Us Gaap Vs. Ifrs

2178 Words Jan 27th, 2015 9 Pages
There are vast and numerous differences between US GAAP and IFRS. The biggest conceptual difference between US GAAP and IFRS is that US GAAP is rule based while IFRS is principle based. Because of this, there are numerous accounting topics that are handled differently between US GAAP and IFRS. It is argued that IFRS fits the actual economics of business transactions more than US GAAP, as IFRS looks more at the substance of transactions. US GAAP, on the other hand, is more concerned with having exact rules to deal with accounting situations. Both the United States and the over 110 countries that use IFRS are working towards a global accounting standard; however, due to the cost and complexity of this process, convergence of US GAAP and IFRS may take years or even decades longer than expected, if indeed they are ever fully converged. Some key areas in which the two systems differ are inventory valuation, classification of leases, revenue recognition including the construction industry, the handling of intangibles including research and development, depreciation methods, and business combinations. While there are many other differences in US GAAP and IFRS, this paper is limited in scope to those listed above.

In the accounting world, there are many different ways to track and value inventory. Commonly used methods in US GAAP include FIFO, LIFO, Specific ID, and Weighed Average. This allows companies a great deal of flexibility on how their inventory appears on the…

More about Us Gaap Vs. Ifrs

Open Document