IFRS vs. GAAP

Introduction3

Discussion3

Business combinations4

Inventory Costs4

Long lived Assets5

Intangibles5

Conclusion6

References7

IFRS vs. GAAP

Introduction

This research paper aims to analyze the International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP) in its practicality and usage i.e. application in representing the financial information by comparing both the systems. The basic understanding in terms of comparability in the framework of these two reporting systems is valid when comparing the firms with the same economic outputs. Similarly, firms with different economic outcomes might consider different reporting system. In the United States, public companies may not be allowed to adopt the IFRS in the near future, but it's the matter of fact that the cross border merger and acquisitions (M&A) and the non-US stockholders' need certainly require the use of IFRS in reporting the information (Barth et al., 2012). IASB and FASB are working together to form a unique procedure for reporting of financial information by working on the major significant differences. Since, there are many difference in both the

Systems, the paper attempts to highlight some of the key differences.

Discussion

The most significant difference between US Generally Accepted Accounting principles (GAAP) and International Financial Reporting System (IFRS) for a practitioner is the role that the underlying concepts play in day-to-day accounting and reporting (Shamrock, 2012). Yet, there are many similarities in IFRS and US GAAP guidance on the presentation of financial statements. Both the systems include profit & loss statement, balance sheet, cash flows, other comprehensive income and notes to the financial statements. Further, both the systems recognize the accrual basis of accounting for the reporting of financial information with certain exception in representation of statement of cash flow. Concept of consistency and materiality of entities has set the similar standards while preparing the financial statements. However certain significant differences are there which need to be addressed for the purpose of convergence of both systems (Harris, 2012).

Business combinations

It was the first major culmination between IASB and IFRS regarding convergence; acquisition method is used for its accounting (Barth et al., 2012). When an entity control or obtains another entity, the transactions are made under the established methods of assets, liabilities, noncurrent assets etc. Even after the convergence of business combinations from both the systems still there exists certain difference. These differences are in acquiress's operating leases, measurement of non-controlling interest, and the assets and liabilities arising from contingencies.

Inventory Costs

Cost is the basic unit when defining inventory under both systems. Moreover, definition ...