Foreign Companies Foreign Companies

By 2010, foreign companies will be able to file on U.S. Stock Exchanges using IFRS standards.

What are some of the challenges facing the accounting profession, and how do you see them affecting you in the future?

Just do response each posted # 1 to 3 down below only

Posted 1

Foreign companies filing on the U.S. stock Exchange using IFRS
standards could be very challenging. The IFRS is used by many countries,
however the United States utilizes the GAAP. If you’ve been to
different countries you may have noticed the difference in culture
compared to the United States. The IFRS is based on principles and the
GAAP is based on rules.

The first challenge that concerns me is, will the IFRS principles
that do not abide by the GAAP rules suffer the same consequences? What
will happen when standards collide? Transitioning from one business
culture to another is hard. Actions taken due to personal beliefs or
ethical reasons, are not always what is best for the company.

The second challenge is inventory. Companies in the United States are
allowed to use the last in first out (LIFO) method which is
unacceptable in other countries. As a result of this, reports may be
inaccurate.

The last challenge would be accounting for shares. How will this
effect shareholders? What currency will be used and does it impact
shareholders from different countries. They would want to know if there
currency has increased or decreased in value because of this change.

I’ve traded in the stock market before. Trading in the U.S. market
and Forex is very different. Investors would have many questions. As an
individual pursuing a degree in accounting, I could see this becoming
confusing and causing frustration. It is always best to give direct
guidance with no room for guessing. Enforcing one standard makes it
easier for the accountant to review financial documents.

Posted 2

After
reading the required text about countries adopting IFRS, I understand
why many jurisdictions are already using these standards. As stated in
the text many countries do business across their borders, no longer by
way of just imports and exports. World markets are becoming increasingly
intertwined (Keiso, Weygandt, Warfield, 2018). American based companies
like Microsoft, Apple, and Facebook have investors that are located in
other countries and they want to make sure that their money is respected
and holds the same value that they would get if they lived here in the
United States.

I foresee quite a few challenges to the accounting profession if the
United States adopted these standards. First, companies in other
countries might value their assets differently. Some might value based
on purchase price, fair market vale or purchase price minus
depreciation. Second, companies In different countries might put a
monetary value on things that another company might not, like tangible
and intangible items. Third, companies might have subsidiaries and they
may add all revenue together or keep it separate. These are just a few
challenges that come to mind immediately, I can assure you there are
more.

if we change our reporting to adopt the IFRS it would mean unlearning
our GAAP, and getting on board with a completely new set of standards.
Accountants might make mistakes in reporting because of the change in
reporting standards. As far as who does the comparison to US GAAP and
IFRS On the exchange, it should be a new committee formed, that way the
burden is not cast onto the user but the new oversight committee that
will be formed making it a fair process and they can publish quarterly
reviews. That can be viewed by all online.

Posted 3

I
learned a lot this week about IFRS through the textbook reading
assignments. My opinion would be that the differences in IFRS and GAAP
are monumental enough that the non-accountant may not realize that
“foreign companies’ financial statements may be prepared using a
different set of accounting standards than companies use in the United
States.”¹ In my opinion, the added burden for users to
interpret financial statements will cause confusion with some companies
using IFRS and others GAAP. The need for the educated accountant to
interpret these differences is becoming increasingly important.

By
not staying active in the workforce or continuing education for the
past 14 years, the following is an example of information I learned this
week and the non-accountant may not have knowledge of either:
“Recently, IFRS has increasingly called for use of fair value
measurements in the financial statements….Fair value information may be
more useful than historical cost for certain types of assets and
liabilities and in certain industries.”² Many of the IFRS
principles are opinion based and that leaves a lot of room for
interpretation. As accountants, I believe one of the challenges we face
is that we need to be careful to interpret the information with facts
and not our opinions of the interpretations the company followed.

For
me personally, I feel that the ever-changing differences in IFRS and
GAAP will encourage me to continually enroll in online courses and
conferences to stay current and knowledgeable.

¹ International Investing. (2016, December 07). Retrieved July 31, 2020, from https://www.sec.gov/reportspubs/investor-publications/investorpubsininvesthtm.html

² Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2018). Chapter 2: Basic Principles in Accounting. In Intermediate accounting IFRS edition (pp. 2-16). Hoboken, NJ: Wiley.