Differences Between GAAP and IFRS Research Paper
Running Head: DIFFERENCES BETWEEN GAAP AND IFRS 1
Differences Between GAAP and IFRS Accounting Practices
Sharon Woodards
Liberty University
Intermediate Accounting II 302
Professor Ashley Harper
November 7, 2014
DIFFERENCES BETWEEN GAAP AND IFRS 2
Both the IFRS ( International Financial Reporting Standards ) and the GAAP ( Generally Accepted Accounting Principles ) are a set of accounting rules that companies either can or must follow when preparing their financial statements. Set by policy boards, the United States enforces the use of GAAP as the set of rules of processes and standards that its companies must use for reporting and recording of their financial statements. At the same, other parts of the words use the IFRS as their set of rules for companies to follow. This IFRS set of rules were developed by the International Accounting Standards Board (IASB). Due to this, the world has been talking about combining the two standards into one globalized set of accounting standards that will comprise of both standards. The object of this would be to have the world recognize one set of globalized set of accounting practices. There are some differences that the US should be aware of before the convergence between the two ever takes place. Some of the major differences between GAAP and IFRS revolve around grants to employees, vesting, modifications, tax withholding, inventory differences, revenues and expenses, required financial documents, assets and liabilities, gains and losses, and comprehensive income. One of the key differences between the two sets of standards is when it comes to the basics of each set. GAAP tends to be more rule based, while the IFRS is based on principles. This principle base allows the IFRS to have more leeway in its interpretations of various transactions. The negative part of this is the inconsistency that arises. GAAP rules were first introduced to meet
Differences Between GAAP and IFRS Accounting Practices
Sharon Woodards
Liberty University
Intermediate Accounting II 302
Professor Ashley Harper
November 7, 2014
DIFFERENCES BETWEEN GAAP AND IFRS 2
Both the IFRS ( International Financial Reporting Standards ) and the GAAP ( Generally Accepted Accounting Principles ) are a set of accounting rules that companies either can or must follow when preparing their financial statements. Set by policy boards, the United States enforces the use of GAAP as the set of rules of processes and standards that its companies must use for reporting and recording of their financial statements. At the same, other parts of the words use the IFRS as their set of rules for companies to follow. This IFRS set of rules were developed by the International Accounting Standards Board (IASB). Due to this, the world has been talking about combining the two standards into one globalized set of accounting standards that will comprise of both standards. The object of this would be to have the world recognize one set of globalized set of accounting practices. There are some differences that the US should be aware of before the convergence between the two ever takes place. Some of the major differences between GAAP and IFRS revolve around grants to employees, vesting, modifications, tax withholding, inventory differences, revenues and expenses, required financial documents, assets and liabilities, gains and losses, and comprehensive income. One of the key differences between the two sets of standards is when it comes to the basics of each set. GAAP tends to be more rule based, while the IFRS is based on principles. This principle base allows the IFRS to have more leeway in its interpretations of various transactions. The negative part of this is the inconsistency that arises. GAAP rules were first introduced to meet