International Financial Reporting

Throughout the textbook, you will notice many references to International Financial Reporting.
This is a very important topic in accounting right now. Currently, different sets of accounting
standards exist between the U.S. (GAAP) and other countries that use International Financial
Reporting Standards (IFRS).
From page 33 of our textbook:
The SEC1 recognizes that the establishment of a single, widely accepted set of highquality accounting standards benefits both global capital markets and U.S. investors.
U.S. investors will make better-informed investment decisions if they obtain high-quality
financial information from U.S. companies that are more comparable to the presently
available information from non-U.S. companies operating in the same industry or line of
business. Thus, the SEC appears committed to move to IFRS, assuming that certain
conditions are met. These conditions are spelled out in a document, referred to as the
Roadmap and in a policy statement issued by the SEC in early 2010.
As you can imagine, a transition from U.S. GAAP to IFRS is significant and will require a
substantial amount of time, effort and expense by U.S. companies to modify their accounting and
reporting. The FASB has already issued a number of standards to modify existing accounting
and bring it more in line with IFRS. Similarly, the IASB has issued standards to make IFRS
more similar to U.S. GAAP. The initial goal for completion of this Convergence Project was
2012, however the project is still ongoing and will be for the indefinite future. The current Work
Plan can be found at http://www.ifrs.org/Current-Projects/IASB-Projects/Pages/IASB-WorkPlan.aspx.
As the joint projects are still underway to resolve the differences in accounting and there will be
many changes in the future before moving to IFRS, we will not focus on it in this class and this
will be our only international assignment. However, you should be aware of this important
upcoming change.
One area where we are likely to see noticeable changes as a result of the convergence is in
financial statement presentation. In July of 2010 the IASB and FASB issued Staff Drafts
(preliminary Exposure Drafts) containing the overall requirements for the presentation of
financial statements, requirements for the structure of financial statements, and principles for
classification and disaggregation of information in the statements. The full draft is available at
the following address: http://www.fasb.org/cs/BlobServer?
blobcol=urldata&blobtable=MungoBlobs&blobkey=id&blobwhere=1175820952978&blobheade
r=application%2Fpdf
It was initially expected that an Exposure Draft would be formally issued in 2011, although this
has not occurred yet. However, on August 11, 2016, the FASB did issue an Exposure Draft for
1

Securities and Exchange Commission (SEC). Most companies that issue securities to the public or are listed on a
stock exchange are required to file audited financial statements with the SEC. The SEC has broad powers to
prescribethe accounting practices and standards to be employed by companies that fall within its jurisdiction.
(Page 8 of our textbook)

Statement of Financial Accounting Concepts No. 8, Chapter 7, related to the Conceptual

Framework for Financial Reporting. The Exposure Draft describes proposed concepts related to
how recognized items should be presented in a financial statement. This chapter would then
become a basis for creating and/or modifying financial statement presentation standards in the
future. Therefore it is likely that in the next few years we will see an Exposure Draft with the
FASBs current proposed changes for the format of the financial statements.
Assignment:
1. Read the IFRS Insights section on pages 29-34 of our textbook.
2. Read the section Hey, It Doesnt Balance! at the beginning of Chapter 5 on pages 200201.
3. Review the proposed new financial statement formats on the following pages (taken from
the FASB Staff Draft).
4. Answer the following question in a Word document (submit your file to the instructor
through the D2L Dropbox):
Briefly describe some of the similarities and differences between the financial
statement presentation currently used in the U.S. under GAAP and the proposed
statements under IFRS.