Ifrs And Gaap : Ifrs Vs Gaap

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Comparison of IFRS and GAAP Several large parent organizations implement and apply the generally accepted accounting principles, also known as GAAP, within their respective countries. GAAP regulations are in place to preserve a level of uniformity between the reports of each of their individual firms; however, this can be an issue when the parent company has subsidiaries in foreign countries. In order to alleviate these issues, the International Accounting Standards Board (IASB) created the International Financial Reporting Standards, also known as IFRS. IFRS regulations are overriding GAAP regulations as the sanctioned reporting procedure of many countries and 283 countries have formally adopted the IASB manual to use for financial…show more content…
Numerous similarities exist between IFRS and GAAP, including periodicity assumption, accrual-basis accounting and no cash-basis accounting (Kimmel, Weygandt, and Kieso, 2012). However, a significant difference between IFRS and GAAP is that IFRS extents across multiple countries and GAAP focuses only on U.S. organizations. The statement of financial position that is reported under IFRS standards is the same to the balance sheet that is reported under GAAP. Although both statements are prepared differently, they are intended to report shareholder equity, liabilities and balance of assets. Revenue Recognition Since GAAP uses a principle based accounting, revenue recognition is based on principles that are definite for individual companies, and different procedures apply to different forms of transactions. These procedures have raised many concerns about revenue recognition due to developing businesses globally, however, it has been an ideal alternative to the generic stand the IFRS maintains. In 2014, the IASB released IFRS 15 Revenue from Contracts with Customers. This combined effort with the Financial Accounting Standards Board (FASB), provided an organized, more structured framework for revenue recognition in global accounting reporting. According to the IFRS 15 Revenue from Contracts with Customers report put out by the IASB (2014),
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