Advantages and disadvantages of the FairTax Act Term Paper - 1

Advantages and disadvantages of the FairTax Act - Term Paper Example ing the proposals into the U.S accounting framework because the most important thing is to delivering the necessary information in an efficient and timely manner. It is therefore apparent that IASB proposals will have a great impact on US GAAP therefore forcing accountants to seek modifications to their activities. Upcoming changes to U.S GAAP intend to have significant effect on revenue recognition, leases and financial instruments. Even though the standard has not been made final, the three major changes to U.S. GAAP are significant and therefore understanding how they affect one’s profession and entities operations (Gallagher, 2010). When revenue recognition, financial instruments and leases standards are finalized, they will definitely become part of U.S. GAAP and affect both private, not for profit and public entities that were previously using the U.S GAAP standards. The revenue recognition proposal will have a great influence on the way revenues will be recognized and disclosed, transactions will be accounted for, and finally the way contractual arrangements will be made as a way of improving comparability across companies, industries and capital markets. A single standard for revenue recognition that converges U.S GAAP and IFRS applicable across all industries and in all transactions is vital in eliminating the transaction and industry specific revenue recognition guidance associated with U.S GAAP (Munter, 2011). The resulting standard will be a principle based approach that will determine revenue recognition because of its ability to affect every entity’s every day accounting and transactions. Standardized revenue recognition standard for both annual and interim reporting will be applied retrospectively including any practical expedients discussed. However, transition to the new revenue recognition standard as well as the potential impacts on financial statements and introduction of new systems may take some time due to challenges of familiarity