In the present situation, both British South Company and New York Solar are the lessee Selection of Accounting Standard
From the analysis of both, GAAP and IFRS, accounting standards, it can be determined that use of IFRS accounting standard would be beneficial for South British Company and New York Solar. IFRS is effective because it will empower both the companies to enhance their similarity and clarity of the accounting data and make it more comparable to determine the benefits from solar panel. IFRS accounting standards are also effective for the firms to show the asset value at fair prices. It is because GAAP focuses on book value only that is quite unrealistic in the current evolving technological environment. The GAAP comprises a complex set of rules attempting to set up guidelines and criteria for any contingency, while IFRS will be beneficial for both the firms as it aims for good reporting by providing direction how a particular target should be identified and valued in the given situation. It will also support both the organisation to give precise data to the financial specialists in context of the assets and liabilities (Mirza, 2011). One of the fundamental explanations for selecting IFRS is that through applying this standard, organizations can get single standard instead of an arrangement of gauges. It will also be effective for both the companies to reduce the issues for the accountants, which they face while recording the international transactions.
At the same time, through applying IFRS standards, firms can execute strict judgemental standards and guidelines in order to prevent the monetary frauds and to work in distinctive nations with more fairness and transparency (Bragg, 2010). It is on the grounds that that the utilization of IFRS will permit both the organizations to examine the budgetary position of the diverse organizations and relate them with operations, which can be useful in creating contractual association with different firms. On the other hand, the use of IFRS accounting standards will also be feasible for South British Company in terms of organising capital from worldwide business sector. It is because, numerous worldwide association use IFRS as a general language for financial reporting. It will be compelling South British Company to discover seaward capital for renting and other expenses associated with the lease. The utilization of IFRS benchmarks will help to reduce monetary extortion exercises in the lease transactions of South British Company and New York Solar. The use of this accounting standard is also effective to enhance the responsibility of accounting and financial supervisor to control financial related data and information in reporting.
The use of IFRS will also enable both the firms to reduce the accounting complexities and to enhance the recording and reporting of the accounting (Menipaz and Menipaz, 2011). From this, it can be conclude that IFRS accounting standard is more beneficial in the lease transaction for South British Company and New York Solar Panel as compared to US GAAP accounting standard. The use of IFRS will enable both the firms to make a comparative judgement for the profitability from the lease transactions.
.