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Although there are similarities between the two, their differences are major and will affect greatly the entities affected by the conversion. In terms of the general, underlying principles and accounting for commonly – occurring transactions, the two principles are actually more similar than different. Despite these similarities, however, the approaches taken by the two principles are different (i.e., IFRS is principle-based while the U. S. GAAP is rule-based). In addition, major differences are also found in their accounting treatments for significant accounts and complex transactions.
This article aims to compare and to contrast the U. S. GAAP and the IFRS. It takes into account the similarities and differences between these two accounting principles. It utilizes materials from various accounting firms and accounting standards board in its comparison. As this topic is so diverse (some publications comparing the two principles have over one hundred pages), only a basic comparison will be done in this article.
The 2006 Memorandum of Understanding or MOU (as updated in 2008) issued by the FASB and the IASB have set the path towards the convergence of U. S. GAAP and the IFRS. The MOU affirmed the two Board’s commitment to “developing common, high quality standards” (FASB, 2009). The ongoing efforts to converge the U. S. GAAP with IFRS have raised a lot of concerns and a lot of questions as to how different or similar the two sets of accounting principles are. The following briefly compares the two principles and outlines their similarities and differences.
Despite their differences, the “general principles, conceptual framework and accounting results” (Ernst & Young, 2009) between these two principles are basically the same or similar. In fact, according to Ernst & Young (2009), the accounting treatment for transactions that commonly occur in companies is the same under both principles.
The basic difference of these two principles is their general
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The author provides examples of company’s financial reports with the constructive information that should offer a fair, faithful presentation and should give a ‘true and fair view” of the financial position of business so that the stakeholders can take informed decision on such financial information.
The application of IFRSs, with additional disclosure when necessary, is presumed to result in financial statements that achieve a fair presentation. (IAS 1.15) Introduction The year of 2008 was not a good year for the financial world. A harsh and sever wave of financial crisis was so powerful that it did not leave any option for financial companies but to shrink their payrolls, reduce their human capital, reduce work force, shut down their branches, franchises.
According to the framework, the objective of financial statement is to provide information in regards to the financial position, performance and changes in financial position of an entity which are is useful to a wide range of users in making economic decision.
The US GAAP, (Generally accepted accounting principles) is another framework which is followed in many countries. This was created before IFRS. Though the purpose of creating these two frameworks is same but there are many differences in the policies and rules in both of the framework.
In the international community the fastest growing accounting framework that is being used in the business industry of different countries is the international financial reporting standards (IFRS). The international financial reporting standards were created by the International Accounting Standards Board (IASB).
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.
Had there been no framework, accounting standards would adopt the easier solution for a particular issue. A solution which is coherent with an interconnected theory of accounting would never be the choice. The Conceptual Framework
Among the most substantial changes made during the revision of IAS 19 on American companies are the definition of employee benefits packages, retirement benefits, employment termination benefits plans, and several other kinds of employee benefits.
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