International Financial Reporting Standards are gaining support around the globe. In 2007, the SEC eliminated the requirement for foreign companies that issue stock in the United States to include in their financial statements a reconciliation of IFRS to U.S. GAAP. There also is serious discussion of allowing U.S. companies to choose whether to prepare their financial statements according to U.S. GAAP or IFRS.

Many outside of the United States claim that a problem with U.S. GAAP is that there are too many rules. They argue for principles-based accounting standards in which the broad principles of accounting are emphasized and less emphasis is placed on detailed implementation rules. Americans counter that IFRS may lack quality and rigor. Additional rules are necessary to provide adequate guidance to users.

Read Appendix E in your book; review the information in Required: Chapter 6 Research Assignment in Lessons, Chapter 6; and perform internet research to answer the following questions.

Requirements:

Describe the two major reporting standards in the world.

Research and name which countries use GAAP vs. IFRS.

Explain the difference between principles and rules-based accounting standards.

Explain the advantages of each approach.