Comparing IFRS to GAAP
ACC/290
14 OCT 2014
Comparing IFRS to GAAP
There are two types of accounting standards currently being used throughout the world. The US Generally Accepted Accounting Principles (GAAP) and the International Financial Reporting Standards (IFRS). The GAAP accounting standard is used in the United States, while the IFRS accounting standards is used in over 110 countries. (Ernest &Young; 2011) The following paper is an overview of the differences between the accounting concept and financial reporting used by IFRS and GAAP.
Both IFRS and GAAP financial statements include a balance sheet, income statement, changes in equity, and cash flow statement. However, under IFRS the recommended title is “Statement of financial position” rather than balance sheet, but it’s usually referred to as statement of assets, and equity. The statement of financial position information is formatted differently under IFRS in comparison to the GAAP format. IFRS usually list current assets in the reverse order of liquidity in comparison to GAAP current assets, which list cash first. (Hoboken & Wiley, 2013, Chapter 2)
Another difference is deferred taxes, under IFRS, deferred taxes must be written as a separate line item on the balance sheet, and cannot be included with assets and liabilities as stated under GAAP. In addition, IFRS comparative information must be presented with respect to the prior period for all amounts reported in the financial statement, while GAAP has some flexibility regarding financial reporting period. (Ernest &Young; 2011) Conceptual framework is the establishment of concepts that underlie financial reporting and its purpose. (Conceptual Framework for financial reporting, ND)
IFRS and GAAP do differ in terms of the objective of financial reporting. IFRS uses fair value principle approach as a measurement in financial statements, while GAAP uses similar measurement...