The United States Securities and Exchange Commission (SEC) issued a Roadmap in 2008 regarding a change in the American accounting standards system. The Roadmap proposes a potential adoption from the United States Generally Accepted Accounting Principles (US GAAP) to the International Financial Reporting Standards (IFRS). The objective with the adoption is to enhance a one-set of accounting standards used in the world in order to increase comparability between public limited companies in different jurisdictions. With the adoption, the valuation of inventories for American companies will change, since the Last-In, First-Out (LIFO) method is allowed under US GAAP, but not under IFRS. A study from 2008 shows that approximately 36 per cent of American public limited companies is using LIFO. They would therefore be forced to use another inventory valuation method, such as First-In, First-Out (FIFO). The LIFO method is normally used by companies exposed to inflation and increases the cost of goods sold (COGS) and consequently lowers the net income and income tax provision. With the potential adoption, these companies would face large increases of income tax provisions, which would affect them severely.

This thesis is a review study with the objective to connect recent research with the SEC Roadmap in order to answer the following research questions: How will US companies that are using LIFO be affected by the inventory valuation change to FIFO, from an economic and accounting-based approach? What are the positive and negative aspects with a removal of LIFO regarding the IFRS adoption?

There is a clear benefit for the US companies using LIFO regarding the smaller income tax provisions. Opponents consider that LIFO will disappear with the US adoption to IFRS. At the same time, recent research considers or doubts that the LIFO method will not face its death with the adoption from US GAAP to IFRS. As a conclusion, the negative effect of removing LIFO as a consequence of this adoption, is the implementation time period, which is too optimistic. Even though, the credibility with a shift from LIFO to FIFO will grow stronger and create a more comparable business world.

During 2007, the Swedish government issued a group to be in charge of the simplification regarding simpler accounting as a part of the large simplification in Sweden. The goal is to lower the administrative costs that are regulated by law with 25 per cent until 2010. During 2008, one of the Swedish Government Official Reports regarding the simplification was presented named; ”Delbetänkandet om Enklare redovisning – SOU 2008:67”.

Some of the suggested changes would result in that normative organs, and especially the Swedish Accounting Standard Board, should be given more responsibility through standardsetting. Since the proposal presents several changes that could affect companies, interested parties and auditors, the authors found it interesting to investigate the answers and comments from consultation bodies of the proposal. At the same time, it was interesting to investigate how the auditors perceive the proposal, since they often has another point of view. The purpose is therefore:

The purpose with this thesis is to investigate how auditing firms and consultation bodies to the Swedish Government Official Report perceive the proposal regarding simplified accounting. (SOU 2008:67)

The investigation is done from a phenomenographical method, which means that it is only the consultation bodies and the auditors’ perception that is investigated – not how the reality actually is. A large part of the working hours has been distributed to read, interpret and understand the investigation. At the same time, a lot of the content had to be complemented and investigated in literature. The interviews have been done through face-to-face dialogues and via e-mail dialogues.

The result shows that everyone welcomes the simplification and believes it is important, since Swedish companies should have an even chance towards the rest of Europe when it comes to competition. Some of the aspects, such as the removal of the “ordinary” annual accounts, have been treated positively from the consultation bodies, but not from the auditors. The conclusion from this is that from the interested parties’ point of view, the ordinary annual accounts are not considered to be of great importance. The removal of the management report for smaller companies is perceived as unnecessary, since most of the content will be kept and placed in the notes. Since most of the smaller companies have more or less standardized management reports, will the change not result in a simplification,

but perhaps instead make it even more difficult.