Comparing IFRS to GAAP
Comparing IFRS to GAAP Essay
Felicia Williams
ACC/291
10/13/2014
Brian Friedel
Comparing IFRS to GAAP Essay
In the Accounting industry, there are various principles and guidelines by which financial accountants, analysts, and organizations need to abide by. The International Accounting Standards Board (IASB) issues standards (IFRS) that have been adopted by the United States and several countries outside of the U.S. (Kimmel, Weygandt & Kieso, 2010). The IFRS along with Generally Accepted Accounting Principles (GAAP), professionals in the accounting industry use these guidelines as a baseline on which accounting practices are built upon. These standards are governed by the Securities and Exchange Commission (SEC) which ultimately oversees U.S. financial markets and accounting standard-setting bodies. Moving forward, the elements of IFRS and GAAP will be discussed to illustrate the similarities and differences and how it relates to Accounting and used in business practice.
IFRS 8-1: Fair-Value Measurement Fair value measurements provide users of financial statements with an accurate picture of the value of a company’s assets. Both IFRS and GAAP require firms to include information regarding fair value measurements practices in the notes of financial statements. Under either system, companies will be required to report assets at either book value or fair value, depending on the situation. As a general rule of thumb, all assets in the same class must receive the same valuation treatment. In regards to the value of receivables, IFRS uses a two-tiered method that first analyzes individual receivables, and then looks at receivables as a whole to determine if there is any impairment. (KPMG, 2012).
Comparing IFRS to GAAP Essay
IFRS 9-1: Component Depreciation
Component depreciation happens when an asset has fundamentally different parts that should be depreciated with different treatment. Under IFRS, firms are required to use component depreciation if the
Felicia Williams
ACC/291
10/13/2014
Brian Friedel
Comparing IFRS to GAAP Essay
In the Accounting industry, there are various principles and guidelines by which financial accountants, analysts, and organizations need to abide by. The International Accounting Standards Board (IASB) issues standards (IFRS) that have been adopted by the United States and several countries outside of the U.S. (Kimmel, Weygandt & Kieso, 2010). The IFRS along with Generally Accepted Accounting Principles (GAAP), professionals in the accounting industry use these guidelines as a baseline on which accounting practices are built upon. These standards are governed by the Securities and Exchange Commission (SEC) which ultimately oversees U.S. financial markets and accounting standard-setting bodies. Moving forward, the elements of IFRS and GAAP will be discussed to illustrate the similarities and differences and how it relates to Accounting and used in business practice.
IFRS 8-1: Fair-Value Measurement Fair value measurements provide users of financial statements with an accurate picture of the value of a company’s assets. Both IFRS and GAAP require firms to include information regarding fair value measurements practices in the notes of financial statements. Under either system, companies will be required to report assets at either book value or fair value, depending on the situation. As a general rule of thumb, all assets in the same class must receive the same valuation treatment. In regards to the value of receivables, IFRS uses a two-tiered method that first analyzes individual receivables, and then looks at receivables as a whole to determine if there is any impairment. (KPMG, 2012).
Comparing IFRS to GAAP Essay
IFRS 9-1: Component Depreciation
Component depreciation happens when an asset has fundamentally different parts that should be depreciated with different treatment. Under IFRS, firms are required to use component depreciation if the
References: Jerry J. Weygandt - Paul D. Kimmel - Donald E. Kieso - Financial Accounting - Hoboken - John Wiley and sons inc. - 2011 - 7th Ed Retrieved from: http://www.cpa2biz.com/Content/media/PRODUCER_CONTENT/Newsletters/Articles_2009/CPA/Sep/DevCosts. Retrieved from: http://www.ey.com/GL/en/Issues/IFRS/IFRS-Overview KPMG. 2012. IFRS Compared to US GAAP: An Overview. KPMG