Question
Suppose you are at the IASB giving a Conference on IFRS and US GAAP to professional accountants representing various countries/jurisdictions. Some of the countries represented
Suppose you are at the IASB giving a Conference on IFRS and US GAAP to professional accountants representing various countries/jurisdictions. Some of the countries represented at the Conference: 1) require IFRS Accounting Standards for all or most domestic publicly accountable entities, while others, 2) countries neither require nor permit IFRS Accounting Standards for any domestic publicly accountable entities .
During the questions section, the Chair of the FASB, Richard R. Jones , expressed the followfollowing:
I am not in favor of IFRS replacing US GAAP in the accounting system of the United States. Local public and private companies must continue to use US GAAP as the sole accounting standard for reporting locally. The main reason is that I cannot trust IFRS because financial information can be manipulated. Therefore, the use of IFRS may result in Financial Statement information being overstated or understated (as compared to US GAAP). I refer specifically to net income, assets, debts, and capital. However, US GAAP provides me with reliable information.
1. Assume you agree with Mr. Jones. Provide an example of how financial statement items can be overstated or understated if IFRS is used. Include an explanation and a numerical example.
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