, Relevant and reliable financial information
INTERNATIONAL ACCOUNTING STANDARDS is a necessity for viable capital markets.
Unfortunately, companies outside the
United States often prepare financial state-
ments using standards different from U.S. GAAP (or simply GAAP). As a result, interna-
tional companies, such as Coca-Cola, Microsoft, and IBM, have to develop financial
information in different ways. Beyond the additional costs these companies incur, users
of the financial statements often must understand at least two sets of accounting
standards (understanding one set is hard enough!). It is not surprising, therefore, that
there is a growing demand for one set of high-quality international standards.
Presently, there are two sets of rules accepted for international use—GAAP and the
International Financial Reporting Standards (IFRS), issued by the London-based
International Accounting Standards Board (IASB). U.S. companies that list overseas
are still permitted to use GAAP, and foreign companies listed on U.S. exchanges
are permitted to use IFRS. As you will learn, there are many similarities between GAAP
and IFRS.
Already, over 115 countries have adopted IFRS, plus the European Union now
requires all listed companies in Europe (over 7,000 companies) to use it. The SEC laid
out a roadmap, shown below, by which all U.S. companies might be required to use
IFRS by 2015.
Foreign issuers SEC issues U.S. companies, investors,
allowed to file in U.S. Roadmap SEC Policy Required use of IFRS
auditors, and regulators prepare
without reconciliation Statement
for use of IFRS
2008 2009 2010 2011 2012 2013 2014 2015
SEC Staff
Work Plan
SEC decides
on required use of IFRS
by U.S. companies
Most parties recognize that global markets will best be
CONVERGENCE OF GAAP AND IFRS served if only one set of accounting standards is used.
For example, the FASB and the IASB formalized their
commitment to the convergence of GAAP and IFRS by
issuing a memorandum of understanding (often referred to as the Norwalk agreement).
The two boards agreed to use their best efforts to:
• Make their existing financial reporting standards fully compatible as soon as
practicable, and
• Coordinate their future work programs to ensure that once achieved, compatibility
is maintained.
As a result of this agreement, the two Boards identified a number of short-term and
long-term projects that would lead to convergence.
EP-2
, Because convergence is such an important issue, we provide a discussion of inter-
national accounting standards at the end of each chapter called IFRS Insights. This
feature will help you understand the changes that are taking place in the financial
reporting area as we move to one set of international standards. Each IFRS Insights, as
hAndReceivables.indd Page 428 12/22/10 1:11:17 PM user-f391 /Users/user-f391/Desktop/24_09_10/JWCL339/New File
c07CashAndReceivables.indd Page 428 12/22/10 1:11:17 PM user-f391 /Users/user-f391/Desktop/24_09_10/JWCL339/New File
shown here, consists of four sections.
hAndReceivables.indd Page 430 12/22/10 1:11:17 PM user-f391 /Users/user-f391/Desktop/24_09_10/JWCL339/New File
An introduction typically lists the
international accounting pronouncements IFRS Insights
related to the chapter topic. The basic accounting and reporting issues related to recognition and measurement of
receivables, such as the use of allowance accounts, how to record discounts, use of the
allowance method to account for bad debts, and factoring, are similar for both IFRS and
GAAP. IAS 1 (“Presentation of Financial Statements”) is the only standard that dis-
cusses issues specifically related to cash. IFRS 7 (“Financial Instruments: Disclosure”)
RELEVANT FACTS
Relevant Facts explain similarities and differences
• The accounting and reporting related to cash is essentially the same under both IFRS of GAAP and IFRS.
and GAAP. In addition, the definition used for cash equivalents is the same. One dif-
ference is that, in general, IFRS classifies bank overdrafts as cash.
About the Numbers generally discusses ABOUT THE NUMBERS
and provides examples of IFRS applications Impairment Evaluation Process
(in many cases, using real international IFRS provides detailed guidelines to assess whether receivables should be consid-
ered uncollectible (often referred to as impaired). GAAP does not identify a specific
companies). approach. Under IFRS, companies assess their receivables for impairment each report-
ing period and start the impairment assessment by considering whether objective
ON THE HORIZON On the Horizon discusses convergence progress and plans
The question of recording fair values for financial instruments will continue to be an related to the accounting topics presented in the chapter.
important issue to resolve as the Boards work toward convergence. Both the IASB and
the FASB have indicated that they believe that financial statements would be more
transparent and understandable if companies recorded and reported all financial
instruments at fair value. That said, in IFRS 9, which was issued in 2009, the IASB
IFRS Insights also includes IFRS Self-Test Questions, as well as IFRS Concepts and
Application, so students can test their understanding of the material. An International
Financial Reporting Problem, based on Marks and Spencer plc, offers students an
opportunity to analyze IFRS-based financial statements.
c01FinancialAccountingAndAccount9 Page 9 11/19/10 11:23:09 AM f-535 /Users/f-535/Desktop/Rajesh 19:11/JWCL413_Kieso_203
Having a basic understanding of international
accounting is becoming ever more important as the pro- OTHER INTERNATIONAL COVERAGE
fession moves toward convergence of GAAP and inter-
national standards. Thus, in addition to the IFRS Insights
pages discussed above, we continue to include marginal International INTERNATIONAL
Perspectives, marked with the icon shown here, which we updated throughout PERSPECTIVE
to reflect changes in international accounting. These notes describe or compare
IFRS as well as accounting practices in other countries with GAAP. This feature helps
you to understand that other countries sometimes use different recognition and
measurement principles to report financial information.
EP-3
, The emerging
importance o
International F
inanc
fial Reporting S
presents challe tandards
nges in how y
and how your ou teach
students learn
accounting.
The Wiley Accounting Team for Success is ready when you
are to help prepare you and your students for the integration of IFRS into your courses.
No matter where you are in this transition, Wiley Accounting is here to provide the tools you
need to fully incorporate IFRS into your accounting courses. We offer the most extensive
Products, Content, Services, Support, and Training available today—leading the way
to prepare you and your students for success!
Innovative Products: New IFRS Editions of Kieso, Intermediate Accounting
and Weygandt, Financial Accounting are the most current and only textbooks available based
fully on International Financial Reporting Standards. Wiley Accounting also offers numerous IFRS
resources that can serve to supplement your course.
Exclusive Content: Our accounting publications feature more quality and
current coverage of IFRS topics than any other textbook available today! The Wiley Accounting
Team for Success authors integrate IFRS content within each chapter through features like
A Look at IFRS, which demonstrates how international standards apply to each
U.S. GAAP topic, as well as provides an opportunity for practical application. International
Insights also provide an international perspective of the accounting topic discussed in the text.
Support & Services: Wiley Accounting features a dedicated IFRS website
(at www.wileyifrs.com) and an Accounting Weekly Updates website (at www.
wileyaccountingupdates.com) to make sure you have the most current resources available.
Timely Training: Wiley Accounting and the Wiley Faculty Network provides free
IFRS virtual training workshops, IFRS Guest Lectures, and IFRS “Boot Camps” featuring authors
Paul Kimmel and Terry Warfield. You can also earn CPE credit for attending these sessions.
To learn more about how the Wiley Accounting Team for Success can help your students succeed,
visit www.wileyteamforsuccess.com or contact your Wiley sales representative today.
INTERNATIONAL ACCOUNTING STANDARDS is a necessity for viable capital markets.
Unfortunately, companies outside the
United States often prepare financial state-
ments using standards different from U.S. GAAP (or simply GAAP). As a result, interna-
tional companies, such as Coca-Cola, Microsoft, and IBM, have to develop financial
information in different ways. Beyond the additional costs these companies incur, users
of the financial statements often must understand at least two sets of accounting
standards (understanding one set is hard enough!). It is not surprising, therefore, that
there is a growing demand for one set of high-quality international standards.
Presently, there are two sets of rules accepted for international use—GAAP and the
International Financial Reporting Standards (IFRS), issued by the London-based
International Accounting Standards Board (IASB). U.S. companies that list overseas
are still permitted to use GAAP, and foreign companies listed on U.S. exchanges
are permitted to use IFRS. As you will learn, there are many similarities between GAAP
and IFRS.
Already, over 115 countries have adopted IFRS, plus the European Union now
requires all listed companies in Europe (over 7,000 companies) to use it. The SEC laid
out a roadmap, shown below, by which all U.S. companies might be required to use
IFRS by 2015.
Foreign issuers SEC issues U.S. companies, investors,
allowed to file in U.S. Roadmap SEC Policy Required use of IFRS
auditors, and regulators prepare
without reconciliation Statement
for use of IFRS
2008 2009 2010 2011 2012 2013 2014 2015
SEC Staff
Work Plan
SEC decides
on required use of IFRS
by U.S. companies
Most parties recognize that global markets will best be
CONVERGENCE OF GAAP AND IFRS served if only one set of accounting standards is used.
For example, the FASB and the IASB formalized their
commitment to the convergence of GAAP and IFRS by
issuing a memorandum of understanding (often referred to as the Norwalk agreement).
The two boards agreed to use their best efforts to:
• Make their existing financial reporting standards fully compatible as soon as
practicable, and
• Coordinate their future work programs to ensure that once achieved, compatibility
is maintained.
As a result of this agreement, the two Boards identified a number of short-term and
long-term projects that would lead to convergence.
EP-2
, Because convergence is such an important issue, we provide a discussion of inter-
national accounting standards at the end of each chapter called IFRS Insights. This
feature will help you understand the changes that are taking place in the financial
reporting area as we move to one set of international standards. Each IFRS Insights, as
hAndReceivables.indd Page 428 12/22/10 1:11:17 PM user-f391 /Users/user-f391/Desktop/24_09_10/JWCL339/New File
c07CashAndReceivables.indd Page 428 12/22/10 1:11:17 PM user-f391 /Users/user-f391/Desktop/24_09_10/JWCL339/New File
shown here, consists of four sections.
hAndReceivables.indd Page 430 12/22/10 1:11:17 PM user-f391 /Users/user-f391/Desktop/24_09_10/JWCL339/New File
An introduction typically lists the
international accounting pronouncements IFRS Insights
related to the chapter topic. The basic accounting and reporting issues related to recognition and measurement of
receivables, such as the use of allowance accounts, how to record discounts, use of the
allowance method to account for bad debts, and factoring, are similar for both IFRS and
GAAP. IAS 1 (“Presentation of Financial Statements”) is the only standard that dis-
cusses issues specifically related to cash. IFRS 7 (“Financial Instruments: Disclosure”)
RELEVANT FACTS
Relevant Facts explain similarities and differences
• The accounting and reporting related to cash is essentially the same under both IFRS of GAAP and IFRS.
and GAAP. In addition, the definition used for cash equivalents is the same. One dif-
ference is that, in general, IFRS classifies bank overdrafts as cash.
About the Numbers generally discusses ABOUT THE NUMBERS
and provides examples of IFRS applications Impairment Evaluation Process
(in many cases, using real international IFRS provides detailed guidelines to assess whether receivables should be consid-
ered uncollectible (often referred to as impaired). GAAP does not identify a specific
companies). approach. Under IFRS, companies assess their receivables for impairment each report-
ing period and start the impairment assessment by considering whether objective
ON THE HORIZON On the Horizon discusses convergence progress and plans
The question of recording fair values for financial instruments will continue to be an related to the accounting topics presented in the chapter.
important issue to resolve as the Boards work toward convergence. Both the IASB and
the FASB have indicated that they believe that financial statements would be more
transparent and understandable if companies recorded and reported all financial
instruments at fair value. That said, in IFRS 9, which was issued in 2009, the IASB
IFRS Insights also includes IFRS Self-Test Questions, as well as IFRS Concepts and
Application, so students can test their understanding of the material. An International
Financial Reporting Problem, based on Marks and Spencer plc, offers students an
opportunity to analyze IFRS-based financial statements.
c01FinancialAccountingAndAccount9 Page 9 11/19/10 11:23:09 AM f-535 /Users/f-535/Desktop/Rajesh 19:11/JWCL413_Kieso_203
Having a basic understanding of international
accounting is becoming ever more important as the pro- OTHER INTERNATIONAL COVERAGE
fession moves toward convergence of GAAP and inter-
national standards. Thus, in addition to the IFRS Insights
pages discussed above, we continue to include marginal International INTERNATIONAL
Perspectives, marked with the icon shown here, which we updated throughout PERSPECTIVE
to reflect changes in international accounting. These notes describe or compare
IFRS as well as accounting practices in other countries with GAAP. This feature helps
you to understand that other countries sometimes use different recognition and
measurement principles to report financial information.
EP-3
, The emerging
importance o
International F
inanc
fial Reporting S
presents challe tandards
nges in how y
and how your ou teach
students learn
accounting.
The Wiley Accounting Team for Success is ready when you
are to help prepare you and your students for the integration of IFRS into your courses.
No matter where you are in this transition, Wiley Accounting is here to provide the tools you
need to fully incorporate IFRS into your accounting courses. We offer the most extensive
Products, Content, Services, Support, and Training available today—leading the way
to prepare you and your students for success!
Innovative Products: New IFRS Editions of Kieso, Intermediate Accounting
and Weygandt, Financial Accounting are the most current and only textbooks available based
fully on International Financial Reporting Standards. Wiley Accounting also offers numerous IFRS
resources that can serve to supplement your course.
Exclusive Content: Our accounting publications feature more quality and
current coverage of IFRS topics than any other textbook available today! The Wiley Accounting
Team for Success authors integrate IFRS content within each chapter through features like
A Look at IFRS, which demonstrates how international standards apply to each
U.S. GAAP topic, as well as provides an opportunity for practical application. International
Insights also provide an international perspective of the accounting topic discussed in the text.
Support & Services: Wiley Accounting features a dedicated IFRS website
(at www.wileyifrs.com) and an Accounting Weekly Updates website (at www.
wileyaccountingupdates.com) to make sure you have the most current resources available.
Timely Training: Wiley Accounting and the Wiley Faculty Network provides free
IFRS virtual training workshops, IFRS Guest Lectures, and IFRS “Boot Camps” featuring authors
Paul Kimmel and Terry Warfield. You can also earn CPE credit for attending these sessions.
To learn more about how the Wiley Accounting Team for Success can help your students succeed,
visit www.wileyteamforsuccess.com or contact your Wiley sales representative today.
