Introduction
In the accounting field a major issue has come to light in recent years that is the difference between GAAP which stands for Generally Accepted Accounting Principles and IFRS which stands for International Financial Reporting Standards. The reason this has come into focus is due to a convergence between the two in the near future. The United States will go under a reconstruction, when this occurs the concept of accounting procedures around the world will be simplified to one standard. This is said
to bring about a more unified and structured standard of accounting practices.
Comparing GAAP to IFRS
When in comparing the difference between the formatting of a statement of financial position under IFRS and a balance sheet under GAAP the outcome have similarities as well as differenced. Under IFRS there is no mandate to have a specific order of accounts on the statement of financial position. Companies usually report assets in order of liquidity an example would be as follows;
Long term assets
Current assets
Shareholders’ equity
Long term liabilities
Current liabilities
Under the standard of GAAP it is required that all accounts be in order based upon their degree of liquidity, meaning cash is regularly reported first and non-current assets reported last. This is the order as displayed on a GAAP balance sheet;
Current assets
Long term assets
Current liabilities
Long term liabilities
Shareholders liabilities
IFRS and GAAP’s conceptual framework does not differ in terms of objectives of financial reporting. They both maintain similar viewpoints on the objectivity of financial data both authoritative standards concur that financial reporting data should be relevant and truthfully represented. Relevant information is any data that can be viewed as imperative in the eyes of investors, creditors, and /or regulators. Truthfully represented information should comply with industry standards.The terms commonly used under IFRS are balance...