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Highlighting the Differences, Challenges of Convergence

International and U.S. accounting principles may soon converge.

The effort to combine the U.S. Generally Accepted Accounting Principles and the International Financial Reporting Standards has been a source of contention between domestic and multinational companies. It has also caused confusion, as there is still some uncertainty around when and how the two will be merged.

Charles Lundelius at FTI Consulting told Financier Worldwide that despite some groups' concerns about the convergence of GAAP and IFRS principles, there will be many benefits.

"Worldwide comparability will bring more options and better information to investors," he said. "Shared standards will make it easier for companies to raise foreign capital, consolidate with foreign subsidiaries, and make cross-border acquisitions."

Scott A. Ehrlich at Mind the GAAP told the source that if convergence is mandated, businesses will have to pay to determine which of their accounting practices will be affected, and create new policies and systems to comply. Luckily, those expenses will only be incurred once, he noted.

Additionally, corporations will have to run an assessment of how the change will affect their bottom lines, and will need to share these findings with shareholders.