Gaap vs Ifrs
Comparison of reporting discrepancies between IFRS and GAAP
Kaci Amon, Poonam Aujla, Daniel Aurora, Yuanyan Fang, Mark Gonzalez
Accounting 306 C1
Professor Xuhong Luo
August 12, 2012
Executive Summary
The generally accepted accounting principal (GAAP) and international financial reporting standard (IFRS) are standards governing how economic events are reported. In the United States, the Securities and Exchange Commission (SEC) relies on the FASB, the accounting standard-setting body of the US, to develop accounting standards that public companies must follow when publishing financial statements. On the other hand, many countries outside of the Unite States have adopted the International Financial Reporting Standard (IFRS) which is issued by the International Accounting Standard Board (IASB). In recent years, the FASB and IASB have worked closely to try to minimize the differences in their standards and principals and to merge the two systems in the future.
The purpose of this paper is to compare and contrast some of important differences between US GAAP and IFRS and, though this analysis, give a better understanding how these standards apply in the real world accounting field. This paper analyzes similarities and differences in revenue recognition, asset impairment, consolidation processes, contingencies, and depreciation. In revenue recognition, the definition and treatment of revenue recognition according to US GAAP and IFRS is different. GAAP recognizes revenue when all of the following criterions are made: persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the seller’s price to the buyer is fixed or determinable, and collectability is reasonably assured. IFRS, on the other hand, has more general requirements and less specified guidance. In asset impairment, the primary difference between GAAP and IFRS is that US GAAP requires a two-step process while IFRS only requires a one step process to
Kaci Amon, Poonam Aujla, Daniel Aurora, Yuanyan Fang, Mark Gonzalez
Accounting 306 C1
Professor Xuhong Luo
August 12, 2012
Executive Summary
The generally accepted accounting principal (GAAP) and international financial reporting standard (IFRS) are standards governing how economic events are reported. In the United States, the Securities and Exchange Commission (SEC) relies on the FASB, the accounting standard-setting body of the US, to develop accounting standards that public companies must follow when publishing financial statements. On the other hand, many countries outside of the Unite States have adopted the International Financial Reporting Standard (IFRS) which is issued by the International Accounting Standard Board (IASB). In recent years, the FASB and IASB have worked closely to try to minimize the differences in their standards and principals and to merge the two systems in the future.
The purpose of this paper is to compare and contrast some of important differences between US GAAP and IFRS and, though this analysis, give a better understanding how these standards apply in the real world accounting field. This paper analyzes similarities and differences in revenue recognition, asset impairment, consolidation processes, contingencies, and depreciation. In revenue recognition, the definition and treatment of revenue recognition according to US GAAP and IFRS is different. GAAP recognizes revenue when all of the following criterions are made: persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the seller’s price to the buyer is fixed or determinable, and collectability is reasonably assured. IFRS, on the other hand, has more general requirements and less specified guidance. In asset impairment, the primary difference between GAAP and IFRS is that US GAAP requires a two-step process while IFRS only requires a one step process to
Cited: Arnold, Steve. "IRS Risk Planning and Controls Execution." Journal of Accountacy 3rd ser. 208 (2009): 34. Print. Briner, Russell F. "The CPA Journal." The CPA Journal. The CPA Journal, Mar. 2001. Web. 24 July 2012. <http://www.nysscpa.org/cpajournal/2001/0300/dept/d035001.htm>. "US GAAP versus IFRS- The Basics." Ernst and Young. N.p., Dec. 2011. Web. 20 July 2012. <http://www.ey.com/>.