U.s. Gaap And Ifrs

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Financial Reporting As of today, there are still many differences between U.S. GAAP and IFRS, but this term paper is to research on some accounts that impacted or will impact the financial statement reporting when U.S. GAAP converged with IFRS, focusing on these accounts: extraordinary items, warranty expense accruals, acquisition costs, capitalized leases, inventory, and ing contingency. Extraordinary Items U.S. GAAP reports extraordinary items on the income statement separately from the ordinary operations under the Income from continuing Operations, net of tax. IFRS does not isolate extraordinary items on the income Statement. Prior to update on how to report extraordinary items, there are two criteria used to classify an event as an…show more content…
This update will align U.S. GAAP income statement presentation guidance with IAS 1, which eliminates the presentation of extraordinary items (FASB, ASC 225-20-20). Warranty Expenses Accruals Using historical information of warranty expenses, U.S. GAAP accrue warranty expense as a percentage of revenue. Accrual should take place in the same reporting period in which the related product sales are recorded. By doing so, the financial statements most accurately represent all costs associated with product sales, which will indicate the true profitability associated with those sales (Accounting Tools-Warranty Accounting, n.d.). An extended warranty is determined by the standalone price of the maintenance contracts, sold separately from the products; and to be defer and recognized over the contract term. There is no relative fair value allocation each component of the sold if the product is sold together. Warranty expense journal entries are shown in exhibit I. IFRS offset accrue warranty expense against revenue. If warranty is part of the product sales, then recognize revenue at the time of sales. Future cost related to the warranty will be recorded as a cost of sales as the warranty does not represent a return of any part of the sales price. The estimated warranty cost will be calculated at the time of sale and a provision is recognized. If unable to estimate the cost of warranty, then no revenue is recognized prior to the
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