Accounting Standards And Financial Reporting Standards

One of the major differences is that one is based on rules and the other on principles. GAAP is more of a a rule-based method. These rules are essential to provide comparison of present and past performances. Whereas IFRS is a principle based method in which you can have different interpretations of the same tax-related

Financial statement presentation varies from GAAP to IFRS. The first variation is the financial period required for comparison. GAAP requires public companies to include the previous 2-year periods of their balance sheets, and 3-year periods

Two types of accounting systems exist. The US GAAP is more rule-based, where IFRS is more principle-based. US GAAP gives very detailed methods of accounting and specific guidance. However, there are exceptions along with rules, which add complexity. In the contrast, IFRS allows potential for different interpretations of similar transactions. Auditors and financial statement reporters can use professional judgment to provide estimates in the financial statements because they cannot rely on specific rules that articulate what is supposed to be done.

Chevis (2014) addresses two of the bigger, but lesser-known, differences between GAAP and IFRS. The two differences addressed, contingencies and depreciation, are the interpretations an accountant has to make on terms not specifically defined by IFRS or GAAP. IFRS is considered to be more “aggressive” for investors while GAAP is considered “conservative” (p. 19). Smith (2012) states IFRS is more principle based, while GAAP is more ruled based. GAAP documents would total over approximately 25,000 pages if printed. IFRS documents would total approximately 2,000 (p. 21).

it provides a better indication of ability to generate cash flows than the cash basis.

IFRS is similar in concept to that of GAAP. IFRS is unique in that is applies to more international countries. The IFRS was

It has been said that conceptually IFRS is more of a principles based accounting standard, while GAAP is more of a rules based accounting standard (Nguyen, 2010). There are both advantages and disadvantages to switching to IFRS from GAAP. Some advantages are: comparisons to foreign companies will be that much easier, and raising capital through foreign nations will be made easier because investors are used to seeing financial statements

GAAP is focused on the practices of US companies while, IFRS are adopted by the international companies. GAAP is known more as a “rule based” standards, on the other hand IFRS are known more as “principle based” standards.

Accountants have used whatever tactics they could to place a positive spin on the financial statements. Over the years, there was a need for improvements in financial reporting. In 1999, the Governmental Accounting Standards Board (GASB) issued Statement No. 34; which caused a major change in the reporting requirements of the government (Fischer, Cheng, & Taylor, 2009). This also led to a very comprehensive accounting process. GASB 34 made big improvements in how the government views their financial statements.

Since 2002, the FASB and International Accounting Standards Board agreed to the convergence of US .GAAP and IFRS. GAAP is usually recognized as a detail oriented accounting guidance, while IFRS is considered to be a more rule-based accounting principle. Sedki (2014) stated Inventory, Revenue Recognition and Consolidated Financial Statements are the major areas considered to be core accounting areas, shares major differences between IFRS and U.S. GAAP and may affect most companies’ financial positions when convert from one to another.

Through this course we have been taking a closer look into the Generally Accepted Accounting Principles (GAAP) and the International Financial Reporting Standards (IFRS). The book lays out the major similarities and differences between the two separate but equal accounting methods. I say, “Equal”, in the sense that the IFRS and GAAP accounting methods are two different ways that the any company that could come to the conclude the financial statements for any such accounting period. The differences that have apparent between the two methods, GAAP is only used in companies that have been started in the United States, whereas internationally IFRS has been adopted by those prospected companies.

GAAP allows the shareholders’ equity and any changes in it to be included in the notes in the appropriate financial statements. IFRS, on the other hand, insists that the changes be incorporated in a separate statement (Ernst and Young, 2012).

(1) Although GAAP is the current basis for financial reporting, it does not constitute a

Unlike IFRS it is not required under US GAAP to present a statement of financial position as the beginning of the earliest comparative period. However, SEC registrants are required to present statements of financial position as of the end of the current and prior periods.

GAAP and IFRS are the accounting standard unitized in over 110 countries in worldwide. Moreover, both of them offer relative information to huge amounts of users. GAAP focuses on separate the objectives for business entities and non-business entities. On the other hand, IFRS