Major Differences Between Us Gaap and Ifrs

1062 Words Aug 28th, 2012 5 Pages
In the global business arena, there are two main institutions whose accounting standards are used for financial reporting, Generally Accepted Accounting Principles (GAAP) and the International Financial Reporting Standards (IFRS). The IFRS, whose rules are established and maintained by the International Accounting Standards Board (IASB), is the most widely used of the two institutions but the primary choice for the United States continues to be GAAP, whose standards are established and maintained by the Financial Accounting Standards Board (FASB). Although both systems have many similarities, there are a variety of significant differences that have a great impact on how reporting amounts are calculated and reported to the general public. …show more content…
This results in giving out too much information to the readers of these financial statements and hinders the transparency that a company might want to maintain. Sometimes there is insight upon certain areas of financial relevance that is disclosed in foot notes and disclosures. For instance the compensation to key management is required in the disclosure sections of the financial statements prepared under IFRS. This condition does not apply if the same statements were prepared using GAAP. According to the GAAP and SEC, “Both generally accepted accounting principles (GAAP) and the Securities and Exchange Commission (SEC) rules contain many disclosure requirements. Disclosure requirements are redundant and unnecessary and create confusion and wasted effort.” (SEC)

Another interesting aspect is the area of depreciation. The financial statements prepared under the IFRS require significant components of an item of property, plant and equipment be recorded and depreciated separately. Some assets have multiple aspects with different lives, they must be depreciated separately rather than as one item as a whole. IFRS requires annual evaluations of an asset. Speaking of assets, whenever there are acquisitions and mergers, the assets under GAAP are carried over to the new owner at historical cost. The IFRS, however, states that the assets can be revalued to represent their present value or fair market value before they
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