Sample Research Paper on Convergence Of GAAP in to IFRS

In this chapter, the background of the study which will elaborate on the setting of the research
and statement of the study problem. The general and specific objectives of the study will also be
outlined in this chapter. Hypotheses to be tested, the significance of the study, and the research
approach will also be captured. The approaches of the research which will state the design and
the approaches used in the study will also be discussed in the chapter.
Background information
According to Van and Vasstraelen (2005), General Acceptance Accounting (GAAP) Principles is
the financial reporting method which entails a collection of popular accounting rules and
financial reporting standards. The specification of this methodology includes the definition of
industry rules and accounting principles. The method aims at ensuring transparency and
consistency of the financial reports from one company to another (Barth and Schipper (2008).
The security and commission transfer in the United States orders that during the financial
reporting processes, the company must adhere to GAAP requirements. According to Albring et
al. (2010), GAAP is stipulated in the state and local government by the Governmental
Accounting Standards Board (GASB). Besides, Financial Accounting Standards Board (FASB)
is concerned with its overall stipulation.
However, most of the states use IFRS, which is structured to provide the general framework of
the companies' financial statements across the globe (Palepu, Healy, and Peek 2013). This
methodology offers investors with cohesive accounting information. Besides, according to Daske
et al. (2008), the method provides general guidelines in the preparation of financial statements,
instead of the specific reporting rules used by the company.
According to Haverals (2007), there still exists a confusion between the IFRS and the IAS
(International Accounting Standards), which was older IFRS. IFRS entails a variety of financial

accounting activities. Some of the compulsory rules adhered by accounting reports using IFRS
are statements of; comprehensive income, financial position, ownership changes and cash inflow
(Mackenzie et al., 2012). The statement of the cash inflow entails the summary of the all the
financial transaction in the firm in a specific period. Besides, equity statements consist all the
changes in the income earned by the company at a given period. Income statement consist of
either loss or the profit statement or both. Lastly, balance sheet which is influenced by the IFRS
in component report method. Balance sheet is also known as financial statement of a firm or
Globally, financial reporting requirements and methods vary by state (Tarca 2012). Therefore,
investors experience a hard time when looking for companies to give them capital. According to
Epstein and Jermakowicsz (2010), the primary difference between GAAP (General Accepted
Accounting Principles) and IFRS (International Financial Reporting Standards) is that IFRS is a
principles-based financial reporting methodology, while GAAP is rule-based accounting
reporting methodology. The IFRS only considers if the assets have a future economic benefit and
reliability. Last-in, first-out is not allowed under the IFRS. On the other side, under the United
States' general accepted accounting principles, the intangible assets acquired are fairly valued.
The methodology entails both the last-in, first-out inventory estimate. In general Accepted
accounting principles, a single inventory costing method could lead to capability enhancement
between the states. In addition, a separate inventory costing method eliminates the need for
analysts of last-in, first-out inventories in comparing the analysis.
According to Albring et al. (2010), IFRS is a global initiative adopted to report financial
statements of the 21st century critically. More than one hundred states’ public companies,
including the United Kingdom’s companies, have adopted IFRS in preparing their financial

statements. The merging of IFRS and GAAP in the United States of America, have taken long to
take place. According to Bishop et al. (2005), Norwalk agreement was the first merging step,
which included the IASB and the FASB in 2002.
According to Al-Yaseen and Al-Khadash (2011), in the globe, the accounting system is
significantly advantageous to professionals because it allows investors to quickly relate the
financial statements between firms and organizations from various states. According to Nellssen
and Zuelch (2011), if all the companies apply IFRS across all the nations in reporting their
financial statements, there would be easy to know what and how different firms do and don’t
disclose in their financial statements. However, it would be beneficial to firms and organizations
in upholding the IFRS. Besides, the IFRS will be of much importance to the accounting
managers in all public companies.
According to Mc-grew (2008), global interconnectedness has increased due to globalization and
technological advancement in both public and private companies across the world. Besides, it is
believed that financial reporting exercises play a significant role in companies' accounting
processes. Furthermore, these accounting processes have great significance to auditors,
executives, and companies, accounting management. They are also beneficial to accounting and
finance students. According to Aras, Aybars, and Kutlu (2010), corporate management is
concerned with the reliability and the quality of the firm’s financial statements. Therefore, there
is a need for understanding the effect of the financial reporting essential of the company due to
the lack of replacing General Accepted Accounting Principles with IFRS
According to Kirsch (2008), the IASB were formed in 1973. It was a result of the issuance of
International Accounting Standards by the (IASC). Later in early 2001, after the replacement of
the IASC by IASB, there was the introduction of promulgating standards in IFRS

pronouncements. IASB adopted IASC for seventeen years (between 1973 and 2000). According
to Whittington (2005), International Accounting Standards continued designating the older
standards under the supervision of IFRS.
Moreover, IASB adopted the IASC’s structure of the organization. This structure entails,
supervision of board market authorities, which appoint the members of the IASC foundation.
According to Madawaki (2012), across the globe, companies have different accounting
standards. Some of the reasons for these are political systems, the source of capital, cultures,
taxation, the complexities of the company, inflation, etc. It is, therefore, very essential to have
global stock markets and global financial markets for the relevance of the International Financial
Reporting Standards. However, IFRS have made efforts to ensure they meet all the individual
needs of a given country, instead of being the irrelevant and ineffective solution in the globe
(Morris et al., 2014). Moreover, the resistance toward IFRS exists, based on the agreement on
deciding who to crate the law, disparities between national accounting standards and IFRS,
national sovereignty, and GAAP to IFRS changing cost.
Statement of the problem
According to Mackenzie, et al. (2012), various studies have looked at how International
Financial Reporting Standards have been adopted and implemented due to continuous debate on
a single set accounting standards transformation. Over one hundred and twenty countries have
been using the IFRS in their financial reporting. Besides, various states have made efforts in
IFRS integration in IASB. Consequently, the accounting quality has increased due to the study of
IFRS, which has indicated a negative change in the asymmetry of information between investors.
In Germany, researchers have studied the disparity between the GAAP and IFRS using first-time
adoption monetary expression at transition, using the net income and the effect of impacts

created on the equity level (Haller et al., 2009). Its research found that there was a significant
positive improvement of the average level of ownership and gross income. The adoption and
implementation of the International Association standards 11, 26, 37, and 38, together with the
IFRS 3, increased the level of equity. Besides, the adoption and implementation of IFRS
increased the level of net income. This research was unable to determine the exemption choices,
which resulted in a significant change in the shareholders' equity experience. In 2011,
Blanchette and Girard conducted a study by examining the reporting activities in different
companies who have/ have not adopted and implemented the IFRS guidelines. The research
shows that there exists an IFRS volatility in the companies which have not yet uphold to the
IFRS guidelines (Callao and Jarne 2010). The quality of the results of Blanchette and Girard's
study was limited as they used only nine companies.
Generally, the various study conducted on investigating the impacts of the application of the
IFRS on companies’ financial statements has not been critically studied. Therefore, this survey
aims to examine the difference between the financial statements for the companies using GAAP
and companies using IFRS in the United Kingdom. The study used the NYSE (New York Stock
Exchange) listed companies, therefore, preparing financial reports using the guidelines of IFRS
and GAAP. Thus, the study will use two different accounting methods to determine the possible
effects contributed by the implementation of IFRS and GAAP in the companies.
The study aims at testing the following null hypothesis and alternative hypothesis
1. H0: The difference between the Personal Protective Equipment financial reporting under
General Accepted Accounting Principles in Us and IFRS in the UK is significant.

H1: The difference between the Personal Protective Equipment financial reporting under
GAAP in the US and IFRS in the UK is not significant.
2. H0: The difference between the financial reporting for inventories under General
Accepted Accounting Principles and IFRS is significant.
H1: The difference between the financial reporting for inventories under GAAP and IFRS
is not significant.
3. H0: The difference between the IFRS financial reporting under IFRS and GAAP is
H1: The difference between the Impairments of Financial Instruments' financial reporting
under IFRS and GAAP is not significant.
4. H0: There are no effects of inventories accounting value changes on reported earning
losses and Personal Protective Equipment by the companies in the United States
H1: There are effects of stocks accounting value changes on reported earning losses and
Personal Protective Equipment by the companies in the United States
Aim and the objectives of the study
General objective
 Describing the critical disparities between the assets' accounting under GAAP and IFRS,
and the impact of adoption and application of International Financial Reporting Standards
in the United States' companies.
Specific objectives
 To examine if the difference between the Personal Protective Equipment financial
reporting under GAAP in Us and IFRS in the UK is significant.

 To determine if differences between the financial reporting for inventories under GAAP
and IFRS are significant.
 To ascertain if the difference between the Impairments of Financial Instruments' financial
reporting under IFRS and GAAP is significant.
 To examine if the effects of inventories accounting values changes on the reported
earning losses and Personal Protective Equipment by the companies in the United States.
Significance of the study
In clarifying the disparities between the United States’ GAAP and IFRS in assets accounting, it
is essential for financial experts to consider the corporate executives, accountants, auditors,
financial analysts, and financial and accounting students. These students will be required to
prepare the accounting reports and assessments in different companies within and outside the
United States, using either GAAP or IFRS.
Therefore, this research makes a significant contribution to the literature concerning accounting
standards convergence from GAAPs to IFRS. The study also highlights the convergence effects
on financial reporting information, mostly basing on the firm’s assets accounting and income
reporting. The study compares the IFRS and the GAAP reporting information basing on the
firms having an alternative stock exchange market listing in the United States. Possible effects
on the adoption and implementation of the financial reporting of Unite State firms by IFRS
reporting activities of the United Kingdom will be exhibited in this study. Therefore, the survey
plays an important role in the IFRS convergence-based studies. The study's conclusion would be
essential in making conclusions on companies' financial performance information. Example, by
concentrating on the possible impacts of the reporting standards on the reported revenue of the

The approach of research
The research is deductive in nature. It is taken from the secondary data of the accounting
standards convergence. This is through the United Kingdom’s IFRS by US companies.
According to Tracy (2012), for this study to be scientific, it used the deductive research
approach, thus becoming systematic in the future studies verification. The design used in this
study was the archival research design. It was convenient for the study, as most of the data were
written data. I.e., the historical information concerning the financial statements. The collection of
the data was done on the listed companies’ financial statements sample on the New York Stock
Exchange. The study presented the sample companies used in appendix one. Qualitative
information is not much considered in this study, as the quantitative data since it is more
objective. According to Braun and Oswald (2011), qualitative information tends to be much
subjective as much of it is biased. Hence, this could interfere with the study’s conclusions.
The outline of the study
The study has six chapters in total. That is, chapter one (introduction), chapter two (Literature
review), chapter three (Research methodology), chapter four (analysis and result of the finding),
chapter five (discussion of the findings), and chapter six (conclusion). The different chapter has a
different and unique role in this study. The combination of these chapters provides a consistent
and complete report.
Summary of the chapter
In chapter one, all the issues under the study are well introduced. The introductory paragraph
aimed at catching the attention of the reader of this research paper. The background information
chapter has given full information about the origin of the research topic. Besides, the statement
of the problem part, which is a focal point of the study, provides a general overview of research

and the reason for the study. The aim and objective of the study paragraph give a broad and
specific purpose of the study in statement form. This chapter also entails the significant of the
study part that creates problem looking perspectives. The part has pointed out how the
investigation is related to the general and specific objectives of the study. Furthermore, the
research approach part has well described the approaches and designs used in the survey to make
it successful. Therefore, the information on the study's motivation and the main areas to be
covered in the survey are included in this chapter.



Albring, J. C., Sandau, M. M., Rapaport, A. S., Edelson, B. T., Satpathy, A., Mashayekhi, M., …
& Murphy, T. L. (2010). Targeting of B and T lymphocyte associated (BTLA) prevents
graft versus-host disease without global immunosuppression. Journal of Experimental
Medicine, 207(12), 2551-2559.
Al‐Yaseen, B. S., & Al‐Khadash, H. A. (2011). Risk relevance of fair value income measures
under IAS 39 and IAS 40. Journal of Accounting in Emerging Economies.
Aras, G., Aybars, A., & Kutlu, O. (2010). Managing corporate performance. International
Journal of productivity and Performance management.
Barth, M. E., & Schipper, K. (2008). Financial reporting transparency. Journal of Accounting,
Auditing & Finance, 23(2), 173-190.
Bishop, P., & Jansen, J. D. (2005). The geomorphological setting of some of Scotland's east
coastfreshwater mills: a comment on Downward and Skinner (2005) Working rivers: the
geomorphological legacy…’. Area, 37(4), 443-445.
Callao, S., & Jarne, J. I. (2010). Have IFRS affected earnings management in the European
Union?. Accounting in Europe, 7(2), 159-189.
Daske, H., Hail, L., Leuz, C., & Verdi, R. (2008). Mandatory IFRS reporting around the world:
Early evidence on the economic consequences. Journal of accounting research, 46(5),
Epstein, B. J., & Jermakowicz, E. K. (2010). WILEY Interpretation and Application of
International Financial Reporting Standards 2010. John Wiley & Sons.

Haverals, J. (2007). IAS/IFRS in Belgium: Quantitative analysis of the impact on the tax burden
of companies. Journal of International Accounting, Auditing and Taxation, 16(1), 69-89.
Mackenzie, B., Coetsee, D., Njikizana, T., Chamboko, R., Colyvas, B., & Hanekom, B.
(2012). Wiley IFRS 2013: Interpretation and application of international financial
reporting standards. John Wiley & Sons.
Madawaki, A. (2012). Adoption of international financial reporting standards in developing
countries: The case of Nigeria. International Journal of Business and management, 7(3),
McGrew, A. (2008). Globalization and global politics. The Globalization of World Politics: An
introduction to international relations, 4.
Palepu, K. G., Healy, P. M., & Peek, E. (2013). Business analysis and valuation: IFRS edition.
Cengage learning.
Tarca, A. (2012). The case for global accounting standards: Arguments and evidence. Available
at SSRN 2204889.
Van Tendeloo, B., & Vanstraelen, A. (2005). Earnings management under German GAAP versus
IFRS. European Accounting Review, 14(1), 155-180.
Whittington, G. (2005). The adoption of international accounting standards in the European
Union. European accounting review, 14(1), 127-153.