...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
...The Difference between U.S. GAAP and IFRS on Revenue Recognition The Difference between U.S. GAAP and IFRS on Revenue Recognition Trade activities among world economies and the expansion of corporate America overseas have created a need for better and uniform global accounting standards. Many countries conduct businesses globally, especially with the United States. The convergence from Generally Acceptable Accounting Principle (GAAP) to International Financial Reporting Standards (IFRS) can be related to the convergence of Europe, when both entities were in search of common ground to conduct business transactions. As a result of global accounting needs, in 2001 the International Accounting Standard Board (IASB) was given the go ahead by major constituents of the world’s capital markets to develop a single set of high quality accounting standards. This crisis gave birth to the Financial Accounting Standard Board - IASB convergence program (Bahusova, 2009). IASB, along with the FASB, had an open debate in December of 2008 on revenue recognition concerning the changes in customer contract and the obligation between them and the seller. The debate focused on uniform standards for both United States companies that use GAAP and other non- foreign companies using IFRS (Mintz, 2009). The two bodies wanted to achieve continuity on revenue recognition for similar contracts, regardless of the company’s origin. This advancement would increase the quality of revenue...
Words: 1708 - Pages: 7
...between IFRS and GAAP Agustin Blanco ACC 290 06/06/2016 Dan Jensen Comparison between IFRS and GAAP This paper provides a comparison between the International Financial Reporting Standards (IFRS) and the United States Generally Accepted Accounting Principles (GAAP) and how they are differentiate from each other in the format of financial statement, conceptual framework, and IFRS terms. There is also a description of some issues the SEC must consider in order to adopt IFRS in the United States as well as a comparison of the rules regarding revenue recognition under IFRS versus GAAP. There is an explanation of the definitions Under IFRS for revenues and expenses, as well as an explanation of the competitive implications (both pros and cons) of Sarbanes-Oxley Act (SOX). Questions 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? 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 to report assets in reverse liquidity under IFRS. Instead, GAAP specifies and requires all a company’s account be classified and ordered based on liquidity. IFRS 2-2: Do the IFRS and GAAP conceptual frameworks differ in terms of the objective of financial reporting? IFRS and GAAP...
Words: 957 - Pages: 4
...Rules vs. Principles Based Accounting Standards in the United States Elsie M. Powell Liberty University Online ACCT 301-D01 December 7, 2014 Rules vs. Principles Based Accounting Standards The United States of America is under a great decisional debate, should the United States adopt a more principles-based accounting standard or stay with the more rules-based standard that is currently used. The two standards offer differing views on how a company should approach their accounting needs. The United States continues its discussion about whether to change from the U.S. Generally Accepted Accounting Principles (U.S. GAAP) to the International Financial Reporting Standards (IFRS) and with the recent accounting scandals, the debate has become a heated topic. The key issues of the argument relates to a variety of moral issues and cost of transitioning from GAAP to IFRS. The question remains, should the United States replace the current rules-based accounting standards with a more relaxed principles based accounting standard. The Financial Accounting Standards Board (FASB) is a “designated organization in the private sector for establishing standards of financial accounting that govern the preparation of financial reports by nongovernmental entities. Those standards are officially recognized as authoritative by the Securities and Exchange Commission (SEC) (Financial Reporting Release No. 1, Section 101, and reaffirmed in its April 2003 Policy Statement) and the American Institute...
Words: 1970 - Pages: 8
...Deal or No Deal: Should the United States of America Adopt the International Financial Reporting Standards? Since 1936, accountants in the United States have been following a set of generally accepted guidelines, historically set by the American Institute of Certified Public Accountants, for their practices. These guidelines have come to be known as the Generally Accepted Accounting Principles, or GAAP. Since their creation, these principles have protected companies and investors from fraud, as accounting practices can sometimes be questionable. The GAAP holds companies accountable for their financial reporting activities and includes rules accountants must follow regarding recording transactions and preparing financial statements. Recently, there have been questions regarding the Generally Accepted Accounting Principles in the United States as opposed to the International Financial Recording Standards, or IFRS ; and whether or not the United States should adopt these new accounting standards. There are a number of pros and cons to the International Financial Recording Standards as well as the Generally Accepted Accounting Principles; however, I do not think that the United States should fully adopt the IFRS considering the history of the GAAP and the reason for the creation of its principles. As previously mentioned, the American Institute of Certified Public Accountants (AICPA) has been responsible for setting accounting standards. In 1973, the Financial Accounting Standards...
Words: 1700 - Pages: 7
...The road to international reporting The Convergence of GAAP and IFRS | Leroy Meadows Advanced Accounting | The road to international reporting The Convergence of GAAP and IFRS | Leroy Meadows Advanced Accounting | The Road to International Reporting The convergence of a rules-based approach and a principles-based approach in relation to accounting and the dissemination of financial information is not something to be taken lightly. With the need for convergence increasing due to globalization, there are sure to be some contentious issues that must be addressed if convergence is to succeed. While the main issue for those who use a rules-based approach is the issue of comparability, there are other issues that must be taken into account as well. This paper will provide a brief history of globalization as well as the response of the United States in the wake of massive corporate fraud between 2000-2002. The differences between a rules-based approach and a principles-based approach and some difficulties that arise when trying to merge two different systems of accounting will also be examined. Lastly, this paper will address why convergence is not only probable, but necessary. The Need to Be One The modern push for globalization has occurred in two stages. The World Trade Organization, in its 2008 report, provides a chronology of this push which shows the first stage of globalization starting in the mid-19th century and continuing until the start of WWI. The...
Words: 4011 - Pages: 17
...organization is reporting under the IFRS standard while their branch in the United States is using US-GAAP. While the differences do not outweigh the similarities, GAAP and IFRS standards have caused some concerns in financial reporting. These concerns have led to the evaluation of these two reporting standards and the discussion on whether to move IFRS worldwide. This paper will outline a few of the differences between GAAP and IFRS as well as review the discussion of standardized reporting using IFRS. Introduction Historically, accounting and reporting standards in the United States have been set by the AICPA (American Institute of Certified Public Accounts) as laid out by the regulations set by the Securities and Exchange Commission (SEC). In 1973, the Financial Accounting Standards Board (FASB) was developed by the AICPA as a council for establishing standards for reporting for all United States companies. Under FASB, GAAP was reorganized into approximately 90 accounting standards offering concise methods to follow for financial reporting. This not only allowed for ease of access when reading US financials statements, but also allowed for comparison of documentation for investments, credits, and other financial decisions. On the other hand, the International Financial Reporting Standards (IFRS) were developed by the International Accounting Standards Board (IASB) based in London. Currently, about 120 nations require the use of IFRS for financial reporting by public companies...
Words: 3687 - Pages: 15
...Comparing IFRS to GAAP ACC/290 7-14-2015 Howard Pickering Comparing IFRS to GAAP As International business increases, 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 primary used in the United States and the IFRS is used in several other countries. If the United States where to every switch to IFRS, they would need to get a good understanding of the difference and acknowledge the similarities. This will only make for better business decisions. “The IASB and FASB are working on a project that would rework the structure of financial statements. Specifically, this project will address the issue of how to classify various items in the income statement. A main goal of this new approach is to provide information that better represents how businesses are run. In addition, this approach draws attention away from just one number—net income. It will adopt major groupings similar to those currently used by the statement of cash flows (operating, investing, and financing), so that numbers can be more readily traced across statements.” (Wiley, 2013) 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? The GAAP requires accounts to be listed in a specific order based on liquidity...
Words: 901 - 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
...of United States Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS) This paper examined the relationship between United States Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS) and found merging both accounting standards into a worldwide standard is ideal for investors. Corporate financial statement requirements depend on location. The two accepted accounting standard systems are GAAP and IFRS. The differences between GAAP and IFRS are GAAP is rules-based and IFRS is principle-based. How can a worldwide accounting standard benefit the world economy? The answer depends on political will, culture, countries history, and business structure. Research indicated there are only slight differences between GAAP and IFRS. These slight differences must be explored further to predict the impact on companies, economic, and financial markets. GAAP and IFRS have to be reconciled as a worldwide accounting standard to efficiently allow investors to compare foreign companies. GAAP set the accounting standard for the United States since its inception in 1929. GAAP evolved over the last 60 years (Măciucă, Ursache, Moroşan, & Apetri, 2014). IFRS was established in 1973 (Smith, 2012). IFRS used GAAP as a source document for its standards, either to imitate, modify, or omit (Chevis, 2014). The European Union established IFRS as the standard in 2005 (Smith, 2012). In 2007, the United States...
Words: 1271 - Pages: 6
...Comparing IFRS to GAAP Paper Ashley Connors ACC/290 Sharon Powers Comparing IFRS to GAAP Paper The comparison between the IFRS and GAAP and how they differ from one another. The accounting industry has many guidelines that need to be followed by accountants, analysts, and organizations. The internal Accounting Standards Board issued standards (IFRS) that have been adopted by the United States and several countries out of the U.S. In what ways does the format of a statement of financial or position under IFRS often differ from a balance sheet presented under GAAP? The format of a statement of finical or position under IFRS differ a balance sheet presented under GAAP in the following ways. IFRS does not require a certain order or classification of accounts on the statement of finical position. Companies are recommended to report assists in reverse order of liquidity. Making sure the users of finical statements have a clear understanding of the company’s structure is important. An example of the order of accounts on the statement of finical position is: * Long Term Assets * Current Assets * Shareholder Equality * Long Term Liability * Current Liabilities GAAP requires that all accounts are ranked on their measureable liquidly. Cash assets will be ordered first and shareholder equity will be ordered last. * Current Assets * Long Term Assets * Current Liabilities * Long Term Liabilities * Shareholder Equity What...
Words: 705 - Pages: 3
...Accounting Horizons Vol. 24, No. 3 2010 pp. 355–394 American Accounting Association DOI: 10.2308/acch.2010.24.3.355 Global Accounting Convergence and the Potential Adoption of IFRS by the U.S. (Part I): Conceptual Underpinnings and Economic Analysis Luzi Hail, Christian Leuz, and Peter Wysocki SYNOPSIS: This article is Part I of a two-part series analyzing the economic and policy factors related to the potential adoption of IFRS by the United States. In this part, we develop the conceptual framework for our analysis of potential costs and benefits from IFRS adoption in the United States. Drawing on the academic literature in accounting, finance, and economics, we assess the potential impact of IFRS adoption on the quality and comparability of U.S. reporting practices, the ensuing capital market effects, and the potential costs of switching from U.S. GAAP to IFRS. We also discuss the compatibility of IFRS with the current U.S. regulatory and legal environment, as well as the possible macroeconomic effects of IFRS adoption. Our analysis shows that the decision to adopt IFRS mainly involves a cost-benefit trade-off between ͑1͒ recurring, albeit modest, comparability benefits for investors; ͑2͒ recurring future cost savings that will largely accrue to multinational companies; and ͑3͒ one-time transition costs borne by all firms and the U.S. economy as a whole, including those from adjustments to U.S. institutions. In Part II of the series ͑see Hail et al. 2010͒, we provide an analysis...
Words: 26892 - Pages: 108
...accessed through the DeVry online library. Choose a country that has already adopted IFRS. In 2-3 pages (12-pt type, double-spaced) answer the following questions: 1. Describe the process that your selected country went through to adopt IFRS, such as how long it took for the country to fully adopt IFRS. IFRS’s are a single set of accounting standards at a global level for all sectors. Accounting standards are trustworthy statements is the reflection of financial statements to be presented to the stakeholders . United kingdom has already adopted IFRS since 2005.I would be discussing on adoption of IFRS by United kingdom for this paper. The United Kingdom has already adopted IFRS for the consolidated financial statements of all companies whose securities trade in a regulated market” (EU Law).The IAS Regulation requires companies with securities either equity or debt acknowledged to trading on a regulated market of any member state of the European Union to use international accounting standards in preparing their consolidated financial statements. As a member state of the European Union, the United Kingdom is subject to IAS Regulation adopted by the European Union in 2002. The EU IAS Regulation requires application of IFRS adopted by the EU for the consolidated financial statements of European companies whose securities trade in a regulated securities market starting in 2005. In the United Kingdom, this would include the London Stock Exchange Main Market. Foreign companies...
Words: 995 - Pages: 4
...BUS5613 | Will the U.S. Adopt IFRS? | U.S. Integration of IFRS | | Christopher Anglin | 5/3/2015 | | Will the U.S. Officially Adopt IFRS? Initially, as a student relatively new to the study of international accounting standards and regulations, I assumed that the United States would be leading the efforts of an internationally accepted accounting standard, and I was both correct and incorrect in that assumption. The fact that the U.S. has the economic influence that it has, and its ties around the world, my assumption that other countries would follow suite, in hind sight, was naive. Days into my research, after being flooded with circumstantial evidence and factual evidence and information both supporting and denouncing the United States influence on this topic, I came up with one conclusion and one conclusion only, the U.S. will adopt IFRS or a future IFRS-like standard that is fully recognized by the international community, and it will not be U.S. GAAP. I am not stating that U.S. GAAP will no longer exist; I am saying that IFRS will be accepted as an equal to the U.S. GAAP and in the future, U.S. domestic reports will reflect and be tailored to IFRS requirements ultimately taking precedents over domestic accounting principles in an effort to save time and money. As we have all learned over the years, large scale changes in the United States take time and they are often slowly integrated over the years to not upset the delicate balance of domestic politics...
Words: 2190 - Pages: 9
...IFRS vs. GAAP: Same or Different ACC407 January 27, 2013 Catherine McBride IFRS vs. GAAP: Same or Different The Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) are working on nearly a dozen joint projects designed to improve both U.S. Generally Accepted Accounting Principles (US GAAP) and International Financial Reporting Standards (IFRS), and ultimately make the standards fully compatible. But in the mean time, the two predominant accounting standards to this day are the U.S. GAAP (Generally Accepted Accounting Principles) and IFRS (International Financial Reporting Standards). These two standards have several differences because they both take a completely different approach to their methodology. The U.S. GAAP is more rule-based, where IFRS is principal-based. With IFRS's principal-based approach, a lot of room was left open for interpretations for similar transactions. It gives room for second guessing, debate and conjecture. Anytime you have a fundamental system that can be debated you create a forum of uncertainty that then requires an arbitrator who can settle the dispute. This arbitrator is called the standards setting board, and it provides fewer exceptions than a rule based system (Parrott, 2008). With the U.S. GAAP you have a rule-based system. This is a more clear approach that distinguishes between what seems correct and what is correct. There is no room for interpretation. Each process has a set...
Words: 2138 - Pages: 9
