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Ifrs Vs. Gaap Essay

987 words - 4 pages

Within the accounting profession, there have been challenges to develop a set of standards that are generally accepted and universally practiced. Thus far, the main debate in setting accounting standards is “Whose rules should we play by, and what should they be?” While the answer is unclear, users of financial statements and reporting must find methods that has an universal objective, that allows “Grapes for Grapes” comparisons that clearly, fairly, and completely prepares a company financial statements. For years GAAP has been the common set of standards and procedures for the U.S, the core for establishing a principle of reporting but now IFRS an international friendly financial ...view middle of the document...

U.S companies that are abroad overseas are still authorized to use GAAP, and foreign companies that are listed on U.S. exchanges are authorize to use IGAAP. Advantages with the adoption of IGAAP it would make it feasible for comparisons for the U.S and foreign countries as well as U.S companies to raise capital in foreign markets. But as of now there are still forms of differences.
Income earned by common stock is called Earnings per Share (EPS). U.S GAAP accounting for EPS is with more details on the computational guidance on calculations similar to IFRS accounting for EPS which is calculations of year to date that varies. When reporting basic and diluted EPS, U.S GAAP includes continuing operations, discontinued operations, extraordinary items, cumulative effect of change in accounting and net income in contrast to IFRS EPS only including continuing operations and net income. Also, for interim reporting IFRS uses treasury stock method on year to date results, unlike U.S GAAP who averages the interim periods’ incremental shares to compute EPS.
IASB and FASB are currently working on an assignment that would improve EPS accounting by simplifying the guidance and in so doing increasing the comparability of EPS data on an international basis.
Another vital factor for financial statements is, accounting for leases, a contract between lessee and lessor, and is either used as a capital or operational lease for either party. IFRS accounting for leases, reports gain on sale/leaseback amortized over term of financing lease, but recognized at once if operating leaseback compared to US GAAP reporting gain on sale/leaseback are not recognized in current earnings. But earnings are deferred and amortized, unless seller retains use of much of asset, in which case gain is recognized.
Similar to US GAAP, IFRS reports finance lease treatment if risks and rewards are transferred to lessee compared US GAAP reports for...

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