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…
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
Cite this document
(“Comparing IFRS to GAAP Essay Example | Topics and Well Written Essays - 750 words”, n.d.)
Retrieved from https://studentshare.org/finance-accounting/1652595-comparing-ifrs-to-gaap-essay
(Comparing IFRS to GAAP Essay Example | Topics and Well Written Essays - 750 Words)
“Comparing IFRS to GAAP Essay Example | Topics and Well Written Essays - 750 Words”, n.d. https://studentshare.org/finance-accounting/1652595-comparing-ifrs-to-gaap-essay.
The research demonstrates that the manner in which the FASB, IASB and the SEC have been working towards achieving convergence between the US GAAP and IFRS is indeed questionable. Despite several delays, there appears to be commitment between both sides to achieve a universal accounting framework at the earliest.
The adoption of the International Financial Reporting Standards by various companies in different countries has occurred in the recent past. The paper will talk about what is going on in the convergence from Generally Accepted Accounting Principles to International Financial Reporting Standards, with special reference to United States.
The financial reports contain several key projects to be addressed by both IASB and FASB such that the financial disclosures require further enhancement as well as alignment with the existing standards issued by IASB and FASB. Currently, the key projects which are required to be considered further, are revenue recognition, leasing and financial instruments.
The main objective of financial reporting is to communicate to investors, creditors, and other interested parties the financial outcomes of a business in a understandable and useful way. The basic responsibility for reporting those financial outcomes rests with the business’s management.
In addition, organizations with subsidiaries in areas that permit or need IFRS may have the capacity to utilize a single accounting language in the company. Also, companies may need to convert from GAAP to IFRS if they are a subsidiary of an international organization that should employ IFRS, or if they have an external financier that must utilize IFRS.
The information is of importance to management, investors, creditors, employees and other government organizations. Financial statements are written reports describing quantitatively the financial health of a company. An income summary shows the income and expenditure of a firm or a balance sheet shows the assets and liabilities and equity of a company are all examples of financial statements.
to collate information regarding these transactions in a manner that allows for investors and other stakeholders to understand the true business dynamics of the entity, and their positioning in the market in terms of various metrics utilised by accountants and analysts as
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