Generally Accepted Accounting Principles and the Need for Consensus: An Australian and United States Comparison Case Study
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Cross-border financial statements can confuse users of financial statements, therefore the development ofInternational Accounting Standards is important in the accounting profession. Comparing countries financial statements can be difficult because Generally Accepted Accounting Principles (GAAP) vary in different countries. To illustrate the need for harmonization of accounting standards, this paper is divided into three research sections. The first section discusses the history, organizations, and conceptual framework of United States and Australian accounting professions. The second section compares and contrasts the similarities and differences between United States GAAP and Australian GAAP. The final section provides a financial statement analysis of two Australian companies. The paper concludes that although Australian GAAP and United States GAAP defines financial statement elements the same, a companies' financial statement ratios will differ because of country specific revenue recognition criteria, netting of assets and liabilities, and reporting requirements.