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PostHeaderIcon Accounting Standards

To be honest, this is one someone forwarded to me that I only have a surface understanding of, so I’ll tell you what I gleaned and link back to the source for you inquiring mind types.

Basically, there seem to be two possible methods of financial accountability, GAAP (general accepted accounting practices) which is used in the U.S. and IFRS (International Financial Reporting Standards) an international standard.

The SEC is asking constituents their opinion of allowing companies to report using IFRS rather than GAAP. The FASB has had a project in the works to eliminate the differences between the two systems for several years and some are concerned that allowing companies the option to choose may endanger that project.

I readily admit, not being a CFO or much of a numbers person, that on the surface I can’t see a downside to switching to an international standard. More and more businesses are operating internationally, from mega-companies like Coke and McDonald’s who have been international for decades, to the VA writing this post who has clients in the US and abroad. If companies want to do business outside the US, and, especially, if they want to seek international financial backing, wouldn’t it make the most sense to use an accounting system understood by investors anywhere on the globe? Am I oversimplifying?

To get the non-Dy version of the scoop, check out the source article I read on The SEC will be taking for approximately the next three months–more details and links at the source.

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