Differences Between Gaap And Ifrs

1442 Words Aug 5th, 2015 6 Pages
Introduction
There are two distinct methods of accounting for finances in the business world. These two methods are the methods both prescribed by the U.S., which is known as the generally accepted accounting principles (GAAP), and that which is used by the international community known as international financial reporting standards (IFRS). GAAP is regulated by the financial accounting standards board (FASB) while IFRS is regulated by the international accounting standards board (IASB). These two methods are currently under a process which is known as convergence or harmonization so that the United States will eventually become integrated into the global community (Miller, S. E. 2009). This will cause financial statements to be more usable for more people across the globe as well as enhance citizens of the U.S.’s ability to perform business more efficiently internationally.

Principles Versus Rules Based Methods
There are many challenges and hurdles to overcome in order to achieve harmonization between GAAP and IFRS. The differences are widespread. Most importantly and fundamentally GAAP is considered to be more rules based, while principalities are largely what guide the users of IFRS. GAAP Regulations are more detailed, specific and voluminous. Conversely, IFRS regulations are less voluminous and make allowance for more exceptions. As an example IFRS allows the reversal of a write down after the fact while GAAP that when a write down is taken then it is irreversible.…
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