhouseCoopers. (2020). The IFRS and US GAAP: Similarities and differences guide outlines the major differences between IFRS and US GAAP that exist today.

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NerdyRoo. (2022, October 14). Financial Accounting Standards Board and International Financial Reporting Standards. Retrieved from https://nerdyroo.com/financial-accounting-standards-board-and-international-financial-reporting-standards/

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"Financial Accounting Standards Board and International Financial Reporting Standards." NerdyRoo, 14 Oct. 2022, nerdyroo.com/financial-accounting-standards-board-and-international-financial-reporting-standards/.

1. NerdyRoo. "Financial Accounting Standards Board and International Financial Reporting Standards." October 14, 2022. https://nerdyroo.com/financial-accounting-standards-board-and-international-financial-reporting-standards/.


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NerdyRoo. "Financial Accounting Standards Board and International Financial Reporting Standards." October 14, 2022. https://nerdyroo.com/financial-accounting-standards-board-and-international-financial-reporting-standards/.

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NerdyRoo. 2022. "Financial Accounting Standards Board and International Financial Reporting Standards." October 14, 2022. https://nerdyroo.com/financial-accounting-standards-board-and-international-financial-reporting-standards/.

References

NerdyRoo. (2022) 'Financial Accounting Standards Board and International Financial Reporting Standards'. 14 October.

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