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Let's talk a little about the difference in tax and financialreporting and the impact IFRS could have. In the United States, inparticular, fair presentation under GAAP sets the standards forfinancial accounting. GAAP is adjusted, if you will, to comply withtax accounting. More specifically, taxable profits must be adjustedfrom GAAP presentation to tax accounting in order to facilitateaccurate tax reporting at year's end.
From an accounting perspective, do you think tax accounting andfinancial accounting should be uniform? I believe that is a hugeleap considering that countries themselves are separated in termsof how accounting systems developed legally. On the one hand, youhave micro-based, common law countries like the U.S., who haveadopted fair presentation standards. On the other hand, aremacro-based, code law countries whose accounting standards conformto tax legislation? I don't believe, under these separate set ofcircumstances, that uniformity will work internationally any morethan one would expect diverse systems of government and capitalmarkets to behave in one way. What are your thoughts?
Discuss the Differences Between GAAP and IFRS
Important Note:All elements of the Week 2Discussion must be completed by Day 7of Week 2.
Accountants are responsible for following standards,conventions, and rules in order to ensure ethical accounting intheir day-to-day practices. However, the rules in the United Statesvary from those followed in other countries. The United States useswhat is called U.S. GAAP. âGAAPâ stands for GenerallyAccepted Accounting Principles. Most of the rest of the worlduses what is called International Financial ReportingStandards known simply as âIFRS.â The United States is in theprocess of either converting or converging U.S. GAAP with IFRS.
To complete this Discussion:
Using your preferred search engine (such as Google), enter oneor more of the following keywords:
IFRS
U.S. GAAP conversion
U.S. GAAP convergence
U.S. GAAP v. IFRS
Using what youâve learned in the interactive course contentalong with the results of your Internet keyword search, focus onand deeply explore the differences between GAAP and IFRS. Considernot only written articles, but also video lecture search results,which you can find by doing your keyword search on YouTube.com. Besure to critically evaluate the sources that you encounter in yourInternet search. Are they reliable? Are they current?
Post an initial response along with responses to othersâ posts,following the directions shown below.
Post a response of at least 150 words in which you discuss thedifferences between GAAP and IFRS. As you write your post, considerthe following:
What are implications of the differences in these two differentfinancial reporting systems?
What are two benefits and two challenges with each?
Jackson Daniels graduated from Lynchberg State College two years ago. Since graduating from the college, he has worked in the accounting department of Lynchberg Manufacturing. Daniels was recently asked to prepare a sales budget for the year 2011. He conducted a thorough analysis and came out with projected sales of 250,000 units of product. That represents a 25 percent increase over 2010. Daniels went to lunch with his best friend, Jonathan Walker, to celebrate the completion of his first solo job. Walker noticed Daniels seemed very distant. He asked what the matter was. Daniels stroked his chin, ran his hand through his bushy, black hair, took another drink of scotch, and looked straight into the eyes of his friend of 20 years. âJon, I think I made a mistake with the budget.â âWhat do you mean?â Walker answered. âYou know how we developed a new process to manufacture soaking tanks to keep the ingredients fresh?â âYes,â Walker answered. âWell, I projected twice the level of sales for that product than will likely occur.â âAre you sure?â Walker asked. âI checked my numbers. I'm sure. It was just a mistake on my part,â Daniels replied. âSo, what are you going to do about it?â asked Walker. âI think I should report it to Pete. He's the one who acted on the numbers to hire additional workers to produce the soaking tanks,â Daniels said. âWait a second,â Walker said. âHow do you know there won't be extra demand for the product? You and I both know demand is a tricky number to project especially when a new product comes on the market. Why don't you sit back and wait to see what happens?â âBut what happens if I'm right and the sales numbers were wrong? What happens if the demand does not increase beyond what I now know to be the correct projected level?â Daniels asks. âWell, you can tell Pete about it at that time. Why raise a red flag now when there may be no need?â Walker states. As the lunch comes to a conclusion, Walker pulls Daniels aside and says, âJack, this could mean your job. If I were in your position I'd protect my own interests first.â Questions 1. What should an employee do when he or she discovers that there is an error in a projection? Why do you suggest that action? Would your answer change if the error was not likely to affect other aspects of the operation such as employment? Why or why not? 2. Identify the stakeholders potentially affected by what Daniels decides to do. How might each stakeholder be affected by Daniels's action and decision? Use ethical reasoning to support your answer. 3. Assume Daniels is both a CPA and holds the Certified Management Accountant (CMA) certification granted by the IMA. Use the ethical standards of these two organizations to identify what Daniels should do in this situation.
