GAAP and IFRS

GAAP and IFRS The Securities and Exchange Commission (SEC) administers and enforces various laws that affect the securities of the investors. [1] It ensures that the investors in the security markers are protected from exploitation and misuse of their funds by the brokers, investment mangers and other clearing agencies. It therefore assists in controlling the marketing policies. It has been provided with enough resources necessary for reviewing both financial disclosures of various companies and the non-financial disclosures.Advertising We will write a custom essay sample on GAAP and IFRS Financial Statements specifically for you for only $16.05 $11/page Learn More It can certify the financial statements of public companies; enforce rules for periodic reporting and other non Generally Accepted Accounting Principles (GAAPs). All these rules affect the way public companies disclose their statements including the Sarbanes-Oxley rules. The rules can extend to the off-balance sheet disclosures and other auditing rules. For example, the SEC enforces that the auditors should be independent to avoid any violations in the disclosure of financial statements to the investors in the public companies. The SEC has powers to enforce the Securities Act according to the US regulations. The SEC has published its standards so that all companies can see them and comply with them. Every company is required to check the publications from time to time so that it is informed on any changes. The New York Stock Exchange (NYSE) makes decisions on how the companies in the US should make use of the international standards of accounting. It enforces various laws that are codified for corporate governance. It sets certain rules that must be followed by the all companies listed in the NYSE. [2] To avoid accounting scandals, the NYSE has set very tough rules on the standards requirements for listing of mergers. [3] It also raises the disclosure standards of companies at the NYSE i n order to avoid any failure of ethics and diligence which may occur in some companies. Through its Corporate and Accountability Committee, it can review it listing standards and any other reforms that have been proposed to ensure that there is Accountability and transparency of all listed companies. To avoid any instance of unethical behaviors, the NYSE has set some standards that allow all shareholders who have invested in the NYSE listed companies to monitor the directors of their companies as well as the performance of these companies. NYSE requires that anyone who is the chair of listed companies’ audit committee should have an experience in financial management. The listed companies are required to publish their codes of business to ensure that the shareholders can monitor the governance of such companies. Every CEO is required to certify that the management of the company has not violated any laws and standards set by the NYSE, failure to which, the company can be deli sted. NYSE publishes these standards for all companies to observe.Advertising Looking for essay on accounting? Let's see if we can help you! Get your first paper with 15% OFF Learn More The Internal Revenues Service (IRS) has set rules on the payment of taxes. It requires that there should be consistency in the accounting method used by the tax payer. [4] For example, if one decides to use the accrual basis, then it should be used throughout the period to ensure proper disclosures and reduce instances of tax evasion. Tax evasion is a criminal offence and therefore one can be sued in a court of law. It has a criminal enforcement on all financial crimes on the tax system by suing the Criminal Investigation Department to detect all those businesses or individuals who violate the tax rules. It has set in place, all standards that govern the exempt organizations, profit and non- profit organizations, government entities, individuals and businesses especially on th e taxation matters. IRS has published the rules and guidelines for the tax payer who is supposed to know the requirements and any changes in the tax system. [5] The International Financial Reporting Standards (IFRS) results in reporting of higher earnings than those of the Generally Accepted Accounting Principles (GAAPs). This means that there shall be higher taxes paid under the IFRS than the GAAPs for any company from any industry. This is because the gains and losses are normally reported in the equity section in the IFRS while the GAAPs require them to be reported in the income statement. [6] These losses can reduce the earnings and therefore lead to less tax paid. Lying, misrepresentation and misstating is likely to occur under the IFRS because it allows companies to use different formats that are specific to their appropriate use. [7] Therefore, a company may try to reduce its reported earnings by lying or presenting in a different format. The main differences relate to the mi nority interests, business combinations and other financial instrument related activities. The IFRS allows companies to use different formats for their income statements while the GAAP does not allow companies to use different formats. In the impairment of intangible assets as well as in the recognition of liabilities, there are significant differences between the two methods. The reporting of financial statements under the GAAPs is more detailed as it includes many items and information while the IFRS is very brief in terms of reporting. [8] The US generally follows the GAAPs in the preparation of the financial statements. Bibliography Accounting WEB, New IRS tax preparer regulations: What they mean for you. Accessed from accountingweb.com/topic/tax/new-irs-tax-preparer-regulations-what-they-mean-youAdvertising We will write a custom essay sample on GAAP and IFRS Financial Statements specifically for you for only $16.05 $11/page Learn More International F inancial Standards, Access the unaccompanied standards and their technical summaries. Last modified March 10, 2012. Accessed from ifrs.org/IFRSs/IFRS.htm. Internal Revenue Service, Tax Information for Retirement Plans Community. Last modified April 16, 2012. Accessed from irs.gov/retirement/index.html. Internal Revenue Service, Tax Information for Government Entities. Accessed from irs.gov/govt/index.html. New York Times, Securities and Exchange Commission. Last modified March 16, 2012. Accessed from http://topics.nytimes.com/top/reference/timestopics/organizations/s/securities_and_exchange_commission/index.html Reuters, Bloomberg: NYSE deal means U.S. accounting for all. Last modified Feb 11, 2011. Accessed from reuters.com/article/2011/02/11/us-exchanges-bloomberg-idUSTRE71A5O020110211 Superpages.com, FRS and GAAP Accounting Compared. Accessed from superpages.com/supertips/ifrs-gaap.html. Thomson Reuter News Insight, NYSE seeks to toughen rules for reverse mergers. Last modified April 10, 2011. Accessed from http://newsandinsight.thomsonreuters.com/Legal/News/2011/08_-_August/NYSE_seeks_to_toughen_rules_for_reverse_mergers/.Advertising Looking for essay on accounting? Let's see if we can help you! Get your first paper with 15% OFF Learn More