Will IFRS and GAAP Convergence (or Adoption) work for investors?
What a Switch from GAAP to IFRS May Mean for Investors
Read more: http://www.foxbusiness.com/personal-finance/2011/11/28/what-switch-from-gaap-to-ifrs-may-mean-for-investors/#ixzz1t7Fuj1U9

The convergence between IFRS and GAAP has been a hot topic in the world of accounting. From defining the difference between adoption and convergence, when should the US adopt to IFRS, how should the US do it, what’s the impact for public company and private company, and the list go on and on. This article in Fox Business discusses the impact of IFRS and GAAP convergence specifically to investors.
The author first discuss about how important convergence of IFRS and GAAP is to the US. Knowing how the global market is a very dynamic market nowadays with companies and firms merging, expanding and investing globally across the world, having a standard financial reporting system would be beneficial not to just investors but to all aspect of people analyzing the business plan. The SEC is working on issue a standard of procedure of educating US companies about the comparison between GAAP and IFRS along with how some foreign companies have used IFRS with SEC filings.
The second part of the article discussed some issues that investors and business analyst might find in dealing with IFRS. First is the flexibility of IFRS standards compare to a strict rule of GAAP standards. The article quoted from Charles Mulford, a professor at Georgia Tech’s School of Business and Director of the Financial Reporting and Analysis Lab, “There is much flexibility in IFRS standards. I think investors would have a hard time comparing results across companies, because there is a lack of comparability between IFRS and GAAP standards.”
Second of all, the author also mentioned that by adapting to IFRS, many parts of the financial reporting will be effected and especially the inventory LIFO reports. This will affect many major companies in the US as the LIFO method is being used widely for tax purposes. By eliminating the LIFO, according to the author, will cause many companies to have to pay the tax effect of inventory differences known as “LIFO Reserve”.
As a conclusion although there are many negative issues in the IFRS and GAAP convergence, I think the adoption of the US financial reporting to IFRS will be beneficial in the long run. Many companies small or big, private or public must deal with international companies in one way or another. With the constant change and dynamic of the global market, the US should adapt to a one financial language where every one in the globe understands. It might take a few years and will go through obstacles but I believe that it will benefit all. Some countries such as Brazil just succeed incorporating IFRS in their own GAAP standards in 2010. Canada just also implemented IFRS last year and India has started their convergence this year. It might be a step back to take a two-step forward move.