IFRS is a crucial factor for companies to consider for cross-border deals, which many companies ignore until they face complications. Out of the many reasons, three substantial ones portray the importance of US GAAP to IFRS conversion. Firstly, it helps to access the capital market internationally which mandates financial statements according to IFRS. Secondly, it helps US-based companies attract foreign investors for fruitful foreign operations. And finally, it smoothens foreign company acquisitions when the IFRS financial statements are available. To help you easily convert to IFRS, we have made a US GAAP to IFRS conversion checklist. Follow it thoroughly for a smooth transition and effective foreign deals and investments.
Steps of converting US GAAP to IFRS
- The very first step when carrying out US GAAP to IFRS conversion should be a detailed accounting gap assessment. It is a critical step and can take between 4 and 8 weeks which completely depends on the intricacies of your business and its size. While conducting the assessment, it is critical to identify the areas of potential difference and pay heed to its implementation in the future.
- To adopt IFRS, every organization needs to apply for IFRS 1 (first-time IFRS adoption). But before that, some exceptional cases may require an IFRS application along with specific disclosure and elective exemption.
- Just like US GAAP, IFRS also has important revenue recognition standards to meet. With that, it is also necessary to meet the new standards of financial instruments and leases, as these standards are substantially different from that of US GAAP. For instance, the ASC 842 lease, according to US GAAP principles, is vastly different from the standards of IFRS. But one can use the collected data for the US GAAP lease and use it for IFRS. A company can even choose to go for the new IFRS leases directly just after the first IFRS adoption to decrease the burden of efforts given on bypassing standard post-IFRS adoption.
- While considering conversion, companies should assess the additional complications associated with separate acquiree’s financial reporting, pro forma financial documents, and accounting reconciliations to accurately exercise change and make it easier to collaborate with foreign entities.
- Converting from IFRS to US GAAP is easier than GAAP to IFRS conversion. Thus, the latter requires more accounting exercises as it has a noticeable effect on the system as a whole which includes business aspects and people connected with the company, so a unified system providing these services will always be beneficial. It is always viable to go for bookkeeping Glasgow services to make the process simpler and hassle-free.
To upscale a US-based organization and make it visible to the international markets, US GAAP to IFRS conversion is a mandatory process. It enables businesses to focus on multinational investors and decreases the differences between different accounting standards on an international level. IFRS also adds up to finances as it rules out the payments related to adjusting and processing financial statements. So, if a business looks to expand away from the US territories, IFRS conversion is a must.
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