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Gaap and Ifrs Convergence

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GAAP and IFRS Convergence
Kenneth DeWitte
Strayer University

1. Describe IFRS and GAAP and what convergence means.
The International Financial Reporting Standards (IFRS) is the accounting framework used by the European Union, Japan, Canada, and other world economic leaders. The IFRS is based on the tenets of understandability, reliability, and comparability. It is based off the International Accounting Standards (IAS) and had the opportunity to be built from accounting ideas and principles used across the world. In recent years it also has had the chance to look at the United States Generally Accepted Accounting Principles (GAAP) and modify the rules to enhance clarity and consistency, intentionally setting itself apart from U.S. GAAP.
United States GAAP is an aggregate of rules that show how to account for transactions and also present the transactions with reliability, consistency, and full disclosure. This amounts to a level of clarity that even someone not very knowledgeable about business can make a confident decision when investing. These rules were brought together by the Financial Accounting Standards Board (FASB). It is more specific than the IFRS requiring less interpretation and more consistent action taken by all businesses, leading to comparability through financial statements.
The convergence of these two accounting frameworks is a must for both foreign and domestic businesses. There are some problems between the two systems coexisting. This has led to companies that need to have two sets of accounting presentation. Now there will be one universal system allowing for clarity and comparability globally. This convergence is not without obstacles though, being a very broad topic with many differing opinions saying in. The process itself will take a while because each topic must get reviewed, written, and implemented by each accounting system,...

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