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Comparing Ifrs To Gaap Essay

794 words - 4 pages

Comparing IFRS to GAAP

Comparing IFRS to GAAP

The United States of America is currently working with the rest of the world to streamline their accounting practices to create a uniform standard. The General Accepted Accounting Practices or GAAP was created by FASB also known as Financial Accounting Standards Board is currently being practiced in the United States. The IASB or International Accounting Standards Board makes the final decision on the practice of the International Finance Reporting Standards or IFRS and the standards used by over one hundred and fifteen countries.
Fair market value is the price charged during a specific date in the selling of a good or ...view middle of the document...

Before 1981, component depreciation was used within corporations to breakup property into smaller parts and assign different depreciation rates to each part. A building could be broken down into more basic parts such as plumbing and electric and have a separate deprecation rate that could help the companies’ taxes. In 1981 the Tax Act changed this for all property purchased after 1980. This practice can be used for machinery or equipment if one part of the component will have a shorter useful life than the other parts. GAAP allows the practice that is rarely used but the IFRS requires the component depreciation method. With component depreciation, being used by the IFRS the plants assets can be revaluated. According to the "IFRS" (2012) website “Revaluations shall be made with sufficient regularity to ensure that the carrying amount does not differ materially from that which would be determined using fair value at the end of the reporting period.” The IFRS requires fixed assets to be recorded at their original cost and then revaluated for the fair market value of the asset. Development of products is a requirement for a successful company and for both GAAP and IFRS research costs are expensed. IFRS requires costs incurred during the developmental phase to be categorized as costs while GAAP does not.
Contingent liability is an obligation to the company that can be caused by past or future events and the company is unable to control the outcome. Lawsuits and environmental clean-up fines can be considered a contingent liability. These contingency funds are...

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