The International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) are working together to eliminate a variety of difference between the United States generally accepted accounting procedures (U.S. GAAP or GAAP) and International Financial Reporting Standards (IFRS). This convergence project grew out of an agreement reached by the two boards in 2002 (Deloitte, 2004).
On February 24, the SEC unanimously agreed to publish a statement of continued support for a single set of high-quality global accounting standards. The SEC acknowledged that IFRS is best positioned to be the global standard. Even without a set conversion timeline from the SEC, IFRS has been affecting …show more content…
It is possible that a benefit arrangement that is classified as a defined benefit plan under GAAP may be classified as a defined contributions plan under IFRS and vise versa. Classification differences would result in changes to the expense recognition model as well as to the balance sheet presentation. Both the FASB and the IASB have major projects on their agendas on accounting for pension and other postemployment benefits, which may result in greater convergence in the future (Deloitte, 2004).
The guidance under GAAP and IFRS as it relates to nonfinancial assets (e.g., intangibles; property, plant equipment, including leased assets; inventory; and investment property) contains some significant differences with potentially far-reaching implications. IFRS permits the revaluation of certain nonfinancial assets to fair value, whereas GAAP does not. The recognition and measurement of intangible assets could different significantly under IFRS. With limited exceptions, GAAP prohibits the capitalization of development costs, whereas under IFRS they can be capitalized if certain criteria are met. Even where GAAP allows for capitalization of development costs (e.g., software development costs), differences exist. GAAP provides guidance depending on whether or not the software is for internal use or for sale. The principles surrounding capitalization under IFRA are the same whether the internally generated intangible is being developed for internal use or for sale.