The United States Generally Accepted Accounting Principles (U.S.GAAP), entails a set of accounting standards, which companies in the Unites States must adhere to when compiling their financial statements. It is a combination of authoritative standards and the accepted ways of recording and reporting financial information. The U.S. GAAP helps to improve the communication of financial information among the organizations, and this indicates that the companies in the United States operate in harsh systems involving exhaustive rules when preparing their financial statements. Furthermore, U.S.GAAP presents complexity and diverse challenges to the accountants when preparing financial statements ( Donelson, Mcinnis & Mergenhaler, 2016) .
The International Financial Reporting Standards (IFRS) is a set of international financial accounting standards describing how specific types of transactions and financial events should be measured and reported in financial statements. IFRS was formed to govern the companies, which operate globally. The standards present the need of global set of standards that would be helpful to better understand the companies that take part in the global market as well as the investors. IFRS reduces complexities and errors in financial statement that might not be considered by the U.S. GAAP ( Erchinger & Melcher, 2011).
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The Financial Account Standards Board (FASB) saw the importance of establishing and adapting standards that dictate the preparation of financial statements and financial reports. The need for better financial reporting saw the convergence of the IFRS and the GAAP accounting techniques. The initial differences that were evident in the two standards were eliminated through a decision for collaboration between the FASB and IASB in the year 2002. The two bodies came into agreement and signed a memorandum of understanding dubbed the Norwalk Agreement. This M o U was later enhanced through the agreements’ strengthening roadmap. The two bodies published a report in 2009 regarding the convergence information upon request by other national and international bodies
International companies can use. FASB would achieve this goal by collaborating with the International Accounting Standards Board (IASB) to improve U.S.GAAP and IFRS and eliminate the differences between them. This collaboration between FASB and IASB works through convergence of projects between U.S.GAAP and IFRS, and one of the successful convergence projects between U.S.GAAP and IFRS is revenue recognition convergence ( Bohusova & Nerudova, 2010) .
Revenue recognition convergence is the most difficult issue that the standard setters and accountants deal with on regular basis. The current U.S.GAAP offers industry and transaction specific guidance that have been set based on ad and hoc, hence not always consistent. This method of revenue recognition convergence allows the revenue to be recognized when two conditions are met, that is, revenue is both realizable and earned. The revenue recognition project presents two guideline aspects, to wit industry and transaction-specific guidelines. Consequently, industries such as Airline, Entertainment, and Software have their own revenue recognition guidelines but they also have transaction-specific guidelines, which result in confusions in these industries. Thus, revenue recognition convergence project between U.S.GAAP and IFRS is important in that it helps the industries to overcome the confusions as they can easily differentiate when to use each of the two aspects of guidelines ( Bohusova & Nerudova, 2010) .
The success of the convergence of projects between U.S.GAAP and IFRS is revealed by its impact on a number of constituents including corporate management, investors, stock market, and accounting professionals. This indicates that the shift of accounting standards and rules to international and convergence results to great impacts to all the companies, investors and markets both local and international ( Erchinger & Melcher, 2011).
The convergence impact the corporate management as it benefits from simpler, streamlined standards, rules and practices that apply to all countries and are adhered to globally. The corporate management finds it easier to get access to the global market due to the common capital market. Furthermore, it gets the opportunity to raise capital through lower interest rates and at the same time lowering risks and the cost of doing business. The corporate management also benefits from fair value that the convergence project allows to be estimated using a cost plus a margin approach which would not be available with U.S.GAAP ( Bohusova & Nerudova, 2010) .
Consequently, through convergence of projects between U.S.GAAP and IFRS, stock markets have experienced the change from the success between the two accounting standards. The stock markets have benefited from the reduction in the costs that accompany entering foreign exchange. Moreover, the aspect of markets following the same rules and standards allows the markets to compete internationally to get the global investment opportunities. This improves both the local and the international market as they compete for the same opportunities globally. The investors also get the opportunities to take part in the increasing capital market ( Erchinger & Melcher, 2011).
In addition, the shift of the standards to international and the convergence of projects between U.S.GAAP and IFRS make it easy to make comparisons. However, the accounting professionals will be forced to learn the new standards. This leads to consistency in the accounting practices and reduce confusions initially experienced by the accountant in regard to the standards and guidelines to follow when preparing financial statements. The confusion that was initially experienced occurred due to the differences between U.S.GAAP and IFRS accounting standards and rules. However, the convergence eliminates the differences between the standards and harmonizes them for a common goal. The process of formulating and implementing the international standards have, therefore, become simpler once the standards’ projects converge ( Bohusova & Nerudova, 2010) .
References
Bohusova, H. & Nerudova, D. (2010). U.S. GAAP and IFRS Convergence in the area of Revenue Recognition. Journal of Economics & Management , 23(2), 12-19.
Donelson, D. C., Mcinnis, J. & Mergenhaler, R. D. (2016). Explaining Rules-Based Characteristics in U.S. GAAP: Theories and Evidence. Journal of Accounting Research , 54(3), 827-861.
Erchinger, H. & Melcher, W. (2011). Convergence between US GAAP and IFRS: Acceptance of IFRS by the US Securities and Exchange Commission (SEC). International Journal of Accounting , 4(2), 123-13.
