7/23/2019 THE GAAP AND IFRS

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GAAP (US Generally Accepted Accounting Principles) is the accounting standard used in

the US, while IFRS (International Financial Reporting Standards) is the accounting

standard used in over 11 countries around the world! GAAP is considered a "ore #rules

 $ased% syste" o& accounting, while IFRS is "ore #principles $ased!% 'he U!S! Securities

and change *o""ission is loo+ing to switch to IFRS $y 1-!

.hat &ollows is an overview o& the di&&erences $etween the accounting &ra"ewor+s used $y

GAAP and IFRS! 'his is at a $road, &ra"ewor+ level/ di&&erences in accounting treat"ents

&or individual cases "ay also $e added as this gets updated!

Comparison chart

GAAP IFRS

Stands for Generally Accepted Accounting

Principles

International Financial Reporting

Standards

Introduction Standard guidelines and structure &or

typical &inancial accounting!

Universal &inancial reporting

"ethod that allows international $usinesses to understand each

other and wor+ together!

Used in United States 0ver 11 countries, including

those in the uropean Union

Performance

elements

Revenue or epenses, assets or lia$ilities,

gains, losses, co"prehensive inco"e

Revenue or epenses, assets or

lia$ilities

Required

documents in

financial

statements

alance sheet, inco"e state"ent,state"ent o& co"prehensive inco"e,

changes in e2uity, cash &low state"ent,

&ootnotes

alance sheet, inco"e state"ent,changes in e2uity, cash &low

state"ent, &ootnotes

Inventory

Estimates

3ast4in, &irst4out/ &irst4in, &irst4out/ or

weighted4average cost

First4in, &irst4out or weighted4

average cost

Inventory

Reversal

Prohi$ited Per"itted under certain criteria

Purpose of theframework 

US GAAP (or FAS) &ra"ewor+ has no provision that epressly re2uires

"anage"ent to consider the &ra"ewor+

in the a$sence o& a standard orinterpretation &or an issue!

Under IFRS, co"pany"anage"ent is epressly re2uired

to consider the &ra"ewor+ i& there

is no standard or interpretation &oran issue!

!"ectives of 

financial

statements

In general, $road &ocus to provide

relevant in&o to a wide range o&

sta+eholders! GAAP provides separate

o$5ectives &or $usiness and non4$usiness

In general, $road &ocus to provide

relevant in&o to a wide range o&

sta+eholders! IFRS provides the

sa"e set o& o$5ectives &or $usiness

7/23/2019 THE GAAP AND IFRS

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GAAP IFRS

entities! and non4$usiness entities!

Underlyin#

assumptions

'he 6going concern6 assu"ption is not

well4developed in the US GAAP&ra"ewor+!

IFRS gives pro"inence to

underlying assu"ptions such asaccrual and going concern!

$ualitative

characteristics

Relevance, relia$ility, co"para$ility andunderstanda$ility! GAAP esta$lishes a

hierarchy o& these characteristics!

Relevance and relia$ility are pri"ary2ualities! *o"para$ility is secondary!

Understanda$ility is treated as a user4

speci&ic 2uality!

Relevance, relia$ility,co"para$ility and

understanda$ility! 'he IAS

&ra"ewor+ (IFRS) states that itsdecision cannot $e $ased upon

speci&ic circu"stances o&

individual users!

%efinition of an

asset

'he US GAAP &ra"ewor+ de&ines an

asset as a &uture econo"ic $ene&it!

'he IFRS &ra"ewor+ de&ines an

asset as a resource &ro" which

&uture econo"ic $ene&it will &lowto the co"pany