Accounting Theory: US GAAP vs IFRS and the Need for Convergence

ACCOUNTING THEORY

INTRODUCTION
 US GAAP and IFRS are the most widely used
accounting standards
 There are many differences between the two
 Addressing the differences is the need of the hour
 Unified approach is vital
 Component of both GAAP and IFRS will enhance
the AS and hence, convergence is essential

US GAAP
 US GAAP is the accounting standard for entities
for US
 Rule based accounting system
 Provides financial information to the users who
needs them
 Cumbersome and complicated
 IFRS is needed as there is high enforcement of
current rules (Carmichael & Graaham, 2012)

IFRS
 IFRS stress upon the concept that accountant
should use the accounting interpretation that
provides the meaningful information
 IFRS supports the fair value method
 IFRS helps the company in ascertain the current
situation