Financial Statements Ifrs vs. Gaap

As the responsibilities of the global harmonization of accounting standards IFRS and GAAP transfer to IASB, FASB’s influence is waning. Advantages of the convergence include high quality financial reporting, which lowers cost of capital for investors and the cost of borrowing for companies. However, there are disadvantages to be noted, such as the costs of introducing IFRS to current and potential accountants and the risk of reducing the uniformity of financial reports due to the lax rulings of IFRS, which promotes earnings management amongst companies. Although arguments regarding the convergence remain prevalent, the completion of IFRS and GAAP is inevitable. Come year 2015, accountants, investors, and companies alike will discover whether or not the pros outweighed the cons; or vice versa.

Does not prescribe a particular format. A liquidity presentation of assets and liabilities is used, instead of a current/ non-current presentation, only when a liquidity presentation provides more relevant and reliable information. Certain minimum items are presented on the face of the balance sheet. Does not prescribe a particular format. A current/noncurrent presentation of assets and liabilities is used unless a liquidity presentation provides more relevant and reliable information. Certain minimum items are presented on the face of the balance sheet.

‘Cash and cash equivalents’ include certain short-term investments and, in some cases, bank overdrafts. Like IFRS, ‘cash and cash equivalents’ include certain shortterm investments, although not necessarily the same short-term investments as under IFRS. Unlike IFRS, bank overdrafts are considered a form of short-term financing, with changes therein classified as financing activities. The statement of cash flows presents cash flows during the period, classified by operating, investing and financing activities. Like IFRS, the statement of cash flows presents cash flows during the period, classified by operating, investing and financing activities. The separate components of a single transaction are classified as operating, investing or financing. Unlike IFRS, cash receipts and payments with attributes of more than one class of cash flows are classified based on the predominant source of the cash flows unless the underlying transaction is accounted for as having different components. Cash flows from operating activities may be presented using either the direct method or the indirect method. If the direct method is used, then an entity presents a reconciliation of profit or loss to net cash flows from operating activities; however, in our experience practice varies regarding the measure of profit or loss used. Like IFRS, cash flows from operating activities may be presented using either the direct method or the indirect method. Like IFRS, if

The income statement (IS) also known as the profit & loss statement provides the net gain or net loss of a business entity. The importance of the income statement is to evaluate profitability of a company (Finkler, Jones, and Koyner, 2013). The best use of the IS,

The five research articles I have chosen to further my research on the convergence between U.S. GAAP and IFRS are The Implication of US GAAP and IFRS Convergence on American Business by Austin Willmore (2015), IFRS adoption by country by PWC (2015), International Financial Reporting Standards and American Generally Accepted Accounting Principles: the Convergence Lessons by Kuzina (2015), The economic impact of IFRS - a financial analysis perspective by Seay (2014), and Accounting for Leases The New Standard by CPA Journal (2016). These articles are related to my topic, where these researchers researched and analyzed the financial statement reporting on convergence of the U.S. Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS), and certain accounts when adopting IFRS present a different result in the financial reporting for U.S. reporting companies when U.S. GAAP standards combined with IFRS. Also, these research articles discuss the existence of two systems of standards, U.S. GAAP and IFRS; and the issue and difficulty of the process to fully converge.

This research project will inform the reader of the difference between the United States accounting standards and International accounting standards. The United States uses the Financial Accounting Standards Board (FASB) to issue financial reporting procedures. The International Financial Reporting Standards (IFRS) are issued by the International Accounting Standards Board (IASB). There are proposals for the United States to adopt the International standards. Financial reporting procedures are debated about the United States using the Generally Accepted Accounting Procedures (GAAP) or following the global procedures. This

Separately, the balance sheet reports a company’s financial position while the income statement reports a company’s fiscal year profits and losses. The balance sheet measures a company’s financial position by reporting its assets, liabilities, and owner’s (shareholder’s) equity. The income statement measures a company’s financial performance by reporting its revenues, expenses, and net income/loss. When combined, they serve two vital purposes: (1) expand the accounting equation and (2) enable analysis using ratios to determine industry position or potential material misstatements. The increase or decrease in owner’s (shareholder’s) equity on the balance sheet is a direct result of the net

IFRS 2-1: In what ways does the format of a statement of financial of position under IFRS often differ from a balance sheet presented under GAAP?

Financial statements provide lenders, investors, and shareholders insight to the overall health of an organization, and serve as tools to provide direction. There are seven accounts that make up financial statements. Three accounts are referred to as permanent accounts: assets, liabilities, and owners’ equity. A permanent account reflects an amount of money on a specific date, and it always has a balance. The four remaining accounts: revenues, expenses, gains, and losses, are referred to as temporary accounts. They reflect activity and amounts of money for transactions that have occurred over a period of time.

This covers most of the basics about IFRS and GAAP, and many of the questions which are asked by curious people interested in accounting, also the users within the accounting world. Included is; some steps taken by both the FASB and ISAB to move to fair value measurements for financial instruments and the way that it is differed, what component depreciation is and when must it be used, what revaluation for plant assets and when it should be applied, some product development expenditures are recorded as development costs so explain the difference between those accounts and how a company decides which classification is appropriate, how IFRS defines a contingent liability and provide an example, and describe some similarities and differences between GAAP and IFRS with respect to the accounting for liabilities.

The US Generally Accepted Accounting Principles (GAAP) is a set of international accounting rules which originated from the United States. US GAAP can be defined as a set of accounting principles, standards and procedures that companies use to compile their financial statements (Elliott & Elliott, 2008). The International Financial Reporting Standards (IFRS) on the other hand are accounting rules originating from the United Kingdom. International Financial Reporting Standards (IFRS) are a set of accounting rules designed with a common global language for business affairs so that financial accounts of companies are understandable and comparable across international boundaries (Devinney, Pedersen & Tihanyi, 2010).

The introduction describes how more countries have adapted the IFRS guidelines and it estimates that the United States may do so in the next decade. Because IFRS is becoming widely accepted, the SEC director is looking into transitioning into IFRS. With the SEC looking into the transition, “public accounting firms are expecting new hires to be aware of the convergence process and the differences in IFRS and GAAP.” (Bandypadhyay, J.& McGee, P.F., 2012) Because of these issues accounting educators, have to become proficient in teaching a new set of rules, while moving from analytical methods to broad based. The specific purpose of this study is the concerns for accounting educators regarding the curriculum impact.

Accounting for business combinations is one of the more complicated processes in accounting. The basic idea can be quite simple. The assets and liabilities being acquired are recorded at fair value and the fair value of the consideration transferred is allocated to them, but there are many problems that can occur that make consolidating financial statements quite difficult to accomplish. In this research paper some of the simpler accounting for business combinations will be discussed. Specifically I will discuss the accounting for a 100% ownership acquisition for which the subsidiary is dissolved. The procedures that will be discussed will correspond to the accounting for these situations that must be performed on the date of acquisition. There are much more complicated instances of business combinations in which multiple problems can cause the accounting to be much more complicated, such as cases in which there is less than 100% ownership of a subsidiary or when the accounting must be performed for reporting after the year of acquisition, but these will not be discussed here. Instead this research paper will spend time detailing the acquisition method for the aforementioned situation; this paper will also contain discussion of the authoritative texts for business combinations for both United States generally accepted accounting standards (henceforth referred to as

Recognition measurement and presentation of cash flow-Lessee statement of financial position and cash flow presentation.

International Financial reporting standards (IFRS) and General accepting accounting principles (GAAP) convergence issue began in the late 2000’s. International Financial Reporting Standards (IFRS) are a set of standards stating how particular types of transactions and other events should be reported in financial statements. Therefore, business and accounts can be understood from company to company and country to country. General accepting accounting principles (GAAP) are set of common accounting principles, standards and procedures that companies use to produce their financial statements. GAAP are a combination of accurate standards that are simply the commonly accepted way of recording and reporting accounting information.