Essay About International Financial Reporting Standards And Acceptable Method.Consistent Cost Formula

International Financial Reporting Standards and Xbrl
International Financial Reporting Standards and Xbrl
International Financial Reporting Standards (IFRS) & XBRLAndre AnsahProf. NiemotkoIntermediate Accounting IDecember 8, 2014 Review of LiteratureThe Globalization of business and finance has resulted in the development of International Financial Reporting Standards (IFRS) or GAAP. IFRS was developed by the International Accounting Standards Board (IASB) and is becoming the global standard for the preparation of financial statements for publicly- held companies. Over 12,000 companies in the almost a hundred countries have already adopted IFRS. The growing acceptance of IFRS for U.S. financial reporting represents a fundamental change for the U.S. accounting profession. Is the U.S. required to implement IFRS?         In September 2002 the IASB and the FASB agreed to work together, in consultation with other national and regional bodies, to remove the differences between international standards and US GAAP. This was known as Norwalk agreement, and approximately 120 nations and reporting jurisdictions permit or require IFRS for domestic listed companies, although approximately 90 countries. Korea, Canada and Mexico have also adopted this style. What are the major differences between IFRS and U.S. GAAP?        The biggest difference when it comes to U.S. GAAP and IFRS is that IFRS provides much less overall detail. Its guidance regarding revenue recognition, for example, is significantly less extensive than U.S. GAAP. IFRS also contains relatively little industry-specific instructions. (IFRS.com) But because of longstanding convergence projects between the IASB and the FASB, the extent of the specific differences between IFRS and GAAP has been shrinking. There are big differences still remaining though, for example: IFRS does not permit last in, first out (LIFO)IFRS uses a single- step method for impairment write- downs rather than the two step method used in U.S.’s GAAP, making write downs more likely.IFRS does not permit debt for which a covenant violation has occurred to be classified as non- current unless a lender waiver is obtained before the balance sheet date. What differences, if any, affect the reporting of?Inventory Long term assets Revenue US GAAP IFRS Costing method LIFO is an acceptable method.Consistent cost formula for allinventories similar in nature is notexplicitly requiredLIFO is prohibited. Same cost formulamust be applied to all inventoriessimilar in nature or use to the entity.Measurement Inventory is carried at the lower of costor market. Market is defined as currentreplacement cost, but not greater thannet realizable value (estimated sellingprice less reasonable costs ofcompletion and sale) and not less thannet realizable value reduced by anormal sales margin.Inventory is carried at the lower of costor net realizable value. Net realizablevalue is defined as the estimated sellingprice less the estimated costs ofcompletion and the estimated costsnecessary to make the saleReversal inventory write-downs Any write-down of inventory to thelower of cost or market creates a newcost basis that subsequently cannotbe reversed.Previously recognized impairmentlosses are reversed up to the amountof the original impairment loss whenthe reasons for the impairment nolonger existPermanent inventory Permanent markdowns do not affectthe gross margins used in applying theRIM. Rather, such markdowns reducethe carrying cost of inventory to netrealizable value, less an allowance foran approximately normal profit margin,which may be less than both originalcost and net realizable value.Permanent markdowns affect theaverage gross margin used in applyingthe RIM. Reduction of the carrying costof inventory to below the lower of costor net realizable value is not allowed.Chart: www. Ey.com -US GAAP versus IFRS The basics (textbook)