Difference Between Gaap And Ifrs

1221 WordsApr 22, 20155 Pages
According to Merriam Webster’s Online Dictionary, one of the definitions of the word “rules” is pieces of advice about the best way to do something. Specifically when dealing with accounting there are many different opinions on what are considered the best rules. There are two sets of rules in the world of accounting: the Generally Accepted Accounting Principles (GAAP), primarily used by the United States, and the International Financial Reports Standards (IFRS), primarily used by other countries. Since 1999, the International Accounting Standards Board (IASB) and Financial Accounting Standards Board (FASB) have been working to remove the differences between the GAAP and IFRS. The main difference between GAAP and IFRS is that GAAP is rule…show more content…
Currently the IASB, FASB, and SEC have been working to complete the Convergence Project. There is no set date on when this will be completed, but they first must settle the differences between the GAAP and IFRS. The multiple differences between GAAP and IFRS have been the biggest struggle for the IASB, FASB, and SEC because it has elongated the completion of the Convergence Project. The first difference between the two is that GAAP permits last in first out (LIFO), while IFRS prohibits LIFO (Kemp & Waybright, p. 260). The FASB and IASB have attempted to minimize this difference by switching all programs to first in first out (FIFO). This could affect U.S. companies because they could no longer move the costs of products from inventory to the cost of goods sold. A second difference is that IFRS has different accounting policies than GAAP. IFRS does not require uniform accounting policies between parent and subsidiary, while GAAP does. In order to minimize this difference, the FASB and IASB have been working towards the IFRS approach. This could affect U.S. companies because they would have to allow certain policies that they did not have before. The third difference is that IFRS uses a single-step method for impairment write-downs rather than the two-step method used in GAAP. The FASB and IASB have been pushing towards to single step method. This would particularly affect those Certified Public Accountants (CPAs) who work for U.S.
Open Document