The United States employs Generally Accepted Accounting Principles (GAAP) as the basis of financial reporting. The International Financial Accounting Standards (IFRS) is an alternative manner to report financials. This article from Ernst and Young compares the two methods of financial reporting.
After reading the article from Ernst and Young, answer the following questions:
Question1. How does the GAAP reporting technique cause cash flows to vary from net income?
Question2. How are the features of the Balance Sheet, Income Statement, and Statement of Cash Flow utilized in both the GAAP and the IFRS reporting techniques?
Question3. Does it make sense to adapt a worldwide standard for financial reporting? Must this be voluntary or mandated?
Question4. Compute some of the potential costs and benefits of switching from GAAP to IFRS.