Differences On The Income Statement

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Differences on the Income Statement Extraordinary Items: One difference of using IFRS and GAAP on the Income Statement is the use of extraordinary items. Under the IFRS rules the use of extraordinary items are prohibited. GAAP rules however allow the use of extraordinary items. Extraordinary items are caused by a gain or loss of an event that is unusual and infrequent. Some examples of extraordinary events are natural disasters or lawsuits. Extraordinary events are not likely to happen again anytime soon. On a GAAP financial statement extraordinary items are reported net of tax and are not reduced by related tax benefits. IFRS stopped recognizing extraordinary items on their income statement in 2002. They have a separate disclosure required for income expenses that are unusual. This discloser can be in the income statement or located in the notes. Revenue Recognition: Another difference of revenue recognition with IFRS and GAAP is the approach of contingency consideration. Under IFRS revenues are often recognized earlier when there are probable future revenues. IFRS principles states that if it is probable that the economic benefits would create reliably measured revenue and certain criteria are met then the revenue can be recognized. The five criteria items that have to be met for revenue to be recognized are that the buyer has to obtain significant risks and rewards of ownership, the entity loses ownership and effective control over the goods sold, revenue can be measured reliably, probable that economic benefits associated with the transaction will flow to the entity, and the costs incurred can be measured reliably. If all of these criteria items are met then the company can consider the contingency revenue. Under GAAP rul... ... middle of paper ... ...thod is only allowed for inventory items that are not ordinarily interchangeable and for goods or services produced and segregated for specific projects. Disclosure Provided in the Footnotes: A difference in the disclosure provided in the footnotes of the financial statements is that under GAAP companies are required to disclose information about their expenses and financial choices. In IFRS the company is not required to list these items in the footnotes. Another difference in the footnotes of IFRS and GAAP financial statements is the listing of the full funded status of postemployment benefit plans. GAAP guidelines requires the full funded status to be reported on the balance sheet. IFRS does not require this information to be disclose on the balance sheet. Instead IFRS companies are required to present the full funded status of their employees in the footnotes.

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