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GAAP and IFRS

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GAAP and IFRS
GAAP and IFRS

There are differences that exist between the US GAAP and IFRS (International GAAP), nonetheless right now there is a convergence project existing between the FASB and the IASB, which issue these GAAPs in that order to narrow down the differences between the two. This is so that there are no misinterpretations when using either GAAPs. With that mentioned, the following differences exist between the US GAAP and IFRS (International GAAP).
Inventory Measurement
GAAP clarifies that inventory value is measured based on FIFO, LIFO and weighted average method, but IFRS does not allow the use of LIFO method.
Recognition of Revenue from Services
GAAP accepts the money as revenue when total services are provided and contract of services is completed, however if there is work pending under the service contract, then it cannot recognize the revenue from service. Nonetheless, IFRS allows the showing of the revenue even when some parts of services are pending. “IFRS also use zero profit model in case if we can not be reasonably calculate the revenue” (Difference between GAAP and IFRS). Difference in Construction Contract 's Revenue Recognition
a) In GAAP: “We can show the % of completed work and recognise its revenue for showing in our financial statement” (Difference between GAAP and IFRS).
b) In IFRS: “IFRS uses only revenue approach of % of completion method but it does not use the gross profit approach of % completion method” (Difference between GAAP and IFRS).
“IFRS uses a single-step method for impairment write-downs rather than the two-step method used in U.S. GAAP, making write-downs more likely.
IFRS has a different probability threshold and measurement objective for contingencies.
IFRS does not permit curing debt covenant violations after year-end” (International Financial Reporting Standards).

References
Difference between GAAP and IFRS. 17 October 2012. Web. < http://www.svtuition.org/2010/



References: Difference between GAAP and IFRS. 17 October 2012. Web. < http://www.svtuition.org/2010/ 06/difference-between-gaap-and-ifrs.html>. International Financial Reporting Standards (IFRS) —an AICPA Backgrounder AICPA IFRS Resources. 17 October 2012. Web. .

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