The International Accounting Standards Committee which was established in 1973 by the professional organic structures of Australia, Canada, France, Germany, Japan, Mexico, Netherlands, United Kingdom and Ireland and United States. The International Accounting Standards Committee regulations were described as International Accounting Standards ( IAS ) . However, in April 2001, International Accounting Standards Committee rule-making maps have been taken over by the freshly constituted organic structure, International Accounting Standards Board. The International Accounting Standards Board present new accounting criterions under a new signifier which is call International Financial Reporting Standards and is recognise thru states and is pattern boulder clay this twenty-four hours. However, International Accounting Standard is still been issued by the old standard-setter International Accounting Standard Committee even thou International Accounting Standards Board is better funded, better staffed and more independent. “ Ball, Ray. ( 2006 ) . Accounting and Business Research, International Accounting Policy Forum. International Financial Reporting Standards ( IFRS ) : Professionals and Cons for Investors. 36 ( Special ) , 5-27 ” . The US General Accepted Accounting Principles was published by the American Institute of Accountants ( AIA ) , this was published as Examinations of Fiscal Statements in 1939. Between the twelvemonth of 1934 and 1935, the Congress approved two major Securities Acts to reconstruct public and investors ‘ assurance after the 1929 stock market clang. The Securities Exchange Commission ( SEC ) has been given authorization to order “ the methods to be followed in the readying of the Financial Reports. The Committee of Accounting Procedure lead by members of American Institute of Accountants was pressured by the Securities Exchange Commission to supply Accounting Research Bulletins with significant important support for proper accounting pattern. The Committee of Accounting Procedure was replaced by Accounting Principles Board to take charge in contracting the differences in accounting patterns to forestall optional interventions. The American Institute of Certified Public Accountants ( AICPA ) once known as American Institute of Accountants insisted that the Large Firms represented the Accounting Principles Board and the sentiments formed by the Accounting Principles Board was overlook by the Accounting Research Division which was form by American Institute of Certified Public Accountants. The Financial Accounting Standard Board replaces the Accounting Principles Board on July 1, 1973 as the Financial Accounting Standard Board was more dependable and independent so the old Board. “ Stephen A.Zeff. ( February 2005 ) . The CPA Journal. The Development of U.S GAAP: The Political Forces Behind Professional Standards. 1 ( 1 ) , 18-29 ” .
The prostration of Enron in 2002 has raised inquiry on the capableness of the accounting pattern and accounting rules of US GAAP. The US GAAP and IFRS are based on rule signifier of coverage criterions, where the absence of regulations to steer has lead the use of histories in Enron a company in the United States as it heavy relayed on professional judgement and been audited in one of the Big house Author & A ; Anderson without place the use that has taken topographic point over a figure of old ages. However many still believe that rule based describing criterion has much more benefits than regulation based coverage, as rule based describing standard provides counsel illimitable position on different types of fortunes that arise in pattern. Besides that, rule based accounting relay on professional opinion by comptrollers, in which comptrollers are able to measure the substance of a minutess. The professional opinion alternatively of trusting on elaborate regulations would heighten professionalism of fiscal statement. It would be simpler standard trusting on rule standard accounting alternatively of trusting on regulations based accounting criterion as rules based accounting would be easier to grok and use to a wide scope of minutess, This because regulations based accounting criterion are n’t flexible plenty to suit hereafter development and has to updated it based of regulations from clip to clip. Besides professional opinion, principal based accounting besides minimise uses of regulations as regulations based creates a mentality of box ticking and conformity civilizations. This attitude would make ‘anything goes ‘ every bit long as it is non prohibited. Rules based accounting do non make a 100 per cent accurate fiscal study as it regulations is limited to a certain grade where in can be bend non broken. The principal based attack on the other manus has many defects as chief based accounting relies on the professional opinion of an accountant therefore has a deficiency of guidelines that would make inconsistence in using the criterions across the administrations in the universe. The principal based relies on single professional opinion and different person has a different attack and opinion, for an illustration the acknowledgment of contingent liability based on professional opinion, how would the companies recognised contingent liability if liabilities are likely or merely moderately possible, would be recognised in pes notes or taken into histories where if the sum is material it would consequence the balance sheet and net income and loss if the contingent liability is non captured and merely a pes note in the fiscal study due to non holding a measurement counsel. The principal based accounting attack is non preferred by many rehearsing comptrollers as it concerns the possible judicial proceeding over their exercising of professional opinion in the absence of regulations. ” Rebecca Toppe Shortrdge, Mark Myring. ( 2004 ) . The CPA Journal. Specifying Principles-Based Accounting Standards. 74 ( 1 ) , 34-37 ” . There would be a alteration in as times goes by as accounting criterions has to slowly move into chief based criterion which is pattern by the US GAAP, nevertheless it would be advisable to keep the bing criterions alternatively of get downing all over a new criterion. There may be job faced while implementing this rule based criterion, with the displacement in attitude from all components of fiscal accounting information, including the criterions compositors, The Securities Commission, investors, hearers and public, dealing into chief based criterion would be much smoother procedure.
The US GAAP is a reputable criterion used in the United States regardless the fraud job face by the United States economic. The transition to IFRS in U.S companies will impact many facet of the concern, nevertheless there are benefits to the companies in US by this transition. Primary the US companies gain a greater market liquidness and lower cost of capital from this transition, as this transition is due to traverse boundary line investing where it has been eliminated when the accounting criterions are a individual set of fiscal of describing standard thru out the universe. Hence forth the IFRS is a rule based accounting that has a wider regulations and less specific application counsel, this will let accountant the room to construe and emphasis on trust on professional opinion. Adoption of IFRS worldwide would promote the trust professional opinion as professional opinion are made by human and will be able to bring forth reply in different scenario or instances and follow to the alterations in environment which computing machine and package are unable to follow.