Differences Between Gaap and Ifrs Essay

1811 Words Aug 16th, 2011 8 Pages
Differences Between GAAP and IFRS
The International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) are working together to eliminate a variety of difference between the United States generally accepted accounting procedures (U.S. GAAP or GAAP) and International Financial Reporting Standards (IFRS). This convergence project grew out of an agreement reached by the two boards in 2002 (Deloitte, 2004).
On February 24, the SEC unanimously agreed to publish a statement of continued support for a single set of high-quality global accounting standards. The SEC acknowledged that IFRS is best positioned to be the global standard. Even without a set conversion timeline from the SEC, IFRS has been affecting
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There are a number of differences between GAAP and IFRS in the area of accounting for pensions and other post-retirement and postemployment benefits (Deloitte, 2004). Some differences will result in less earnings volatility, while others will result in more. Under IFRS, a company can adopt a policy that would allow recognition of gains/losses in other comprehensive income. Gains/losses treated in accordance with this election would not be subsequently recycled through the income statement. This election generally reduces the volatility of pension expense recorded within the company’s income statement because gains/losses would be recorded only within other comprehensive income. Other policy elections available under IFRS for gain/loss recognition are similar to those under GAAP. Under IFRS, companies are not required to present the full-funded status of the postemployment benefit plans on the balance sheet. However, companies are required to disclose the full-funded status within the notes to the financial statements. GAAP permits the use of a calculated asset value to spread market movements over periods up to five years in the determination of expected returns of plan assets. IFRS prohibits the use of calculated value and required that the actual fair value of plan assets at each measurement date be used. Differences between GAAP and
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