Major Differences Between GAAP and IFRS

GAAP, or Generally Accepted Accounting Principles, the accounting rules used to demonstrate financial statements for public companies or private, non-profit organizations, and government authorities in the United States Received. IFRS, or International Financial Reporting Standards, is designed so that companies around the world can compare each of the financial statements. Both bodies have similarities and differences with each other. The United States is the only place that uses GAAP, which can make it difficult to compare these figures with an international company. However, many large U.S. companies using IFRS as well as to adapt them to international competition. 

There are five major differences between GAAP and IFRS. Their revenue recognition, financial assets, impairment of assets, intangible assets, and inventory.When dealing with the recognition of revenue, GAAP uses concepts, while IFRS uses a standard, making it more difficult to compare the two. With GAAP, revenue may be amortized over a period of time, but there IFRS revenue can be identified immediately. Income contingent and different handling between the two objects. For GAAP, revenue is not recognized until the value is set. For IFRS, contingent revenues be recognized when the amount can be estimated accurately and when it is likely that profits will benefit the treatment of financial assets business.GAAP discussed several times in different parts. 

IFRS, however, there are only two standards dealing with financial assets, one for the disclosure, and one for the other issues. One of the main parts dealing with their financial assets classified. GAAP uses the classification of legal forms, whereas IFRS make them based on their properties. Another big part of dealing with financial assets when they release your financial statements. GAAP removal of assets when control has been released. IFRS see if there is a transfer of assets by gift passed.GAAP using a two-step process when annual impairment testing. The first step is to determine whether the carrying value of assets over future cash flows are discounted. If yes, then go to the next step, which is to calculate the impairment. Decrease in the carrying value exceeds the amount of value available. 

To IFRS, decreased decide whether the carrying value is higher the higher the discount cash flow or fair value less disposal in accordance costs.Both GAAP and IFRS intangible assets considered to be non-monetary asset without physical element. There are three main differences between the two bodies when it comes to dealing with intangible assets. The first involves the development costs. Under GAAP, development costs are expensed as incurred. Under IFRS, development costs are capitalized. When GAAP is dealing with the cost of advertising, one expensed as incurred or when the advertising fee was imposed for the first time. When IFRS handle advertising costs for intangible assets, all costs expensed as incurred. Using GAAP, revaluation is not permitted for intangible assets, but under IFRS, the revaluation at fair value of intangible assets is a two-body problem permitted.

Another inventory management policies. When using GAAP, spent the LIFO method is acceptable, but under IFRS, LIFO is not acceptable. This creates a challenge for GAAP converges with IFRS because taxpayers are required to use the same method of accounting in financial reporting and taxation. Companies currently using LIFO to solve the corresponding requirements if they are forced to change their methods feasible because of changes in IFRS. GAAP recognizes inventory at a lower cost or market inventory IFRS are recognized as a lower cost or net realizable value. GAAP also shows that the lower cost or market adjustment will not be able to reverse, whereas IFRS said that under certain circumstances, a lower cost or market adjustment should reversed.

Although there are a lot of differences between GAAP and IFRS, the two bodies have the same overall goal attempt to keep all the financial records accurately. There is a large amount of discussion of whether the United States will be converted to International Financial Reporting Standards, which will make it easier to compare financial companies abroad. Although that day comes, we do not know.