Comparing IFRS to GAAP Comparing and Contrasting
IFRS differs a lot from GAAP. IFRS does not demand a specific order of accounts on the statement of financial position. When reporting assets, IFRS reports them in reverse order of liquidity. Doing so, allows the people that use the financial statements a better understanding of the structure of the company’s assets. GAAP is the opposite of IFRS. GAAP lists assets in the order of the assets with the highest liquidity first. For example, cash has a higher liquidity, so it would be listed first on the balance sheet. When it comes to conceptual framework of IFRS and GAAP, they do not differ in terms of the objective of financial reporting. Both IFRS and GAAP have the objective to report data that is relevant to the users of the financial reports. Any other information that could be useful is also included in these statements.
There are two terms that are commonly used under IFRS that are synonymous with common stock and balance sheet. Share Capital Ordinary is equivalent with common stock. GAAP’s Common Stock refers to the value of equity and IFRS’ Share Capital Ordinary is common ownership stakes. Statement of Financial Position is correspondent to balance sheet. Both of these are slightly different in format, but show a comparison of equity and assets to liabilities.
When deciding whether the United States should adopt IFRS, the SEC must consider a few things. I have always followed the rule of, “If it’s not broke, don’t fix it”. With that being said, GAAP has been used in the United States for a long time and it is working out just fine. A lot of change would be hard on the bankers and accountants. There would have to be extensive training on IFRS and there would be a lot of errors as the transition was going on. It would really affect businesses, big or small. When companies start to swap to a