International Financial Standards (IFRS) are global accounting standards developed by the International Accounting Standard Board (IASB) with the goal of preparing the public company financial statements. The U.S government is moving from GAAP to IFRS, and the new system will present the following changes. The first change is the conceptual approach. The change from GAAP to IFRS means that the accounting system will move from a rule-based system that is exhibited by GAAP to a principle based accounting system under IFRS. With the principle-based system, IFRS will exhibit an attribute that entails having the potential to provide different interpretation for a similar transaction (International Financial Reporting Standards, n.d). On the same note, the standards-setting board can clarify areas of interpretation and provide fewer exceptions. Second, on the side of the organizations, the finance departments will be required to update their process since the adoption of IFRS will impact gathering and maintenance of information and how contract are written. Third, the change to IFRS will bring about a change in management reporting. Precisely, the change will be in the format the data is required.
The changes brought by IFRS will provide a positive a positive impact on the organizations involved. The IFRS system helps public companies with general guidance on the preparation of financial statements. When the U.S adopts IFRS, both the business and foreign competitors can present their financial statements on the same basis thus making comparisons easier. Similarly, IFRS is important for large companies that have subsidiaries in different nations (International Financial Reporting Standards, n.d). With a single set of worldwide standards, companies will be able to use one reporting language with a simplified accounting procedure.
International Financial Reporting Standards. (n.d). AICPA IFRS Resources. Retrieved June 17, 2016, from http://www.ifrs.com/updates/aicpa/ifrs_faq.html
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