This website uses cookies to ensure you have the best experience. Learn more

One Global Gaap: Ifrs Vs. Us Gaap

2168 words - 9 pages

One Global GAAP: IFRS vs. US GAAP
Acct 522 Current Topics in Financial Reporting
Zhipeng Cao
CIN: 300443421

The most influential accounting reporting criteria today is the International Financial Reporting Standards (IFRS) by and U.S Generally Accepted Accounting Principles (U.S. GAAP). These two different accounting standards have various emphases. In short, IFRS states principles and it leaves the decision-making in everyday questions for accountants, while US GAAP consists of very detailed measures. Under the globalization environment, many companies are operating under a global scale; however, each country has its own accounting standard which makes the translation ...view middle of the document...

Unlike the IFRS, Unlike IFRS, the Framework is non-authoritative guidance and is not referred to routinely. Like IFRS, U.S. GAAP need not be applied to items that are “immaterial”. Unlike IFRS, there is no general principle that transactions should be accounted for in accordance with their substance, rather than only their legal form. (Bohusova, H. (2009)) IFRS serve as a conceptual basis for accountants, which is a simple set of key objectives are set out to ensure good reporting. Explanation of the objective and common examples are provided as guidance. it try not to provide specific guidance or rules for every possible situation. On the other hand, U.S. GAAP attempts to address as many potential contingencies as possible which consist of bright-line tests, multiple exceptions, a high level of detail, and internal inconsistencies.

First of all, one of the most noticeable differences between GAAP and IFRS is the method of determining the inventory costs. According to the intermediate accounting by Donald E. Kieso, Inventory for retailers is a list for goods and materials that company holds for sale in the ordinary course of business, or goods and materials held for produce the goods to be sold for manufacturers. (Intermediate Accounting, Donald Kesio, p368).
In the IFRS regarding the inventory, general inventories are measured at the lower cost and net realizable value; decommissioning costs incurred through the production of Inventory are included in the cost of that inventory; if the inventories having a similar nature, the same cost formula is applied to it as well as using to the entity; Net realizable value can be calculated as selling price less the estimated costs of completion and sale; the write-down is reversed If the net realizable value of an item that has been written down increases subsequently. (KPMG 2008 May p 76).
Unlike the IFRS, U.S. GAAP measure the general inventories at the lower cost and market; asset retirement obligations incurred through the production of inventory are added to the carrying amount of the related item of property, plant and equipment; “market” is replacement cost limited by net realizable value (ceiling) and net realizable value less a normal profit margin (floor); a write-down of inventory to market is not reversed for subsequent recoveries in value. (KPMG 2008 May p77)
The most obvious difference between these two standards would be the inventory cost method, under IFRS, the cost of inventory generally is determined using the FIFO (first-in, first-out) or weighted average cost method. The use of the LIFO (last-in, first-out) method is prohibited. On the contrary, U.S. GAAP, the cost of inventory can be determined using the LIFO method in addition to the FIFO or weighted average method.
There are two different methods of inventory are “first-in, first-out”, or FIFO and “Last-in, first –out” or LIFO. FIFO assumes that a company uses goods in the order in which it purchases them...

Other Papers Like One Global Gaap: Ifrs vs. Us Gaap

Ifrs vs. Gaap Essay

987 words - 4 pages for capital lease accounting that required if one of four defined conditions are met; otherwise, operating lease. Other minor distinctions, IFRS permits third-party guarantees as must be included in minimum lease payments to determine whether capital lease criteria are met whereas US GAAP does not recognizes it. The IASB indicated for its international purpose to reform the rules on accounting for leased assets, also assisting FASB on a

Ifrs vs Gaap Essay

1482 words - 6 pages IFRS vs. GAAP Life is ever changing and evolving into things we never dreamed that were possible. We need to recognize this fact in every aspect of our lives today. This includes such things as technology, digital information and even accounting standards that were set long ago by the Financial Accounting Standards Board. Even though the accounting principles were changed in 2008, FASB needs to review businesses practices today and take

Ifrs Vs Gaap

914 words - 4 pages recommends that the company settle out of court for leaser money. The methodology used to asses an accounting treatment is just one of difference between IFRS and GAAP. The convergence of certain accounting refers to the goals of accounting standards that will be used to reduce the GAAP and IFRS. The GAAP is consider a ruled-based, whereas, the IFRS is principle-based. The principle is the framework in the financial statements. The ruled-based

Ifrs vs U.S Gaap

2618 words - 11 pages . | | |US- GAAP: The united states encourage company to develop | | |everything, and this method can decrease company’s tax | |5. Cultural Driver |liability. | | |IFRS- Amortize expenses

Gaap vs. Ifrs

1329 words - 6 pages Comparison of IFRS to GAAP Khadija Boyd Crystal Scott ACC 290 11 August 2014 Deborah Wilson This paper will examine comparisons between the International Financial Reporting Standards (IFRS); which is designed to be a common global language for business affairs and the Generally Accepted Accounting Principle (GAAP); which refer to the standard framework of guidelines for financial accounting. There are certain ways that the format of a

Acc 290 Ifrs vs Gaap

782 words - 4 pages IFRS and GAAP Shannon Strickland ACC 290 November 10, 2014 Annette Anigwe IFRS and GAAP Accounting around the world could be considered the same but different. The United States generally falls under GAAP (Generally Accepted Accounting Practices) most other countries use the IFRS (International Financial Reporting Standards). While at their basic fundamentals both are still accounting, there are differences that must be adhered to in

Ifrs Versus Gaap

952 words - 4 pages inventory accounting methods and procedures. GAAP is used principally in the United States, although the Security and Exchange Commission (SEC) is looking to switch to IFRS by 2015, the system used in the European Union and many other countries. Many countries have their own accounting systems, although most conform to one main system or the other as they work to keep their markets modern. In fact, the SEC must consider some challenging points before

Comparing Ifrs to Gaap

1238 words - 5 pages , the cost for businesses to make the switch would be in the billions, not including the time and effort it would ultimately take to make this change. One of the scapegoats for accounting scandals such as the Enron and WorldCom scandals was the “rules-based” GAAP (Chunhui, Chun Yip Yuen, & Lee, 2014). The SEC’s main job is to protect investors from fraud on public exchanges; the commission must determine whether IFRS does a better job of

Gaap & Ifrs Convergence

2025 words - 9 pages statements. With regards to income statements and balance sheets, there are several key elements that differ between GAAP and IFRS. These include: * Extraordinary items - “Under IFRS, extraordinary items are not segregated in the income statement, while, under US GAAP, they are shown below the net income” (Forgeas, 2008). * Contingencies – Under US GAAP, “contingent liabilities must be disclosed”, but under IFRS “disclosure of contingent

Comparing Gaap & Ifrs

810 words - 4 pages interpretation. The specific differences are far too many to cover in a short presentation, however, an explanation of some major differences are mentioned below. In certain instances, GAAP and IFRS follow different approaches for the determination of specific amounts as well as how these amounts are recognized in financial statements and within the notes. One of these instances occurs in the measurement of inventory. Unlike GAAP which accepts the

Comparing Ifrs To Gaap

729 words - 3 pages companies at an advantage. SOX compliance, documentation, and review can be very costly, but by not having to comply directly with the SOX requirements, International companies could be saving more over the US companies. Saving losses to profits may be worth added costs for US businesses because the security and fast detection that controls brought on by SOX mitigate. While the United States works on transitioning to IFRS from GAAP, individuals can now

Related Essays

Ifrs Vs Gaap Essay

988 words - 4 pages IFRS vs. GAAP: What are the differences, how does it affect net income reporting and what difficulties may exist in mandating IFRS in the U.S. Introduction I propose to write a paper on some of the major differences which still remain between IFRS and US GAAP. Although the FASB and IASB along with the SEC have been working to converge the two accounting systems, many differences still exist. In particular I plan to show the effects on the

Gaap Vs Ifrs Essay

666 words - 3 pages GAAP vs IFRS GAAP vs IFRS: Opposing the Proposed Shift Kelsey Perez Author Affiliation There has been a growing demand over the past twenty years to unite the business world under one conceptual framework for reporting financial statements. Currently, there are two types of frameworks used throughout the accounting world. They are the General Accepted Accounting Principles ( GAAP) and International Financial Reporting Standards (IFRS

Ifrs Vs. Gaap Essay

1014 words - 5 pages IFRS vs. GAAP ACC/291 June 1, 2015 Judith Bines IFRS vs. GAAP The International Financial Reporting Standards (IFRS) and the Generally Accepted Accounting Principles (GAAP) are rules used to ensure ethical reporting of financial information. During Accounting 291, we have learned how to apply these rules however the differences between the United States GAAP and the IFRS make it difficult to compare companies. Some of these differences

Ifrs Vs Gaap Consolidation Essay

1395 words - 6 pages | | |CONSOLODATION: | |US GAAP vs IFRS