Comparing Ifrs to Gaap Paper

774 Words4 Pages
Comparing IFRS to GAAP Paper

Comparing IFRS to GAAP Essay


Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
Different assets, liabilities, and equity instruments are measured at fair value. The standards in U.S. GAAP and IFRS that require or permit fair value measurements are different. As a consequence, an asset, liability, or equity instrument that is measured at fair value in U.S. GAAP might not be measured at fair value in IFRS and vice versa. The Boards have separate projects to address the measurement basis in other standards (for
…show more content…
The main housing may have a useful life of 20 years and a salvage value of $40,000, but the control unit will be obsolete in 4 years and have a salvage value of $100. Because these two components have contrasting patterns of benefit, IFRS requires that they be depreciated separately.
REVALUATION OF PLANT ASSETS The reevaluation of plant assets can be defined as the process of change values from book value to fair value. This process is required in the event that there have been substantial economic changes in the market have occurred. For example, if a company purchased a building 10 years ago and it has appreciated due to a real estate boom, it can be reevaluated to fair value. If an asset is to be reevaluated under IFRS, it is required that all assets in its class must be treated with the same valuation method. This ensures that companies maintain consistency in valuations for the same types of assets.
CONTINGENT LIABILITY A contingent liability is an obligation that has a probability of occurring in the future. These items will not be included in financial statements, but should be disclosed within the notes. For example, imagine an oil company that was involved in an accidental oil spill in the Mississippi River. An example of a contingent liability would be potential fines imposed by the Union for environmental violations. The company may not know the extent of the fines yet, but they
Get Access