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Comparing IFRS to GAAP - Essay Example

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International Financial Reporting Standards (IFRS) refers to the accounting standards setup by the International Accounting Standards Board (IASB) and are applicable in most parts of the globe. Generally Accepted Accounting Practices (GAAP) is accounting rules applicable in the…
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Comparing IFRS to GAAP Essay
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Comparing IFRS to GAAP

Download file to see previous pages... Although GAAP and IFRS are similar in their application and usually results to uniform results, there are slight variations arise where GAAP and IFRS offer options due to the nature of business, company’s interpretation of principles, industry practices and details of transactions (Shamrock, 2012).
The FASB and IASB have adopted criteria for fair measurement of financial instruments in order to reflect fair value of business assets and liabilities. Fair value is used to refer to the current market value of the financial instruments (Shamrock, 2012). The boards have adopted two steps to ensure fair value measurements whereby businesses are supposed to record particular financial instruments to reflect their current market value. The approaches include “disclosure of the fair value information in the notes” and “fair value option” that allows companies to record particular financial instruments at fair value in the financial report (Kimmel, 2013). However, IFRS differ from US GAAP in some ways because IFRS examines specific loans and debtors to ensure the same are not impaired, and the same loan and debtors are examined collectively to establish whether they are not impaired (Shamrock, 2012). In addition, GAAP and IFRS employ different criteria for recording a factoring transaction whereby, IFRS applies combination of methods dealing with reward, risk and loss control whereas GAAP applies the loss of control as the chief method. Also, GAAP takes into consideration incomplete derecognition of receivables while IFRS does not allow incomplete derecognition of receivables (Kimmel, 2013).
Depreciation refers to distribution or spread of costs of assets over its useful life according to IFRS (Shamrock, 2012). Depreciation reflects the value of assets over a given period and depicts the potential of that asset to generate income for the business. It portrays the ...Download file to see next pagesRead More
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