Accounting Standards



Use our Accounting Research Online for financial reporting resources. This publication helps users understand the significant differences between IFRS Standards and US GAAP, and provides a summary of differences encountered most frequently. This publication focuses primarily on recognition, measurement and presentation.


Objectives of financial statements In general, broad focus to provide relevant info to a wide range of stakeholders. GAAP provides separate objectives for business and non-business entities. In general, broad focus to provide relevant info to a wide range of stakeholders. IFRS provides the same set of objectives for business and non-business entities. Underlying assumptions The “going concern” assumption is not well-developed in the US GAAP framework. IFRS gives prominence to underlying assumptions such as accrual and going concern.

Main Differences Between Gaap And Ifrs

Work is being done to converge GAAP and IFRS, but the process has been slow going. This article is to provide readers information on financial modeling best practices and an easy to follow, step-by-step guide to building a financial model. An example is the recognition of internally generated brands, mastheads, publishing titles, customer lists and items similar in substance, for which recognition is prohibited by IAS 38. In addition research and development expenses can only be recognised as an intangible asset if they cross the threshold of being classified as ‘development cost’.

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GAAP is more inclined towards the literature, whereas in IFRS, reviewing of facts pattern is more thorough. Data tenancy is a key piece of any data protection scheme and can be crafted around five building blocks to provide safe, secure …

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  • While GAAP does provide a general standard, many times it will also create exceptions, while offering more specific guidance targeted towards specific industries.
  • IFRS, however, does not approve this method as LIFO does not reveal the actual flow of inventory in most cases, resulting in unusually low-income levels.
  • Management, investors, shareholders, financiers, government, and regulatory agencies rely on financial reports for decision-making.
  • Last year, the SEC announced plans to issue a proposal that would allow U.S. public companies to voluntarily disclose limited IFRS information as non-GAAP supplemental information to their regular GAAP financial statements.
  • Member firms of the KPMG network of independent firms are affiliated with KPMG International.
  • Each country’s authorities require companies within their jurisdiction to report based on the local standard, which may include China GAAP, German Handelsgesetzbuch and Australian Accounting Standards.

It covers the recognition, measurements, presentation and disclosure of financial information. Usually, these principles also match with those set by the IFRS. The primary feature of the GAAP standards is that it only applies to companies in the US. GAAP is mandatory for all public companies operating in the US. Apart from that, most nonprofits and government bodies must adhere to these standards. On top of that, companies outside the US may also prepare their financial statements under GAAP.

Intangible Assets

These costs are not deducted from the revenue but are depreciated or amortized over time. Companies following the GAAP can use all three inventory costing methods. This flexibility enables organizations to use the process that is most convenient for them. The IFRS allows the FIFO and weighted average methods but bans its practitioners from using the LIFO method. It believes the LIFO method does not provide an accurate depiction of inventory flow, potentially portraying lower income levels that the organizations have. The relevance of IFRS for a company is with the listing of the shares in the public stock exchange.


The adoption of both standards is in different parts of the world. Knowledge about the differentiating parameters of both the standards is useful for publicly traded companies. GAAP does not allow asset revaluation after it is impaired while IFRS permits acids to be re-evaluated on their original cost and allow adjustment for depreciation. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. More than ever, they are accountable to growing numbers of active stakeholders – including governments and regulators across the world – for their approach to environmental, social and governance issues.

Ifrs And Us Gaap

GAAP requires companies to measure and report financial performance consistently. It promotes comparability between the financial statements from different companies. For comparisons with outside companies, the same may not apply. Most of those companies use the IFRS to prepare financial statements. Essentially, IFRS is based on the guiding principle that revenue is recognized when value is delivered. GAAP has much more specific rules regarding how revenue is recognized in different industries, but essentially, income isn’t recognized until goods have been delivered or a service has been rendered. When the exchange/service has been completed, the accountant needs to consider the industry-specific rules regarding revenue recognition.


IFRS standards are International Financial Reporting Standards that consist of a set of accounting rules that determine how transactions and other accounting events are required to be reported in financial statements. They are designed to maintain credibility and transparency in the financial world, which enables investors and business operators to make informed financial decisions. However, not all companies prepare comparable and consistent financial statements. Usually, accounting standards provide companies with the accounting treatment for financial transactions. On top of that, companies in different areas must abide by specific accounting standards. However, companies in the US must report their financial statements under GAAP. IFRS stands for International Financial Reporting Standards.

Us Gaap Vs Ifrs: Financial Statement Presentation

Reference to the underlying accounting standards and any relevant national regulations is essential to understanding the specific differences. GAAP is a common set GAAP vs IFRS of generally accepted accounting principles, standards, and procedures that public companies in the U.S. must follow when they compile their financial statements.

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  • Lower Of Cost Or MarketLower of cost or market is the conservative way through which the inventories are reported in the books of accounts.
  • The IFRS believes this method presents a distorted picture of a company’s stock.
  • Companies are also expected to benefit, as investors will be more willing to provide financing.
  • In contrast, IFRS considers each interim report as a standalone period, and while an MD&A is allowed, it is not required.

The IFRS statements consist of a statement of the comprehensive income statement of financial position, statement of cash flows, statement of changes in equity, and notes. IFRS is short for International Financial Reporting Standard is a globally adopted method of financial reporting issued by International Accounting Standard Board . Formerly, it is known as International Accounting Standard .

Each Board can then incorporate the other’s standards it deems to be an improvement on its own existing standards. This approach has advantages, even though the process results in differences in standards for an accounting topic for some period of time as experience develops. Central to this support must be strong engagement by U.S. constituents in the ongoing efforts to produce high-quality, globally accepted standards. Apart from tangible assets, GAAP and IFRS also differ on intangibles. GAAP recognizes intangible assets at the current fair market value. However, it does not allow for any additional or future considerations. On the other hand, IFRS enables companies to recognize intangible assets with a future economic benefit attached.

Implications Of Potential Convergence

However, the LIFO method is not permitted under IFRS as the method often does not signify an accurate physical flow of goods, and it could result in lower net income being reported than actual. Method Of LIFOLIFO is one accounting method for inventory valuation on the balance sheet.

Varying market or technological factors can affect the value of organizations’ assets. When the value falls below the current value in their accounts, they classify it as an impairment and list it as a loss on their income statement.

Three methods that companies use to value inventory are FIFO, LIFO, and weighted inventory. When an asset experiences a reduction in value due to market or technological factors—which in turn, causes it to fall below its current value in a company’s account—it’s classified as a loss on impairment. While impairment is often permanent, an asset’s value can increase after this loss has been recognized if the elements that caused it no longer exist. While GAAP and IFRS share many similarities, there are several contrasts, beyond the regions in which they’re applied.

Research And Development R&d Costs

For example, in 2006 senior partners at PricewaterhouseCoopers called for convergence to be “shelved indefinitely” in a draft paper, calling for the IASB to focus instead on improving its own set of standards. US GAAP and IFRS can differ in the specifics and level of detail required. Footnotes are essential sources of additional company-specific information on the choices and estimates companies make and when discretion is exerted, and thus useful to all users of financial statements.

The assumptions are related to a business entity, monetary unit principle, time period principle, and going concerned. The constraints include the Consistency principle, objectivity principle, materiality principle, conservatism principle, and cost constraint.

IFRS requires financial statements to include a balance sheet, income statement, changes in equity, cash flow statement, and footnotes. The separation of current and noncurrent assets and liabilities is required, and deferred taxes must be shown as a separate line item on the balance sheet. Minority interests are included in equity as a separate line item. The U.S. Generally Accepted Accounting Principles and the International Accounting Standards — also known as the International Financial Reporting Standards — both serve the same purpose.

However, if the factors that caused the devaluation no longer exist, the value of the assets can increase again. The generally accepted accounting principles and International Financial Reporting Standards also differ on how companies recognize revenue. The GAAP’s general rule is that revenue is not recognized until the delivery of goods or rendering of services.


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