Today’s Discussion

• Introduction of IFRS
• Introduction of US GAAP
• Introduction of IAS
What is IFRS?

• International Financial Reporting Standards (IFRS) are a set of accounting

standards developed by the International Accounting Standards Board (IASB) that
is becoming the global standard for the preparation of public company financial
statements.
 Who are the international standard setters?
• International Accounting Standards Board (IASB):
• The IASB develops IFRS.
• The IASB is an independent group of 15 full-time members.
• The board intends to expand to 16 members by 2012.
• These members are appointed by the trustees.
Why “IFRS” is important:
First-time Adoption of International Financial Reporting Standards, there is a variety of
exemptions and options that the promoter may elect to utilize in the adoption process
that need to be assessed to best position of the company.
The IFRS adoption and convergence efforts impact much more than just the accounting
function.
Additional functions that are impacted include the following:
• Information systems
• Tax
• Treasury
• Investor relations
• Sales
• Human resources
• Mergers and acquisitions
What is the difference between convergence and adoption?

Adoption would mean that the SEC sets a specific timetable when publicly listed
companies would be required to use IFRS as issued by the IASB.
Convergence means that the U.S. Financial Accounting Standards Board (FASB) and
the IASB would continue working together to develop high quality, compatible
accounting standards over time. More convergence will make adoption easier and
less costly and may even make adoption of IFRS unnecessary.
Supporters of adoption, however, believe that convergence alone will never
eliminate all of the differences between the two sets of standards. In 2011, SEC
staff introduced a possible method of incorporating IFRS into the U.S. financial
reporting system that would represent an endorsement and convergence approach
for aligning U.S. GAAP with IFRS over a period of time.
Ultimately, the expectation is that the SEC will make a determination on whether it
will incorporate IFRS into the financial reporting system for U.S. issuers and, if it
decides to incorporate IFRS, the method of incorporation.
Contd.,
• Knowledge of IFRS provides an ability to practice accounting in the global
marketplace.
• Through convergence efforts, US GAAP continues to become more aligned with
IFRS.
• US practice of IFRS currently exists in the following ways: –
Foreign multinationals that report using IFRS have US operations.
While some of these entities file IFRS financials with regulators of foreign
exchanges, some file with the SEC as foreign private investors (FPIs) under IFRS as
well.
US multinational companies have foreign operations that are required to report
using IFRS.
Many US companies are making assessments of the potential impact of adopting
IFRS and IFRS convergence efforts on their current operations.
Contd.,
• Approximately 120 nations and reporting jurisdictions permit or require IFRS for
domestic listed companies, although approximately 90 countries have fully
conformed with IFRS as promulgated by the IASB and include a statement
acknowledging such conformity in audit reports.
• What are the advantages of converting to IFRS?

By adopting IFRS, a business can present its financial statements on the same
basis as its foreign competitors, making comparisons easier. Furthermore,
companies with subsidiaries in countries that require or permit IFRS may be able
to use one accounting language company-wide. Companies also may need to
convert to IFRS if they are a subsidiary of a foreign company that must use IFRS,
or if they have a foreign investor that must use IFRS. Companies may also benefit
by using IFRS if they wish to raise capital abroad.  
What could be the disadvantages of converting
to IFRS?
• Despite a belief by some of the inevitability of the global acceptance of IFRS,
others believe that U.S. GAAP is the gold standard, and that a certain level of
quality will be lost with full acceptance of IFRS.
• Further, certain U.S. issuers without significant customers or operations outside
the United States may resist IFRS because they may not have a market incentive
to prepare IFRS financial statements. They may believe that the significant costs
associated with adopting IFRS outweigh the benefits.  
Who are the key players in the United States regarding the
development and adoption of IFRS?
• The key players are the Securities and Exchange Commission, which is responsible
for the supervision and regulation of the securities industry and has oversight
responsibility for the FASB; the Financial Accounting Standards Board, an
independent body that establishes and interprets U.S. GAAP; and the IASB, which
is working with the FASB on the convergence of U.S. GAAP and IFRS.
• The AICPA has provided thought leadership to the IASB and the FASB on financial
reporting topics.
• The American Institute Of Certified Public Accountants (AICPA) is the non-profit
professional organization of certified public accountants in the United States.
INTRODUCTION OF “US GAAP”

•  Definition of GAAP : Generally accepted accounting principles

• GAAP (pronounced "gap") stands for "generally accepted accounting principles,"
a collection of commonly followed accounting rules and standards for financial
reporting.
• GAAP specifications include definitions of concepts and principles, as well as
industry-specific rules. The purpose of GAAP is to ensure that financial reporting
is transparent and consistent from one organization to another.
• Generally Accepted Accounting Principles, also called GAAP or US GAAP, is the
accounting standard adopted by the U.S. Securities and Exchange Commission
(SEC).
Contd.,
• Generally accepted accounting principles (GAAP) refers to a set of rules,
standards and practices used in the accounting industry for preparing and
standardizing financial statements issued outside a company. The standards help
investors and creditors better compare businesses.

Many countries and multinational companies would like the differences between
GAAP and IFRS eliminated. Blending the two would help comparisons between
businesses based in different regions. Advocates believe the merger would
simplify management, investment, transparency and accountant training.
• The main difference between the standards is that IFRS is principles-based and
GAAP relies on rules and guidelines. The goal of the IFRS is to provide good
information, whereas the standards offer guidelines on achieving that goal.
“US GAAP”
• Generally Accepted Accounting Principles, also called GAAP or US GAAP, is the 
accounting standard adopted by the U.S. Securities and Exchange Commission
 (SEC). While the SEC previously stated that it intends to move from US GAAP to
the International Financial Reporting Standards (IFRS), the latter differ
considerably from GAAP and progress has been slow and uncertain
History of “US GAAP” :
• Accounting standards have historically been set by the 
American Institute of Certified Public Accountants (AICPA) subject to 
Securities and Exchange Commission regulations.
• The AICPA first created the Committee on Accounting Procedure in 1939 and
replaced that with the Accounting Principles Board in 1959. In 1973, the
Accounting Principles Board was replaced by the 
Financial Accounting Standards Board (FASB) under the supervision of the 
Financial Accounting Foundation with the Financial Accounting Standards Advisory
Council serving to advise and provide input on the accounting standards.
Contd.,
• Other organizations involved in determining United States accounting
standards include the Governmental Accounting Standards Board
 (GASB), formed in 1984; and the 
Federal Accounting Standards Advisory Board (FASAB), formed in
1990
Balance Sheet
Under GAAP is in
the format of
A=L+OE
With IFRS A-L=OE
is acceptable  
Introduction of International Accounting Standards
• International accounting standards were issued by the Board of the International Accounting
Standards Committee (IASC); since 2001, the new set of standards has been known as
the international financial reporting standards(IFRS) and has been issued by the International
Accounting Standards Board (IASB).
• History of IAS :
• The concept of converging accounting standards started in the 1950s with post-World War II
economic integration and related increases in cross-border capital flows. Initial attempts to
converge focused on harmonization, or reducing differences among the accounting principles
used in major capital markets throughout the world.
• By the 1990s, harmonization was replaced with convergence — the development of a unified
set of high-quality, international accounting standards used in all major capital markets and
elsewhere.
What were the “International Accounting Standards – IAS”

• The international accounting standards (IAS) were an older set of standards stating how particular
types of transactions and other events should be reflected in financial statements.
• Although IASC has no authority to require compliance with its accounting standards, many countries
require the financial statements of publicly-traded companies to be prepared in accordance with IAS.
• The IASB is an independent accounting standard-setting body, based in London. It consists of 15
members from multiple countries, including the United States. The IASB began operations in 2001
when it succeeded the International Accounting Standards Committee.
• It is funded by contributions from major accounting firms, private financial institutions and industrial
companies, central and development banks, national funding regimes, and other international and
professional organizations throughout the world.
• While the AICPA was a founding member of the International Accounting Standards Committee, the
IASB's predecessor organization, it is not affiliated with the IASB. The IASB neither sponsors nor
endorses the AICPA's IFRS resources website 
International Accounting Standards Committee
• The International Accounting Standards Committee, formed in 1973, was the original
organization setting international standards.
• The body was reorganized in 2001 and became an independent international standard
setter called the International Accounting Standards Board.
• As of 2013, the European Union and over 100 other countries require or permit the use of
international financial reporting standards (IFRS) the IASB issues or a local variant of them.

International Accounting Standards Board:

• The IASB’s mission is developing the IFRS and bringing financial markets transparency,
accountability and efficiency worldwide. A monitoring board of public authorities oversees
the nonprofit organization and serves the public interest by fostering trust, growth and long-
term financial stability for the global economy.
• The organization’s governance and due process keep its setting of standards independent of
special interests while ensuring accountability to stakeholders around the globe.