Gaap vs Ifrs
Kaci Amon, Poonam Aujla, Daniel Aurora, Yuanyan Fang, Mark Gonzalez
Accounting 306 C1
Professor Xuhong Luo
August 12, 2012
The generally accepted accounting principal (GAAP) and international financial reporting standard (IFRS) are standards governing how economic events are reported. In the United States, the Securities and Exchange Commission (SEC) relies on the FASB, the accounting standard-setting body of the US, to develop accounting standards that public companies must follow when publishing financial statements. On the other hand, many countries outside of the Unite States have adopted the International Financial Reporting Standard (IFRS) which …show more content…
A roadmap has not been created for future years. The lower priority projects referenced in Appendix A include: financial instruments with characteristics of equity, emissions trading scheme, and loss contingencies. Based on the indication given by PWC, it is unlikely that we will reach 100% convergence in the near future and perhaps we will never reach full integration of Codification considering that US GAAP would prefer to be more conservative measures with financial reporting than risk taking a less conservative approach.
US GAAP is generally described as rule based because it contains many detailed rules and procedures. US GAAP leaves less up to interpretation and enables accountants to prepare proper statements as long as it follows all the GAAP rules, which often provide a more conservative approach. Whereas IFRS is simpler and more principle based. It leaves the detailed implementation up to the accountant to determine the correct method, which can create a less conservative result.
Revenue recognition is essentially done to determine the accounting period in which revenues and expenses are recognized. There are differences between the way revenue is recognized between International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP). These differences are due to various factors including interpretation of standards as well as the IASB trying to intentionally avoid potentially