For example, there are many SEC registered companies, and they are not all American companies. Many of them are actually headquartered in foreign countries. In the past they had to change their accounting and financial information over to GAAP requirements, but changes are allowing companies to continue to use IFRS instead. Some of the U.S. based companies are also going to be allowed to use IFRS in order to help foreign investors better understand how they match up with competitors from other countries (AICPA, 2008). In the next few years, all companies (U.S. And otherwise) may be using IFRS (Bradshaw, et al., 2010). When addressing the disclosure levels to which companies have to adhere, IFRS and GAAP are not so different. The differences generally come into play with the specifics of the issue, because there are certain documents in which specific information needs to be provided, and those documents can vary greatly between the two types of reporting standards (AICPA, 2008). Because the documents are different between the reporting types, the way the information is presented and even the way it is collected can vary. That means both of those issues would need to be addressed by any company that is going to move from the GAAP system to the IFRS system or vice versa. The current idea is to move all companies over to using the IFRS system, including companies that are based in the U.S. That will require U.S. companies to spend time learning how to use the IFRS system, which will require a degree of time and effort (AICPA, 2008). Currently, the IFRS system is more strongly principles based, while a more rules based approach is taken by the GAAP (Gucenme & Arsoy, 2005).

The GAAP has highly specific guidance in the way it is applied, and the IFRS is less specific, making its application more limited in some ways. Overall, the biggest difference that is seen between the GAAP and the IFRS is how strict the rules are (International, 2007; SEC, 2008). The GAAP requirements are very heavy on the rules that are set out for the companies that must report under it when it comes to their financial dealings and accounting. The IFRS is much less specific in its requirements, and the rules that it requires companies to follow are far more relaxed in nature. Whether this is good or bad obviously depends on which side of the issue one is on and what one is attempting to do with the information he or she hopes to acquire about a company's financial status.

It is important to clarify that the idea that the IFRS is less rules-based does not mean that it is an unacceptable method for international accounting standards or that it is lax. Instead, it only means that there are differences in the ways in which information can be, should be, and is provided. Moving to that system would mean changes in the strict way U.S. companies have to provide their accounting and financial information under the GAAP standards that they currently use. It would seem as though this would be a very welcome change, but that may not necessarily be the case for some companies. The lack of any real rigidity in the requirements provided by IFRS can complicate the providing of financial information for people who are used to handling the issue in a particular way. Creating the reports will take time, and what goes into them will also be more subjective.

Theories and Debates

Anytime that changes are made or changes are being discussed, there will be theories created and debates started as to what will be done and why it should (or should not) be done. There are many companies that want to see the changeover to IFRS standards, and nearly an equal number of companies that want to keep the GAAP standards they are used to (Crovitz, 2008). It is likely not going to be possible to see agreement between all companies as to what would be the best course of action. It is also possible that there could be a middle ground compromise made that would blend the two different reporting standards and allow all companies to have an adjustment period so that the change would not appear so jolting to them. It remains to be seen how the issue will actually be handled.

Right now, however, current discussion does not allow for a compromise. It is focused on a one-or-the-other approach in that either the GAAP...

With that being the case, there are strong debates about whether it is most valuable to simply change everything over to IFRS. What that change will do to the accounting profession depends on who is asked the question. The all-or-nothing style that is being provided currently, though, is not an overly promising option for what can be done to make the accounting standards more "standard" throughout the world. Comparing Lockheed Martin and BAE right now, for example, is very difficult because the information they are required to provide is different for each company. Without the same information presented in the same way, analysis of the issues they may face and how they truly compare financially to one another may be very difficult to determine.
On the positive side of things, there are a large number of U.S. companies that like the change. The lack of strictness in the rules will be a welcome change for many of these companies, since the IFRS requirements are much more similar to guidelines as opposed to actual rules. That ensures that each company could provide the right and requested information relatively easily. Not everyone is looking at this positively, however, because there are other theories that show a lot of concern with the IFRS and its lack of actual rules. The main concern is whether there will actually be enough information provided in order to allow investors to make good, informed choices about whether they should get involved with a company or not. Additionally, some wonder how companies will know whether they are getting what they need in the way of information when they want to acquire or merge with other companies. A lack of information could leave them at a serious financial disadvantage when they agree to a merger or acquisition of another company.

These issues have to be addressed, but there are not going to be any easily provided answers to the questions they pose. Some companies feel good about the IFRS regulations, and some companies feel bad about them. That is just the way things are, and they are not likely to change. As with nearly everything in life, there are many varied opinions as to the value of the change to IFRS requirements and how much of a benefit it is actually going to offer to the parties that will be involved with it. A complete consensus on the issue is not going to be realistic or possible, because opinions as to which set of regulations should be followed and which set is best will always vary.

In the meantime, the debate is going to continue as to whether IFRS or GAAP is the best choice. One side prefers IFRS, and one side prefers GAAP - and this is not completely divided based on whether a company is currently using one system or the other. There are also those who are lobbying for a middle ground approach, where the two accounting systems would be merged and the rule sets would be blended to provide something less strict than GAAP but more comprehensive and structured than IFRS (Crovitz, 2008; Gucenme & Arsoy, 2005). This theory is plausible, but the set of rules that would be created from the blend would be difficult to address and highly complicated to create. Naturally, that is not something to which most companies would willingly subscribe - especially when there are options that are much easier to deal with from the beginning and that would not require them to do nearly as much work as they currently do.

Because governing bodies are so busy, they also do not want to spend inordinate amounts of time going over and over rules and regulations and arguing about whether something is acceptable or should be changed. The majority of the world uses the IFRS standards, while GAAP is a U.S.-only creation. Because of that, it makes perfect sense that the U.S. would convert to IFRS instead of asking the rest of the world to convert to GAAP. Even though there are many U.S. companies that are not happy with the conversion idea and do not want to change, they are likely fighting a battle which they will lose. Most IFRS uses do not want to change, either, and there are a lot more of them because so many countries throughout the world use the IFRS standards instead of the GAAP regulations. While some may argue that the majority is not necessarily right,…