Name
Tutor
Course
Date
 
Sec Position on Adoption of IFRS
The convergence of financial standards is one measure of enabling easy preparation of financial statements as well as ensuring consistency of financial documents prepared by international businesses. In order to ensure that businesses that operate in the US and other jurisdictions have consistent financial documents, SEC has undertaken purposeful measures to converge the US generally accepted accounting principles (GAAP) with IFRS. So far, the joint efforts between IASB, which prepares IFRS, and FASB, which prepares GAAP, have been fruitful.
Potential Benefits of Convergence
The benefits of convergence are broad and diverse depending on the nature and type of business. As for US Steel, the convergence will enable it to avoid the need of preparing dual accounting system, one with GAAP and the other with IFRS. In addition, since IFRS is used by most countries, the convergence will enable the business to align its financial statements to match international standards. Finally, the preparation of financial statements using a single standard will enable easier interpretation of these documents since accountants will be exposed to a similar method of accounting.
Recently Issued Accounting Standards
Revenue from Contracts with Customers (ASU 2014-09 / IFRS 15)
The main objective of this standard is forming a guideline on determining whether there is a contract between a business and a customer. In addition, it also gives clear detail on the type of disclosures that an entity should make, while giving clear information to all users of financial documents about their type, the period when they were prepared, and cash flows from various contracts (FASBa 45-52).
Inventories
The adoption of this standard will enable US steel to disaggregate its sources of revenues into various categories. For examples, the company will be able to classify its inventories into clear subgroups, which will enables its shareholders to understand its performance. Generally, depending on the inventory, the company can classify them as opening stock, closing stock, work in progress and finished goods. This format will enable users of its financial statements, such as shareholders, to understand the cost of producing each inventory and the rate of stock turnover. Proper classification of inventories associated with inventories will enable users of these records to estimate the remaining obligations of the business. Contract obligations such as those on receivables, payables, opening balances, and closing balances will enable these users to identify how US Steel has performed in a given period.
Leases (ASU 2016-02 / IFRS 16)
These new standard requires businesses to recognize most leases in their balance sheet. In this new standard, all leases that have a term of more than 12 months will be recognized in the balance sheet. Lease expense on these assets will be classified as either interest expense or amortization expense (KPMG 6-9). In addition, businesses will have to make relevant disclosures about the time within which the lease is operational, the amount of the lease, and uncertainty on cash flow (FASBb 78-83).
Financial Instruments—Credit Losses (ASU 2016-03 / IFRS 9)
This new standard, which is almost similar to the IFRS 9 impairment approach, aims at enabling businesses to recognize current expected credit loss (CECL) so that they can be recognized in soonest time possible. In addition, this new standard minimizes the number of credit impairment models that are used by companies when accounting for debt (AICPA 3-7). FASB expects businesses to recognize CECL of all assets.
Earnings and Equity
The adoption of this new standard will enable the business to create a proper valuation of its shares, and accordingly, its net worth. For instance, instances such as depletion of mines or significant probable loss in value of the company will enable it to adjust its net worth to match the market reality. As a result, this method will enable shareholders to have a correct valuation of their shares. Further, proper classification of the company’s earnings will enable shareholders the source of the company’s income. In particular, they will know if these incomes are from ordinary trade or from disposal of assets.
Conclusion
The biggest difference between GAAP and IFRS is the need for additional disclosures and proper classification of information. These differences do not hurt the business in the long term. Generally, these requirements make the business more transparent and enable it to attract more capital for investment. As a result, USA should adopt the IFRS rules.
 
 
 
 
 
Works Cited
AICPA. (2016). New Revenue Recognition Accounting Standard—Learning and Implementation Plan. Financial Reporting Center, p. 1-9.
Financial Accounting Standards Board, FASBa. (2016). Accounting Standards Update: Revenues From Contracts With Customers (Topic 606). No. 2014-02, p. 1-150.
Financial Accounting Standards Board, FASBb. (2016). Accounting Standards Update: Leases (Topic 842). No. 2016-02, p. 1-185
KPMG. (2016). Summary of Similarities and Differences between New U.S. GAAP and IFRS Lease Accounting Standards. Defining Issues, no. 12-6, p. 1-19, p.