...Comparing IFRS to GAAP Serena Schulke ACC/291 March 21,2016 Emily Baculik Comparing IFRS to GAAP Comparing the IFRS and GAAP has been a three-week process for learning team F. Our team spent time discussing fair value measurements, component depreciation, revaluation of plant assets, development expense, development cost, contingent liabilities, and the differences between GAAP and IFRS accounting liabilities. Fair Value The GAAP fair value standards focus on the sale of an asset or the transfer of a liability using an exit price, unadjusted for transaction costs (Tran, 2012). Unlike GAAP, IFRSs standards are based on principle rather than on strict rules. IFRS requires some assets and liabilities to be measured at fair value in certain circumstances, the concept of fair value measurements in integral to the IASB’s conceptual framework (Tran, 2012). Component Depreciation Component depreciation is a method in which the parts or sections of property or individual depreciated at different rates. Component depreciation should be use by a business when it has items that will have product or assets that are the same with different useful lives (Business Dictionary,2016). Revaluation of Plant Assets Revaluation of plant assets is a change in the book value of assets, caused by a devaluation of the currency in which their value is recorded in the accounts (Business Dictionary, 2016). Revaluation of plant assets should be used for all of your plant assets to maintain...
Words: 860 - Pages: 4
...Comparing IFRS to GAAP Nicole A. Walker ACC/290 September 7, 2015 Linda Gandy Comparing IFRS to GAAP International Financial Reporting Standards or IFRS for short, is the standard method of accounting that is used in a little more than 110 counties in the world. US Generally Accepted Accounting Principles, GAAP for short, is the method of accounting that is used regularly in the United States. International Financial Reporting Standards is more “principles based” method, while the US Generally Accepted Accounting Principles is more “rules based” accounting system. IFRS 2-1: In what ways does the format of a statement of financial position under IFRS often differ from a balance sheet presented under GAAP? IFRS guidelines do not specify a certain format. Companies usually report their assets in reverse order. IFRS financial statements have current and noncurrent assets and then current and noncurrent liabilities listed separately on their balance sheet. GAAP requires that accounts are ordered based on what could be liquidized first. Cash, assets, liabilities and equity in that order. (Epstein, 2013) IFRS 2-2: Do the IFRS and GAAP conceptual frameworks differ in terms of the objective of financial reporting? Explain. No, from what I have read about the IFRS and GAAP it seems to me that both authorities believe in reporting accurate and relevant information. The information is relevant in the eyes of a creditor or regulator and should be accurate to conform to either...
Words: 970 - Pages: 4
...Comparing IFRS to GAAP In financial reporting the U.S uses the generally accepted accounting principles, to record and report. The international financial reporting standards have been used in over 110 countries all over the world. The have similarities but are very different in structure as well, the GAAP is rules based and the IFRS is more principle based when it comes to financial reporting. I will cover some of these difference and similarities in this essay. In what ways does the format of a statement of financial position under the IFRS often differ from a balance sheet presented under GAAP? The IFRS does not require that the statement of financial position be put into a specific order, when reporting financial information. However most under companies IFRS will report their assets in reverse order of liquidity. Under the GAAP companies are required, to report all accounts in specific order by liquidity. Do the IFRS and GAAP conceptual frameworks differ in terms of the objective of financial reporting? No the objectives are both the same for the GAAP and IFRS, they have very similar ways of reporting financial information. They both want companies to keep the information they report up to date, and data needs to be reported in an honest manner. All data reported should also be useful, to an investor, creditor, or regulator. When information is reported correctly, companies are abiding by the industry standard set forth. What terms commonly used under IFRS are synonymous...
Words: 970 - Pages: 4
...Comparing IFRS to GAAP Essay In the Accounting industry, there are various principles and guidelines by which financial accountants, analysts, and organizations need to abide by. The International Accounting Standards Board (IASB) issues standards (IFRS) that have been adopted by the United States and several countries outside of the U.S. (University of Phoenix, 2013). The IFRS along with Generally Accepted Accounting Principles (GAAP), professionals in the accounting industry use these guidelines as a baseline on which accounting practices are built upon. These standards are governed by the Securities and Exchange Commission (SEC) which ultimately oversees U.S. financial markets and accounting standard-setting bodies. Moving forward, the elements of IFRS and GAAP will be discussed to illustrate the similarities and differences and how it relates to Accounting and used in business practice. IFRS 8-1: Fair-Value Measurement Fair value measurements provide users of financial statements with an accurate picture of the value of a company’s assets. Both IFRS and GAAP require firms to include information regarding fair value measurements practices in the notes of financial statements. Under either system, companies will be required to report assets at either book value or fair value, depending on the situation. As a general rule of thumb, all assets in the same class must receive the same valuation treatment. In regards to the value of receivables, IFRS uses a two-tiered method...
Words: 856 - Pages: 4
...Comparing IFRS to GAAP Comparing IFRS to GAAP The United States of America is currently working with the rest of the world to streamline their accounting practices to create a uniform standard. The General Accepted Accounting Practices or GAAP was created by FASB also known as Financial Accounting Standards Board is currently being practiced in the United States. The IASB or International Accounting Standards Board makes the final decision on the practice of the International Finance Reporting Standards or IFRS and the standards used by over one hundred and fifteen countries. Fair market value is the price charged during a specific date in the selling of a good or service. This is also called market to market accounting. FASB has a new Accounting Standards Codification System which has Topic 820 revised from Financial Accounting Standards No. 157: Fair Value Measurement to Fair Value Measurement and Disclosure. (Metzger, 2013) The IASB has revisions pending in their Fair Value Measurement guidelines but both entities have two approaches for their valuation techniques. Income approach will convert future amounts like cash flow and earnings to a single current amount. The cost approach is the amount required to replace the asset. The value has been separated into a three level hierarchy. Level 1 is for quoted prices for identical assets or liabilities. Level two are non-quoted prices for a similar product in the market. Level 3 is used for unobservable...
Words: 779 - Pages: 4
...Jennifer Linnell Comparing IFRS to GAAP ACC 290 Katherine Conrad 07/07/2014 The United States are transitioning from GAAP to IFRS. While trying to understand and compare IFRS and GAAP, we see how the United States will be affected by this change, as well as see if the United States will benefit and prosper from using IFRS instead of GAAP. In what ways does the format of a statement of financial position under IFRS often differ from a balance sheet presented under GAAP? IFRS will refer to a statement of financial position as the statement of assets and equity. IFRS will present statements of financial position information in a certain order; Non-current assets, current assets, equity, non-current liabilities, and current liabilities. While IFRS is presented in a certain order, GAAP assets are listed in the order that they are expected to be converted into cash. GAAP specifically requires all accounts to be ordered based on their degree of liquidity. Cash is reported first and non-current assets are reported last. An example of a GAAP balance sheet order would be; Current assets, long term assets, current liabilities, long term liabilities, and shareholder equity. (Kieso, D.E, Kimmel, P.D., & Weygandt, J.J., 2014) Do the IFRS and GAAP conceptual frameworks differ in terms of the objective of financial reporting? When it comes to the terms of objective, IFRS and GAAP conceptual frameworks do not differ. Both IFRS and GAAP focus on setting a set of accounting principles...
Words: 729 - Pages: 3
...Comparing IFRS to GAAP Michaela Lyons ACC/290 03/28/2016 Sharon Powers Comparing IFRS to GAAP This collaborative team experience has been quite motivating and has really pushed me to research the information extensively to ensure my personal understanding. My team didn’t exactly connect easily and it really pushed me to develop my understanding on my own. Although that isn’t the ideal outcome in a team setting, however in my opinion it actually helped me push further. GAAP is the US Generally Accepted Accounting Principles, the accounting standard used in the United States, while IFRS the International Financial Reporting Standards is used in a vast amount of countries around the world (Tilea, D. M., Bleotu, V., & Serban, A. A. M. (2013)). The Contrast IFRS does not command an exact order or classification of accounts on the statement of financial position. In most cases, companies report assets in reverse order of liquidity. GAAP explicitly requires that all accounts be ordered based on their degree of liquidity. Consequently, cash is usually reported first and non-current assets will be reported last. GAAP and IFRS sustain comparable perspectives on the neutrality of monetary data. It’s contracted that economic reporting data should be pertinent and loyally signified. Material that is pertinent is anything that could be viewed as useful in the eyes of an investor, creditor, or regulator. Material that is loyally signified...
Words: 836 - Pages: 4
...the differences between Generally Accepted Accounting Principals (GAAP) and the International Financial Reporting Standards (IFRS). Currently, the majority of countries in the world follow International Financial Reporting Standards guidelines; however, the United States still uses Generally Accepted Accounting Principals. This topic has been a main focus because there is a plan for convergence between the two frameworks in the near future. The United States accounting system will undergo drastic changes when this occurs, but in the long-run the idea is to simplify the accounting procedures around the world. The main difference between GAAP and IFRS is that GAAP is considerably rule-based, whereas IFRS is more principal-based which means IFRS has room for 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 FIFO, LIFO, and weighted-average methods, IFRS does not accept LIFO. Also, when inventory is recorded on the balance sheet, IFRS requires that it be reported at the lower of historical cost or Net Realizable Value. GAAP, on the other hand, requires inventory to be reported at the lower...
Words: 795 - Pages: 4
...Comparing IFRS to GAAP ACC/290 June 5, 2016 Arin Smith Comparing IFRS to GAAP As international business increase those with financial responsibilities should be well versed in the two primary accounting methods: GAAP (Generally Accepted Accounting Principles) and IFRS (International Financial Reporting Standards). The Financial Accounting Standards Board set the GAAP which is primarily used in the United States and the IFRS is used in several other countries. It has been reported that the United States Security and Exchange Commission is planning to switch to IFRS in 2015 (Logue, 2011). While the two accounting methods share some similarities, there are some differences that could result in different reporting. Having a good understanding of both methods will allow companies to make business decisions that are effective and compliant. IFRS 2-1: In what ways does the format of a statement of financial or position under IFRS often differ from a balance sheet presented under GAAP? In my understanding, the IFRS does not give any specific order for the statement of financial position. If anything the, IFRS requires separation of current and noncurrent assets and liabilities. For a lot of the companies today they just report their assets in reverse order based off their liquidity. Now, the GAAP recommends separation of current and noncurrent assets and liabilities and also. require that all the accounts be in a specific ordered based on the liquidities hierarchy. IFRS 2-2:...
Words: 984 - Pages: 4
...Comparing IFRS to GAAP Paper ACC/291 Comparing IFRS to GAAP Essay RECONCILING FAIR VALUE MEASUREMENTS Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Different assets, liabilities, and equity instruments are measured at fair value. The standards in U.S. GAAP and IFRS that require or permit fair value measurements are different. As a consequence, an asset, liability, or equity instrument that is measured at fair value in U.S. GAAP might not be measured at fair value in IFRS and vice versa. The Boards have separate projects to address the measurement basis in other standards (for example, the projects to address the accounting for financial instruments and leases). There will be different accounting requirements in U.S. GAAP and IFRS for measuring the fair value of investments in investment company entities. Some the disclosures about fair value measurements will be different for U.S. GAAP and IFRS. For example, IFRS do not distinguish between recurring and nonrecurring fair value measurements. In addition, because IFRS generally do not allow net presentation for derivatives, the amounts disclosed for fair value measurements categorized within Level 3 of the fair value hierarchy might differ. COMPONENT DEPRECIATION Component depreciation happens when an asset has fundamentally different parts that should be depreciated...
Words: 762 - Pages: 4
...Comparing IFRS to GAAP Donald Cleveland University of Phoenix Kurt Meyer ACC/290 Author Note [Include any grant/funding information and a complete correspondence address.] Abstract [The abstract should be one paragraph of between 150 and 250 words. It is not indented. Section titles, such as the word Abstract above, are not considered headings so they don’t use bold heading format. Instead, use the Section Title style. This style automatically starts your section on a new page, so you don’t have to add page breaks. Note that all of the styles for this template are available on the Home tab of the ribbon, in the Styles gallery.] Keywords: [Click here to add keywords.] Comparing IFRS to GAAP In the financial industry there is a well-known difference between how the United States operates, and how the rest of the world conducts accounting practices. Generally Accepted Accounting Principles (GAAP) is the accounting standard practiced in the US. International Financial Reporting Standards (IFRS) is the accounting standard used around the world. GAAP is known to have more rules, while IFRS is based more on principle and general acceptance. In this paper GAAP and IFRS will be compared and contrasted in a brief overview. IFRS 2-1 The main difference between the formatting of IFRS and GAAP statement of financial of position and a GAAP balance sheet is the ordering of liquidity. IFRS does not require a particular order or any classification of accounts. It is common for companies...
Words: 967 - Pages: 4
...Comparing IFRS to GAAP Essay Joshua Tracey ACC /2291 March 22nd, 2016 Mr. Bob Wells Comparing IFRS to GAAP Essay The past few weeks, the team and I have been discussing each of the questions and have come to some very good answers to each. We tried to compile a list so that each can put into our own words and input our opinions and examples that we have direct experiences with. Each question is outlined below and has a brief excerpt of each of our discussions. IFRS 8-1: What are some steps taken by both the FASB and IASB to move to fair value measurement for financial instruments? In what ways have some of the approaches differed? Under either system, companies will be required to report assets at either book value or fair value, depending on the situation. Fair value measurements provide users of financial statements with an accurate picture of the value of a company’s assets. Both IFRS and GAAP require firms to include information regarding fair value measurement practices in the notes of financial statements. As a general rule of thumb, all assets in the same class must receive the same valuation treatment. In regards to the value of receivables, IRFS uses a two-tiered method that first analyzes individual receivables, and then looks at receivables as a whole to determine if there is any impairment. IFRS 9-1: What is component depreciation, and when must it be used? Component depreciation happens when an asset has fundamentally different parts that should...
Words: 1015 - Pages: 5
...Comparing IFRS to GAAP Essay ACC/291 10/12/15 James Ferguson Comparing IFRS to GAAP Essay The International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP) have some similarities and differences when it comes to accounting for liabilities. There are steps that are taken by both the FASB and IASB to move to fair value measurement for financial instruments. There are some differences between these approaches. IFRS 8-1 What are some steps taken by both the FASB and IASB to move to fair value measurement for financial instruments? In what ways have some approaches differed? It doesn’t matter if the FASB or IASB is followed; the steps taken to move to fair value measurement for financial instruments are to be noted in the financial statements regarding fair value measurement practices. Under each system, a company must report the assets at book value or fair value situational depending. Every asset in the same class of assets must get the same valuation. When valuing receivables, the IFRS operates under a two-tiered method that will analyze individual receivables first then takes a look at receivables as a whole to see if there is any impairment. IFRS 9-1 What component depreciation, and when must it be used? Component depreciation should be used when parts of the assets are fundamentally different. It is when the asset has different components with varying lifespans. Under IFRS, companies are required to use component depreciation...
Words: 804 - Pages: 4
...Comparing IFRS to GAAP Paper In this paper, I will be talking about what the International Financial Accounting Standards (IFRS) is, and General Accepted Accounting Principles (GAAP) are and what differences as well as similarities. IFRS is a set of international accounting standards that regulate what type of events and transactions should be reported in a financial statement. GAAP is accounting rules that keep a detailed logistical account of what is declared by the company. FRS 2-1: In what ways does the format of a statement of financial or position under IFRS often differ from a balance sheet presented under GAAP? Although the IFRS does not have a specific order that it must be listed on the statement, companies tend to report in reverse order of liquidity such as: Long Term Assets Current Assets Shareholder Equity Long Term Liabilities Current Liabilities GAAP requires that accounts are ordered based on the degree of liquidity which report cash first and non-current assets last such as: Current Assets Long Term Assets Current Liabilities Long Term Liabilities Shareholder Equity IFRS 2-2: Do the IFRS and GAAP conceptual frameworks differ in terms of the objective of financial reporting? Explain. IFRS and GAAP do not differ in the terms of financial reporting. Both GAAP and IFRS have very similar viewpoints as to financial reporting data should be relevant and represented correctly and accurately. Any related information is all that may be necessary...
Words: 835 - Pages: 4
...Comparing IFRS to GAAP Carla Neill ACC/291 – Principles of Accounting II August 3, 2015 Annette Anigwe Comparing IFRS to GAAP The word accounting has people to believe it is just about numbers and nothing else, well there is more to the story than just numbers. At this time, there is two different methods of accounting GAAP and IRFS. GAAP stands for Generally Accepted Accounting Principles. GAAP is used primarily by businesses reporting their financial results in the United States. (Bragg, 2011) GAAP is rules based. IFRS stands for International Financial Reporting Standards. IFRS is used everywhere expect the United States, but there is talk about the U.S. going to the IFRS. IFRS is more principle based, which is much easier to understand. It requires businesses to report their financial position by using same rules. (Bragg, 2011) IFRS8-1: What are some steps taken by both the FASB and IASB to move to fair value measurement for financial instruments? In what ways have some of the approaches differed. Fair value measurements provide users of financial statements with an accurate picture of the value of the company’s assets. Both IFRS and GAAP require including information of fair value measurement practices in the notes of financial statements. Under IFRS or GAAP companies are required to report assets at either book value or fair value, depending on the situation. The approaches differ by the implementation. IFRS 9-1: What is component depreciation, and...
Words: 923 - Pages: 4
