November 14, 2007
We all have heard the saying, Its a small world. With the globalization of many companies, the world is becoming even smaller. In order to succeed in business in today's market, companies must expand outside the United States' borders. With this expansion comes a completely new set of issues that must be resolved. One of those issues is resolving the differences between the U.S. GAAP and all of the other countries GAAP. The International Financial Reporting Standards is the bridge to resolving the differences.
Most of the world is in the process of converging or have already converged toward the International Financial Reporting Standards. Once the U.S. completes this convergence, the consolidation of a company doing business internationally will become less cumbersome and less expensive. The need for the reporting books and the local books will be eliminated. This will reduce the workload and eliminate the need for duplicate efforts on the part of the accounting staff.
In the past, if a foreign company wanted to be listed on an American stock exchange, that business was required to restate its financial statements in accordance with the U.S. GAAP. This requirement could present a problem for many companies based on financial burden alone. With the acceptance of a foreign companys financial statements that are in accordance with IFRS, the SEC has increased the possibility of more foreign investments since it has eliminated the need for the restatement.