The Status of IFRS in the USA, Research Paper Example

IFRS, the International Financial Reporting Standards is a common language in global business affairs that facilitates a clear understanding of company accounts across global boundaries. Global shareholding in business and trade has progressively grown and consequently necessitated for the adoption of IFRS for the companies that operate in several countries across the globe. IFRS has therefore progressively replaced the accounting standards applicable at national levels. The benefits associated with application of IFRS include easy maintenance of the books of accounts through high degree of comparability, reliability and relevance and makes the work of accountants easier.

This initiation of IFRS was intended at harmonization of accounting in all European Union. Due to the value attributed to this harmonization, many countries across international boundaries embraced the IFRS concept. Therefore, IFRS is now applicable in several countries across the world among them being Russia, Singapore, Pakistan Australia India, Hong Kong, Turkey, Malaysia, GCC countries, Chile, South Africa, and the European Union (Kieso, et al, 2011). Although little has made with regard to IFRS adoption in USA, great potentials are latent in this development if the country will invest substantially in research on implementation of IFRS in this country. The adoption of IFRS in all countries across the world is anticipated to benefit most users including investors because the financial statements associated with IFRS will cut down the costs involved in comparisons of alternative investments coupled with enhancement in information quality. The benefits are also expected to spill down to companies especially those involved in international activities at high levels because the willingness of investors in providing financing will also be enhanced.  In a nutshell, IFRS is expected to be beneficial in USA since most investors perceive long term benefits associated with IFRS implementation which by far outweigh the associated cost.

Supporting rationale as to the likelihood of IFRS adoption in the USA

The recognition of the need for single and extensively acceptable and high quality standards of accounting is linked to the benefits to US investors together with the global capital marketers. The movement towards the adoption of IFRS in the United States requires consideration of comprehensive as well as high quality international standards. Investors in the United States have high anticipation for the adoption of IFRS although the process is perceived take substantial time as the requirements of substantial investment in training staff and research by Association of Chartered Certified Accountants, ACCA must be met (International Accounting Standards Board, 2007). ACCA has been involved in research by surveying about 500 investors based in the United States.

Evaluation of the possibility of adoption of IFRS among the domestic users across the United States has been an important task of SEC. it is however postulated that, IFRS adoption in majority of the capital markets is not like to lead to the achievement of the vision. This fact is attributed to the investors’ protection coupled with efficient application in capital globally which is only achievable on application of international accounting standards of extremely high quality in consideration of reasonable consistence. As a result, the achievement of the vision is dependent on IFRS adoption in the most vital capital markets coupled with enhanced cooperation together with coordination of the national regulators, IASB as well as its interpretive body, preparation as well as auditing for the purpose of facilitating consistent IFRS application. The two elements must be implemented prior to the realization of the vision.

The ongoing international adoption of IFRS has significant implication to the conventional business in the United State (International Accounting Standards Board, 2007). According to a report released by ACCA, majority of investors cherish IFRS adoption because of the anticipated benefit that the economy in the US is anticipated to reap. The benefits are associated with tremendous boost to the internationally comparable financial reporting and the world economies in general. Majority of the investors are for the opinion that the future of IFRS is an important consideration in the economy of the US (International Accounting Standards Board, 2007).

However, some indication from the report by the staff recommends additional analysis before the decision of SEC concerning the integration of IFRS in to the financial system of reporting in the United States. The timing of IFRS implementation in US is uncertain but it is anticipated to go beyond 2012. The proposed process of implementation is expected to follow five steps.

• Agenda: identification of topics and their placement in the agenda of the Board.
• Discussion papers: preliminary research coupled with the analysis of pros as well as the cons
• Public hearing: an opportunity of thought sharing by the general public
• Exposure draft: evaluation of the responses as well as issues from the public by the board
• Standard issues: evaluation of responses by the board and revision of exposure draft and the issuance of the final standard (Kieso, et al, 2011).

Timeline adoption IFRS in US

An extensive work plan was designed by IASB as well as FASB in 2002 and reinforced in 2006 to facilitate achievements of the vision (International Accounting Standards Board, 2007). The work plan led to the formulation of a timetable as indicated below:

Source: (Kieso, et al, 2011)

Works cited

International Accounting Standards Board. International Financial Reporting Standards 2007 (including International Accounting Standards (IAS(tm)) and Interpretations as at 1 January 2007), LexisNexis, 2007.

Kieso, Weygandt, & Warfield. Intermediate Accounting: IFRS Version Volume 1. Hoboken New Jersey. Wiley & Sons, 2011.