By Dr. Ken Feng Figure 1: Differences in framework Framework Purpose of framework Objective financial statements Assumption Qualitative characteristics Relevance and reliability are the primary characteristics. the US GAAP IFRS Require management to consider the framework if no explicit standard exists on an issue. Present different objectives for business and non-business financial statement reporting Have one objective for both.

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Place more emphasis on the going concern assumption. Relevance, reliability, comparability and understandability are the primary characteristics. (1)List income and expenses as the elements related to performance. (2)Define it as a resource from which a future economic benefit is expected. (3)Use “probable” to define the criteria for recognition.

Financial statements elements

(1)List revenues, expenses, gains, losses and comprehensive income as the elements related to performance. (2)Define an asset as a future economic benefit. (3)Use “probable” to define assets and liabilities. (4)Don’t allow the values of most assets to be adjusted upward.

Figure 2: Differences in 会计事项 会计事项 US GAAP 强制性规定 选择性规定 Balance Sheet Marketable Investment Securities Classified as held-to-maturity, trading and available-for-sale. LIFO, FIFO and the average cost method. Inventory Once an inventory write-down occurs, any subsequent recovery of value is ignored. Subsequent recovery of value can be included. Trading securities are known as held-for-trading securities. FIFO and the average cost method. IFRS 强制性规定 选择性规定 Case

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Property and Equipment

Don’t permit upward revaluations.

Permit upward revaluations. Property and equipment are reported at fair value at the revaluation date less the accumulated depreciation since revaluation. The equity method can be used and proportionate consolidation is preferred. The firm must expense costs