Trident University International
ACC201 Module 3 Case
Professor: Dr. Heesam Kang - P
Is there a difference in approach to valuation by US GAAP and IFRS? Discuss and note two or three specific differences.
Differences in approach to valuation between IFRS and U.S. GAAP While this is not a comprehensive list of differences that exist, these examples provide a flavor of impacts on the financial statements and therefore on the conduct of businesses. Consolidation — IFRS favors a control model whereas U.S. GAAP prefers a risks-and-rewards model. Some entities consolidated in accordance with FIN 46(R) may have to be shown separately under IFRS. Statement of Income — Under IFRS, extraordinary items are not segregated in the income statement, while, under US GAAP, they are shown below the net income. Inventory — Under IFRS, LIFO (a historical method of recording the value of inventory, a firm records the last units purchased as the first units sold) cannot be used while under U.S. GAAP, companies have the choice between LIFO and FIFO (is a common method for recording the value of inventory). Earning-per-Share — Under IFRS, the earnings-per-share calculation does not average the individual interim period calculations, whereas under U.S. GAAP the computation averages the individual interim period incremental shares. Development costs — These costs can be capitalized under IFRS if certain criteria are met, while it is considered as “expenses” under U.S. GAAP. Distinguish between an expense (expired cost) and an asset.
A cost might be an expense or it might be an asset. An expense is a cost that has expired or was necessary in order to earn revenues. Assets are the items a company owns such as automobiles, furniture, equipment, and real estate that have no balance due on them or lien against them. Distinguish between current and long term assets.
Current assets include Cash, Accounts Receivable, Inventory, etc or anything that is or can be...
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