Are you familiar with the abbreviations GAAP and IFRS? If you’re a business owner and you aren’t, you soon will be. The Securities and Exchange Commission (SEC) is considering switching from one to the other, and businesses had better be ready if they do.

Generally Accepted Accounting Principles (GAAP) is the set of principles by which corporations prepare their income, expenses, assets, and liabilities on their financial statements. It is the current standard in the United States.

International Financial Reporting Standards (IFRS) is a set of international accounting standards stating how particular types of transactions and other events should be reported in financial statements. IFRS is issued by the International Accounting Standards Board.

If the SEC decides to switch from GAAP to IFRS, U.S. companies will be required to use IFRS beginning in 2014. U.S. companies will experience an unprecedented change in accounting standards as key aspects of U.S. GAAP and IFRS converge, will require accountants to use Certified Machinery and Equipment Appraisers.

The SEC’s ruling is due to be announced by the end of this year. We’ll keep you posted as we near the end of 2010 and the SEC makes its final decision.

By: NEBB Institute