Comparing GAAP And IFRS And The Accounting Standards And Differences

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GAAP and IFRS have their similarities as well as differences. “GAAP is the accounting standard used in the US, while IFRS is the accounting standard used in over 110 countries around the world. GAAP is considered a more rules based system of accounting, while IFRS is more principles based” (Diffen). The Diffen site compared GAAP and IFRS elements using a chart. The chart is broken down into sections such as performance elements, required documents, inventory estimates and reversal, purpose of framework, etc. GAAP and IFRS both use revenue, expenses, assets, and liabilities as performance elements; but with GAAP gains, losses, and comprehensive income are added. GAAP and IFRS also use some of the same financial statements such as the balance…show more content…
GAAP uses the statement of comprehensive income in addition to the statements listed previously, unlike IFRS. “Inventory write-downs should generally be made on an item-by-item basis when using IFRS. U.S. GAAP allows for write-downs to be made using categories of items and like IFRS, does allow write-downs to be performed on an item-by-item basis” (Lasker). Reversals of inventory write-downs under GAAP are prohibited. There are three other topics used to compare IFRS and GAAP in the Diffen article. They are: purpose of the framework, objectives of financial statements, and underlying assumptions. The purpose of framework for GAAP has no provision that requires management to consider framework a standard while under IFRS management is required to consider the framework if there is no standard. The main objective of financial statements under GAAP and IFRS is the broad focus to provide relevant info to a wide range of stakeholders. The underlying concern for IFRS is going concern under GAAP this concept not…show more content…
We would love for these impacts to always have a positive impact; however the impact can affect a company in a negative manner. “ Researchers Holger Daske, Leuz Hail, Christian Leuz and Rodrigo Verdi examined 3,100 firms in 26 countries mandated to adopt IFRS in “Mandatory IFRS Reporting around the World: Early Evidence on the Economic Consequences”. The study examines the economic effects of IFRS, both early and mandated adoption” (Bolt-Lee). They were able to conclude that a company’s adoption of IFRS creates strong economic benefits in countries with rigid regulation over financial reporting. The article also explains that these benefits include an increase in the stock’s market value, an increase in market liquidity, and a lower cost of capital. Companies with major differences between GAAP and IFRS standards show the greatest benefit when supported by a strong regulatory

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