Difference of Costing Methods Between Gaap and Ifrs

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For those in the business world - particularly in the accounting field - a major issue has surfaced in recent years relating to the differences between Generally Accepted Accounting Principals (GAAP) and the International Financial Reporting Standards (IFRS) (Squadroni, 2010). Today majority of countries in the world follow International Financial Reporting Standards guidelines; however, the United States still uses Generally Accepted Accounting Principals. There have been discussions to adopt IFRS fully in the near future. The United States accounting system will undergo drastic changes in 2010 when this occurs. There are many similarities between US GAAP and IFRS but I will be discussing the costing methods for GAAP, IFRS and the differences between the two. GAAP is a codification of how CPA firms and corporations prepare and present their business income and expense, assets and liabilities on their financial statements (Kartia, 2008). GAAP is not a single accounting rule, but rather the aggregate of many rules on how to account for various transactions. (Kartia, 2008). IFRS are the less-detailed financial reporting rules that have been developed by the London-based International Accounting Standards Board (IASB), and which recently have become widely mandated, adopted or emulated in by about 100 countries (Epstein, 2008). Most notably, IFRS have been formally mandated for publicly held companies chartered by European Union (EU) member nations (Epstein, 2008). With IFRS standards, comparative information must be disclosed in respect of the previous period for all amounts reported in the financial statements. (Young, 2009) The main difference between GAAP and IFRS is that GAAP is considerably rule-based, whereas IFRS is more principal-based which means IFRS has room for interpretation (Squadroni, 2010). GAAP and IFRS both have different methods to determine specific amounts as well as how amounts are recognized in financial statements. For...
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