The Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS) are indispensable in ensuring companies' streamlined financial reporting ( Lemus et al., 2014) . While there are a few similarities in the approaches, there are also differences between the two. One of the most critical similarities between them is their purpose and some of their objectives. Both frameworks aim at providing relevant stakeholders with a framework that has to be adhered to while doing financial reporting. While the standardized procedures might not be the same, the objective is the institution of laws that guide how reporting is done. Besides this, the inventory approaches under both systems are similar to some extent. Both standards allow First In, First Out (FIFO), similar methods of valuing inventories, and weighted average cost.
There are significant differences between GAAP and IFRS, most of which have negatively impacted the ease of converging the two. In the assessment of accounting treatment, GAAP research is inclined to using literature. On the other hand, for IFRS, facts, and patterns are developed using more thorough methodologies ( Shamrock, 2012) . On inventories, although both methods allow them to be written down to market value and hence are similar to some extent, they are different in that under IFRS, it is possible to reverse a write down done initially if market values increase. Under GAAP, it is prohibited. Besides, although the IFRS favors a control model, GAAP is inclined to use the risk and reward model.
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The two standards should be converged because of the resultant benefits. A number of stakeholders argue that convergence is likely to result in simplification, renewed clarity, and comparability. The above is likely to ensure a smooth and efficient financial reporting process. Besides this, streamlined guidelines an easy way to understand as well as interpret financial information. Besides this, stock markets are likely to be positively impacted, IFRS, and GAAP.
References
Edel Lemus, M. I. B. A. (2014). The similarities and differences between the financial reporting standards under United States. GAAP versus IFRS. Global Journal of Management And Business Research .
Shamrock, S. E. (2012). IFRS and US GAAP: a comprehensive comparison (Vol. 7). John Wiley & Sons.
