IFRS .IFRS and US GAAP Comparison - Essay Example

IFRS and US GAAP: Comparative Study U.S GAAP (Generally Accepted Accounting Principles) is practiced only in the United States while IFRS (International Financial Reporting Standards) are adopted by the International Accounting Standards Board (IASB). There are notable differences between IFRS income statement and a typical income statement prepared using U.S GAAP. The current status of SEC acceptance of IFRS statements for the US based companies is described below. SEC seems shifting from US GAAP to IFRS statements for the US based companies because of the differences between these two systems describe below.

Firstly, income statement captions are not required in the case of US GAAP while IFRS prescribes minimum caption in income statement. In addition, the US GAAP treatment allows either single step or multiple steps format for income statement captions. According to the US GAAP treatment, classification of extraordinary items is permitted under certain circumstances and it can also be segregated within operating income; in contrast, IFRS bans classification of unusual items although it permits segregation of such items (Deloitte).

The US GAAP provides a broader definition for discontinued operations while IFRS sets a narrow definition. Under US GAAP, restructuring costs are recognized only when it becomes necessary but IFRS recognizes restructuring costs when it is announced. Limited guidance on offsetting of assets and liabilities is a characteristic feature of US GAAP; however, IFRS insists specific guidance on offsetting of assets and liabilities. In case of IFRS, financial position’s classified statement is essential unless liquidity ordering is more meaningful.

In contrast, such a statement is not required under US GAAP. Exclusion of long-term debt from current liabilities is a specific feature of IFRS. The US GAAP treatment refinances the exclusion of long term debt. The IFRS treatment states the minority interests as a component of equity while US GAAP guidelines restrict the presentation of minority interests as equity (“IFRSs and US GAAP….”). As per the US GAAP balance sheet format, entries are presented as total assets balancing to total liabilities in addition to shareholders’ equity.

In contrast, IFRS entries include current and non-current assets and current and non-current liabilities. While US GAAP presents items on the basis of decreasing order of liquidity, the IFRS presents the items in the increasing order. Works Cited“IFRSs and US GAAP: A pocket comparison.” An IAS plus Guide: Audit, Tax, Consulting and Financial Advisory. Deloitte. (March 2007): 1-31. Web. 13 October 2011.