The Differences Between IFRS and GAAP: How Walmart Could Benefit from Switching

Abstract

Hello Class & Professor Spears, Accounting standards ensure that companies follow the requirements of representing the financial state of their company. They protect consumers by ensuring that organizations follow the standard accounting methods when preparing and presenting statements of financial performance (Vichitsarawong & Eng, 2020). International Financial Reporting Standards (IFRS) and the Generally Accepted Accounting Principles (GAAP) differ in various ways since IFRS is based on principles while GAAP follows specific rules. While the logical principles of IFRS ensures that companies present meaningful details, GAAP offers more information based on its rules of reporting. If Walmart were to switch from IFRS to GAAP, it could use the LIFO inventory method to make their financial position more appealing to investors. An advantage of switching to GAAP for Walmart would be ensuring more transparency in reporting since the method is more informative about the company’s performance. The rules of GAAP require financial statements to be more self-explanatory to meet the readers’ needs. Additionally, it would be easier for Walmart to compare itself to global competitors using the same financial reporting standard (CFI., n.d). In addition to the performance in the American market, Walmart would want to know how the company compares to organizations in the international front. A disadvantage of the reporting method is that it follows strict regulations that include industry-specific details that companies must provide. This would make it harder for the company to comply with the requirements of GAAP accounting standards. Australia uses an, Australian Accounting Standards (AAS), accounting standard that is mostly similar to IFRS with several exceptions for the not-for-profit organizations. Walmart’s switch to GAAP would imply that the company does not follow the principles that the stakeholders and investors would expect in the company’s reporting (CFI., n.d). Legally, the organization may be required to reveal the...