Gaap Vs. Ifrs Standards

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GAAP vs. IFRS Standards GAAP generally accepted accounting principle The Financial Accounting Standard Board issues GAAP, which focus on the practices of US companies. GAAP is known as the common set of rules, standards and procedures for accounting used in financial reporting. “GAAP is the combination of authoritative standards (set by policy boards) and the commonly accepted ways of recording and reporting accounting information” (Investopedia.com, 2003). Companies follow GAAP rules to clarify the communication of financial information. Generally accepted accounting principle ensures the minimum level of consistency in a company’s financial statements. Moreover, these principles makes it really easy for the investors to analyze and…show more content…
These principles facilitates the accountants to understand the financial activities from company to company and from country to country. The key role of IFRS is to maintain satiability and transparency in whole financial world because of several reasons. First, it helps the investors both individuals and businesses examine the actual financial condition of the company in which they want to invest. Second, make educated and smart decision about the investment. IFRS are operated in many parts of the world, specially the countries that do a lot of international business such as European Union, Asian countries, South America etc., use these standards frequently. IFRS are not applicable in The United States because The Securities Exchange Commission (SEC) make decision about whether or not to adopt the standards in America. Accountants believe that the major benefit of the adoption of IFRS are to save money on alternative comparison and individual investigation because these standards provide the bench mark for all international companies in reporting of financial transactions as well as helps the information to move freely. Difference between GAAP and IFRS GAAP is focused on the practices of US companies while, IFRS are adopted by the international companies. GAAP is known more as a “rule based” standards, on the other hand IFRS are known more as “principle based” standards. The principles based frame work provides more potential to evaluate the
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