The policies of IFRS are more advanced and precise for meeting the changes in the new accounting and audit systems, so US is also moving towards IFRS. The US GAAP is actually concept based, whereas IFRS is based on principles. The methodology of these two frameworks and the accounting treatments are also different. In US GAAP, the research is mainly based on the literature but in case of IFRS, the rules are mainly based on reviews and patterns of facts. Table of Contents International Financial Reporting Standards (IFRS) 4 Generally Accepted Accounting Principles (GAAP) 5 Different between IFRS and GAAP 5 International Financial Reporting Standards (IFRS) International Financial Reporting Standards (IFRS) is a principle based framework created to develop new standards of accounting and auditing. The International Accounting Standards (IAS) was renamed as IFRS and the policies of IAS was also changed or renewed under this. The IFRS was constructed to develop a globalised accounting and auditing model. The IFRS approves three main accounting models: The current cost accounting, maintenance of financial capital in the units of the constant purchasing power and the capital for maintaining nominal monetary units. IFRS follows three basic assumptions: Going on Concern: It states that an entity will continue its activities and any form of hindrance would not stop it from doing so. The assumption for proper and stable measuring units: The changes in the purchasing ability of functional currency excluding the 26 percent p.a. for consecutive 3 years can be considered immaterial for not considering the capital maintenance as stated in the guidelines of IFRS. Purchasing Power: It considers the constant power to purchase at all levels of inflation and deflation in relation to the consumer price index. Generally Accepted Accounting Principles (GAAP) The Generally Accepted Accounting principles (GAAP) are the rules in relation to accounting and auditing which are used for presenting, and preparing the financial reports or statements for different entity. It includes the policies for the entire accounting and auditing industry. The GAAP is actually set or formulated by the Government Accounting Standard Board (GASB). The basic objectives of GAAP are: To safe guard the interest of the investors. To help the authorities take important financial decisions. It plays a significant role in maintaining records. It improves the performance of the organization (Cerritos, n. d.). Different between IFRS and GAAP The basic difference between IFRS and US GAAP framework are: Inventory: Under the system of IFRS, the LIFO system cannot be used, but in GAAP both LIFO and FIFO are allowed. So companies have choices in the second case. Cost of Development: In case of IFRS the
International Financial Reporting Standards (IFRS) Abstract International Financial Reporting Standards (IFRS) is a framework prepared to develop new rules for accounting and auditing. It was created to maintain a uniform global accounting and auditing policy for smooth functioning of the global financial markets…
The United States is in the midst of attempting to transform their long used accounting standards of, the GAAP, for the internationally recognized system, of the IFRS. This change is bringing about many benefits as well as concerns.
Some of these variances in presentation can be seen in the comprehensive income statement presentation. There are several examples to illustrate this. IFRS 5, for example, requires that post-tax loss/income be part of the disclosures in the statement of comprehensive income or be put in another income statement’s contents where this is applicable.
The IASC (International Accounting Standards Committee) Foundation is a private, not-for-profit organization that oversees the activities of IASB. As stated above, the main objective of IASC Foundation is to oversee development and refinement of IFRS that can be applied globally.
However, financial reporting in the United States is currently influenced by the International Financial Reporting Standards (IFRS). This reporting application is having an impact on business decisions. Over the past 2 year, there has been a tremendous change in the field of Financial and Accounting reporting.
Due to these evolving financial relations between countries, the need to establish a common, convenient and comparable standard for accounts and financial reports.
The perceived need to establish a comparable and convenient system of accounting and financial reporting, by promoting harmonisation to establish similar transactions led to the establishment of the International Accounting Standards Committee (IASC).
This Essay provides an adequate knowledge of International Accounting Standard (IAS) and General Accepted Accounting Principle (GAAP) and their comparison. Mainly we only emphasize on the 5 IAS and compare their similarities and differences with the GAAP.
The IFRS uses and recommends the use of a standard set of framework, sort of a new language to communicate financial reporting, as explained by KPMG. KPMG said that IFRS “represents a complete change in the language of financial
International financial reporting standards (IFRS) refer to a set of international standards in accounting that determine how the reporting of certain transactions in the financial statements should be done (Godfrey & Chalmers 2007, p. 233). IFRS tends to be based on