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D-1
APPENDIX D
INTERNATIONAL FINANCIAL REPORTING STANDARDS
DISCUSSION QUESTIONS
1. In recent years, the removal of trade barriers and the growth in cross-border equity and debt
issuances have led to a dramatic increase in international commerce. As a result, companies are
often reporting financial results to users outside of the United States. Historically, accounting
standards have varied considerably across countries. These differences have been driven by
2. International Financial Reporting Standards (IFRS) are a set of global accounting standards.
IFRS applies to companies that issue publicly traded debt or equity securities, called public
companies, in countries that have adopted IFRS as their accounting standards. Since 2005,
3. The International Accounting Standards Board (IASB) is the body charged with developing
International Financial Reporting Standards. Like the FASB, the IASB is an independent
entity that establishes accounting rules. Unlike the FASB, the IASB does not establish
4. a. Adoption would entail the U.S. Securities and Exchange Commission formally deciding to
adopt IFRS as the accounting standard framework for U.S. GAAP. Only the SEC has the
b. Convergence is the alignment of IFRS and U.S. GAAP one topic at a time, slowly merging
IFRS and U.S. GAAP into two broadly uniform sets of accounting standards. The FASB
and IASB have agreed to work together on a number of difficult and high-profile account-
5. a. U.S. GAAP is considered to be a “rules-based” approach to accounting standard setting.
The accounting standards provide detailed and specific rules on the accounting for
business transactions. There are few exceptions or varying interpretations of the
accounting for a business event.
b. IFRS is a “principles-based” approach that must be broad enough to capture cross-country
legal and cultural differences, while still presenting comparable financial statements. This
APPENDIX D International Financial Reporting Standards
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6. Under IFRS, a company may select between historical cost or revalued amount (a form of
fair value). If impaired, the impairment loss may be reversed in future periods.
