Topics: Generally Accepted Accounting Principles, Depreciation, Balance sheet Pages: 7 (1306 words) Published: November 15, 2013

Diffen › Economics › Business › Business Finance › Accounting 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.

Comparison chart EMBED THIS CHART
Improve this chartGAAPIFRS
Stands for:Generally Accepted Accounting PrinciplesInternational 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 StatesOver 110 countries, including those in the European Union Performance elements:Revenue or expenses, assets or liabilities, gains, losses, comprehensive incomeRevenue or expenses, assets or liabilities Required documents in financial statements:Balance sheet, income statement, statement of comprehensive income, changes in equity, cash flow statement, footnotesBalance sheet, income statement, changes in equity, cash flow statement, footnotes Inventory Estimates:Either last-in, first-out or first-in, first-outOnly first-in, first-out Inventory Reversal:ProhibitedPermitted 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 of financial statements:In general, broad focus to provide relevant info to a wide range of stakeholders. GAAP provides separate objectives for business and non-business entities.In general, broad focus to provide relevant info to a wide range of stakeholders. IFRS provides the same set of objectives for business and non-business entities. Underlying assumptions:The "going concern" assumption is not well-developed in the US GAAP framework.IFRS gives prominence to underlying assumptions such as accrual and going concern. Qualitative characteristics:Relevance, reliability, comparability and understandability. GAAP establishes a hierarchy of these characteristics. Relevance and reliability are primary qualities. Comparability is secondary. Understandability is treated as a user-specific quality.Relevance, reliability, comparability and understandability. The IASB framework (IFRS) states that its decision cannot be based upon specific circumstances of individual users. Definition of an asset:The US GAAP framework defines an asset as a future economic benefit.The IFRS framework defines an asset as a resource from which future economic benefit will flow to the company.

1 Objectives of Financial Statements
2 Presentation of Earnings
3 Documents
4 Disclosure
5 Intangibles
6 Accounting for Assets
6.1 Fixed Assets
7 Underlying Assumptions
8 How IFRS impacts US companies
9 See Also
10 References
EDIT Objectives of Financial Statements
Both GAAP and IFRS aim to provide relevant information to a wide range of users. However, GAAP provides separate objectives for business entities and non-business entities, while the IFRS only has one...
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