Why is ifrs better

If the software will only be used internally, GAAP requires capitalization only during the development stage.

IFRS has no specific guidance for software. GAAP requires that long-lived assets, such as buildings, furniture and equipment, be valued at historic cost and depreciated appropriately. Under IFRS, these same assets are initially valued at cost, but can later be revalued up or down to market value.

Any separate components of an asset with different useful lives are required to be depreciated separately under IFRS. GAAP allows for component depreciation, but it is not required. IFRS includes the distinct category of investment property, which is defined as property held for rental income or capital appreciation. Investment property is initially measured at cost, and can be subsequently revalued to market value.

Some companies also report benefits from being able to use IFRS Standards in their internal reporting, improving their ability to compare operating units in different jurisdictions, reducing the number of different reporting systems and having the flexibility to move staff with IFRS experience around their organisation.

In Japan, where use of IFRS Standards has been voluntary since , a report by the Japanese Financial Services Agency identified business efficiency, enhanced comparability and better communications with international investors as the main reasons why many Japanese companies had chosen to adopt IFRS Standards. IOSCO recognised the benefits of global Standards when, in the year , it recommended to its members that they allow IFRS Standards to be used on their exchanges for cross-border offerings.

Since that point, IFRS Standards have gone on to become the de facto global language of financial reporting, used extensively across developed, emerging and developing economies.

Our research shows that jurisdictions now require the use of IFRS Standards for all or most publicly listed companies, whilst a further 12 jurisdictions permit its use.

Visit our jurisdictional use of IFRS Standards page for more information on individual jurisdictions. This website uses cookies to support your browsing experience, including cookies for signing in to your IFRS account and analytics cookies.

You can view the full list of cookies in our privacy policy. Phrase search. Word search. About us Who we are. Our structure. Working in the public interest. Our consultative bodies. GAAP takes a more conservative approach and prohibits reversals of impairment losses for all types of assets. Internal costs to create intangible assets, such as development costs, are capitalized under IFRS when certain criteria are met.

These criteria include consideration of the future economic benefits. Under GAAP, development costs are expensed as incurred, with the exception of internally developed software.

For software that will be used externally, costs are capitalized once technological feasibility has been demonstrated. If the software will only be used internally, GAAP requires capitalization only during the development stage. IFRS has no specific guidance for software.

Under both sets of standards, long-lived assets, which include property, plant, and equipment, are initially valued at acquisition cost. If the asset consists of multiple components with different useful lives, IFRS requires separate depreciation of those components. Under IFRS, assets can be later revalued to fair value, whether this is an increase or a decrease in value.

In both cases, the requirements on foreign issuers are much lighter than on U. The SEC proposal acknowledges these issues but proposes no changes at this time. But these issues, and others, should be addressed in any final rule dropping the reconciliation. Filing deadlines for IFRS annual reports should be gradually moved up so that they are eventually equal to the deadlines U.

And interim information should be filed not just furnished by foreign issuers on at least a semi-annual, and probably quarterly, basis, within reasonable periods of time. Neither of these should be a problem once the reconciliation is gone.

The idea of giving U. Of course, U. Others view giving companies a choice as a way to bring market forces to bear in improving accounting standards. The boards are working to converge their standards, not to leapfrog one another in quality. In addition, users of financial statements generally want one set of high-quality standards—not competitive sets of standards that they would need to reconcile. Indeed, I have heard that some U. I think these companies are wrong, as I expect IFRS to be enforced by the SEC just as rigorously as [it enforces] GAAP, but that the idea is being discussed at all shows that companies might not choose their accounting standards based solely on which set produces more transparent reporting.

Still, there are some very good reasons for some U. As discussed in the concept release, many U. More and more, those statutory filings can or must include IFRS financial statements. Also, a U. Users might well prefer this outcome too. With foreign issuers, the choice is reconciliation in its current form or no reconciliation.

But with U.