Gaap Vs. Ifrs Essay

Gaap Vs. Ifrs Essay

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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 sheet, income statement, changes in equity, cash flows statement, and footnotes. 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 ...


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...ds. They also created new training opportunities within companies. IFRS is not a perfect set of rules but according to a variety of sources and surveys, International Financial Reporting Standards are successful in many countries. Some of the benefits are multinational companies can use common financial reporting systems, IFRS may ease financial statement comparability among companies, and IFRS is intended to facilitate cross-border investments and access to global capital markets (AICPA 2). “Other key benefits include opportunities to improve business functions and processes, globally integrate the financial IT systems, and achieve consolidation reporting efficiency” (AICPA 2). Although IFRS standards are not required in the United States It would be interesting to see companies in the U.S. adopting International Financial Reporting Standards and embrace change.

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