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This difference between the IFRS and the GAAP is the core of other differences between the two standards.
A major difference between the two standards is the way revenue is recognized. The GAAP has more extensive guidelines on revenue recognition compared to the IFRS. The IFRS has two standards of dealing with revenue recognition while the GAAP provides several concepts as well as detailed rules to deal with revenue recognition in different industries. The IFRS requires revenue to be recognized when it is likely that the benefits associated with a transaction can be traced to the entity and quantified reliably. In contrasts, the GAAP provides criterion for determinable or fixed pricing in revenue recognition. In this case revenue cannot be recognized until the amount of the revenue is ascertained. This implies that under the IFRS revenue that is not of a set amount is recognized earlier as compared to the GAAP (Erchinger, and Winfried 124).
Another point of difference between the two standards is in relation to financial assets. The IFRS only provides two standards to deal with financial assets while the GAAP has extensive guidelines that apply in various industries. While the IFRS classifies assets into various categories, the GAAP classifies financial assets into pronouncements. The GAAP looks into the legal form of the entity while classifying financial assets while the IFRS considers the nature of the instrument. Financial asset classification is important as this affects income statements and the entities equity. Different classification of financial assets by the two standards can significantly affect the amount in the entity‘s financial statements.
There is also a major difference in the manner the two standards treat intangible assets. While the GAAP does not allow for capitalization of internally incurred costs related to development, the IFRS allows for this capitalization when certain criteria are met. In relation to asset impairment, the IFRS
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International Financial Reporting Standards (IFRS) sets out accounting standards and procedures for reporting financial information of a company to the outside world. It is very much necessary that these financial reports that become available to the stakeholders of a company help them considerably in their decision-making process.
According to the report there are two forms of accounting typically taking place within an organisation, namely, financial accounting and management accounting. Financial accounting is mainly focused on provision of financial statements of interest to external stakeholders while management accounting is majorly focused on provision of details.
Since 2012 we have adopted those IFRS which were effective January 2009. However, there are no plans to at this time to adopt IFRS fully and some of the standards that were effective in 2009 have since been revised and would therefore increase the gap between our revised standard (for the process of convergence) and the revised IFRSs.
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.
The big question is, in terms of cost versus benefits will this adoption be favorable to the business community? A clear answer to this could be obtained by evaluating its effect to the various entities in business.
For instance, the IASB (international accounting standards board) was formed out of a desire to create an independent accounting standard that can be utilized as a baseline of understanding for the way in which financial transactions and accounting for these can be
adopting International Financial Reporting Standards, companies can present their financial reports on the similar basis as their overseas competitors, thus making comparisons simpler. Organizations with subsidiaries in nations that permit or require IFRS might be capable enough