ifrs vs usgaap

Topics: Balance sheet, Generally Accepted Accounting Principles, Financial statements Pages: 6 (1479 words) Published: October 2, 2013
What are some of the key differences between IFRS and U.S. GAAP? The International Financial Reporting Standards (IFRS) - the accounting standard used in more than 110 countries - has some key differences from the U.S. Generally Accepted Accounting Principles (GAAP). At the conceptually level, IFRS is considered more of a "principles based" accounting standard in contrast to U.S. GAAP which is considered more "rules based." By being more "principles based", IFRS, arguably, represents and captures the economics of a transaction better than U.S. GAAP. Some of differences between the two accounting frameworks are highlighted below: Intangibles

The treatment of acquired intangible assets helps illustrate why IFRS is considered more "principles based." Acquired intangible assets under U.S. GAAP are recognized at fair value, while under IFRS, it is only recognized if the asset will have a future economic benefit and has measured reliability. Intangible assets are things like R&D and advertising costs. Inventory Costs

Under IFRS, the last-in, first-out (LIFO) method for accounting for inventory costs is not allowed. Under U.S. GAAP, either LIFO or first-in, first-out (FIFO) inventory estimates can be used. The move to a single method of inventory costing could lead to enhanced comparability between countries, and remove the need for analysts to adjust LIFO inventories in their comparison analysis. Write Downs

Under IFRS, if inventory is written down, the write down can be reversed in future periods if specific criteria are met. Under U.S. GAAP, once inventory has been written down, any reversal is prohibited. (To learn more, check out International Reporting Standards Gain Global Recognition)

GAAP vs IFRs

GAAP (US Generally Accepted Accounting Principles) is the accounting standard used in the US, while IFRS (International Financial Reporting Standards) is the accounting standard used in over 110 countries around the world. GAAP is considered a more “rules based” system of accounting, while IFRS is more “principles based.” The U.S. Securities and Exchange Commission is looking to switch to IFRS by 2015.

What follows is an overview of the differences between the accounting frameworks used by GAAP and IFRS. This is at a broad, framework level; differences in accounting treatments for individual cases may also be added as this gets updated.

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GAAP
IFRS
Stands for:
Generally Accepted Accounting Principles
International Financial Reporting Standards
Introduction (from Wikipedia):
Generally accepted accounting principles (GAAP) refer to the standard framework of guidelines for financial accounting used in any given jurisdiction; generally known as accounting standards or standard accounting practice. International Financial Reporting Standards are designed as a common global language for business affairs so that company accounts are understandable and comparable across international boundaries. Used in:

United States
Over 110 countries, including those in the European Union
Performance elements:
Revenue or expenses, assets or liabilities, gains, losses, comprehensive income Revenue or expenses, assets or liabilities
Required documents in financial statements:
Balance sheet, income statement, statement of comprehensive income, changes in equity, cash flow statement, footnotes Balance sheet, income statement, changes in equity, cash flow statement, footnotes Inventory Estimates:

Either last-in, first-out or first-in, first-out
Only first-in, first-out
Inventory Reversal:
Prohibited
Permitted under certain criteria
Purpose of the framework:
US GAAP (or FASB) framework has no provision that expressly requires management to consider the framework in the absence of a standard or interpretation for an issue. Under IFRS, company management is expressly required to consider the framework if there is no standard or interpretation for an issue. Objectives...
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