...IFRS vs GAAP – differences in revenue recognition IFRS and GAAP in Canada are both principle-based frameworks with significant conceptual similarities, but where they differ drastically is in the application of those general principles. By looking at the detailed guidance of GAAP vs IFRS for processing various accounting transactions, one can start to embrace the magnitude of the disparity between the two sets of reporting standards. Revenue recognition principle illustrates the IFRS vs GAAP divergence. Under IFRS, the revenue from the sale of goods is recognized when the seller has transferred the significant risks and rewards of ownership to the buyer and no longer has control or managerial involvement over the goods. Canadian GAAP follows the same logic, but has more specific criteria underlying these principles such as: the existence of persuasive evidence of an arrangement, the occurrence of delivery or rendering of services, and whether the seller’s price to the buyer is fixed or determinable. By the same token, Canadian GAAP provides a detailed approach for revenue recognition for multiple-deliverable arrangements which is not specific to a scenario or industry; IFRS does not provide such detailed guidance, however, it does consider some specific scenarios. The Canadian GAAP vs IFRS distinction can be further seen in examining multi-deliverable arrangements. Canadian GAAP provides a detailed approach for revenue recognition for multiple-deliverable arrangements which...
Words: 443 - Pages: 2
...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
...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
...IFRS vs. GAAP Accounting 290 IFRS vs GAAP The world has never been smaller than it is today. Technology has created ways to reach out to the far corners of the world that have never been possible in the past. This has made the transfer of information the easiest and fastest it has ever been. This revelation of information didn’t just make it easier for individuals to connect around the world, but business as well. Internationalization of business has never been stronger throughout the world. Just like different cultures from around the world differ, so do the ways business operate and report their finances. There are two main ways business around the world report their accounting information. The Generally Accepted Accounting Principles (GAAP) is primarily used in the United States and the International Financial Reporting Standards (IFRS) is primarily used in European markets as its accounting system. With the United States looking to join its European counterparts in 2015 to switch to a IFRS system, it’s important for business to understand the similarities and differences between the two accounting systems. In What Ways Does the Format of a Financial Statement Differ? One of the big changes will be the requirements of separating current, non-current assets, and liabilities under the IFRS. The GAAP only recommends that you separate assets, non-current assets, and liabilities but does not require a company to do so. The IFRS requirements...
Words: 883 - Pages: 4
...US GAAP vs. IFRS The basics March 2010 Table of contents 2 5 7 8 11 13 14 16 18 20 26 28 31 33 35 38 40 42 43 44 46 47 Introduction Financial statement presentation Interim financial reporting Consolidations, joint venture accounting and equity method investees Business combinations Inventory Long-lived assets Intangible assets Impairment of long-lived assets, goodwill and intangible assets Financial instruments Foreign currency matters Leases Income taxes Provisions and contingencies Revenue recognition Share-based payments Employee benefits other than share-based payments Earnings per share Segment reporting Subsequent events Related parties Appendix — The evolution of IFRS Introduction It is not surprising that many people who follow the development of worldwide accounting standards today might be confused. Convergence is a high priority on the agendas of both the US Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) — and “convergence” is a term that suggests an elimination or coming together of differences. Yet much is still made of the many differences that exist between US GAAP as promulgated by the FASB and International Financial Reporting Standards (IFRS) as promulgated by the IASB, suggesting that the two GAAPs continue to speak languages that are worlds apart. This apparent contradiction has prompted many to ask just how different are the two sets of standards? And where differences exist, why do they exist...
Words: 19604 - Pages: 79
...One Global GAAP: IFRS vs. US GAAP Acct 522 Current Topics in Financial Reporting Zhipeng Cao CIN: 300443421 Introduction The most influential accounting reporting criteria today is the International Financial Reporting Standards (IFRS) by and U.S Generally Accepted Accounting Principles (U.S. GAAP). These two different accounting standards have various emphases. In short, IFRS states principles and it leaves the decision-making in everyday questions for accountants, while US GAAP consists of very detailed measures. Under the globalization environment, many companies are operating under a global scale; however, each country has its own accounting standard which makes the translation more difficulty. So the demand for the convergence of the two most important standards comes out. (Accounting Reporting Criteria, 2009, March 23). In this paper, I will put more emphasis on the comparison of the detail differences between International Financial Reporting Standards (IFRS) and U.S Generally Accepted Accounting Principles (U.S. GAAP). I will also pay attention to the convergence of the two accounting principles. Body 1 In this part, I will mainly discuss the difference between IFRS vs. US GAAP; the table below shows the brief summary of the major differences between IFRS vs. US GAAP. I would like to discuss some of them. General approach The most significant difference between IFRS and U.S. GAAP exist in the general approach. IFRS mostly provides the basic accounting...
Words: 2150 - Pages: 9
...IFRS vs. GAAP Introduction The U.S. GAAP is accounting principles adopted by the U.S Securities and Exchange Commission (SEC). Over time SEC has been talking about moving these principles over to the IFRS, The International Financial Reporting Standard. “IFRS is an accounting standard that was developed by a not-for-profit group called the International Accounting Standard Board. (www.Ifrs.com)” This summary will give you a subject by subject look of some differences and similarities both the IFRS and the GAAP carry. IFRS 2-1: In what ways does the format of a statement of financial or position under IFRS often differs from a balance sheet presented under GAAP? Accounting follows the double entry standard where transactions are broken down into sections, revenue or expenses, assets or liabilities. Under IFRS, it does not dictate a particular order of accounts on the statement of financial. Usually, companies report their assets in reverse order of liquidity. For example, you would start with long term assets and work your way down to current liabilities. Under GAAP, it requires that all accounts be in order of their liquidity. Cash is usually reported first and non- current assets would be listed last. With these differences financial reporting results would be different for companies. IFRS 2-2: Do the IFRS and GAAP conceptual frameworks differ in terms of the objective of financial reporting? Explain. No, IASB and FASB conceptual frameworks are organized in similar...
Words: 937 - 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
...IFRS VS. GAAP Gregory Abraham ACC/290 August 17, 2015 Sherrick Johnson IFRS VS. GAAP In accounting, there are sets of standards, accounting principles, and procedures that businesses use to assemble their financial statements. IFRS and GAAP are two common sets that companies use to comply their statements. IFRS, International Financial Reporting Standards, are a set of accounting standards established by the IASB, the International Accounting Standards Board, which is becoming the international standard for the preparation of public company financial statements. GAAP, Generally Accepted Accounting Principles, are a mixture of influential standards and simply the commonly accepted ways to record and report accounting information (Offill, 2012). Even though GAAP and IFRS are both commonly used, they are still differently structured. IFRS Format of a Statement Differ From GAAP Balance Sheet IFRS does not obligate a precise order or arrangement of financial records on the statement of financial position. A lot of the time businesses report possessions in opposite order of assets. For example, the sequence of accounts on the statement of financial position could include Current Assets, Long Term Asset, Long Term Liabilities, Shareholder Equity, and Current Liabilities. GAAP on the other hand, specifically desires that all financial records be organized established on their degree of assets. Thus, money is typically conveyed initially, and non-current possessions...
Words: 1069 - Pages: 5
...Alice Hines IFRS vs. GAAP Monday May 11, 2015 ACCT/290 Principles of Accounting I Tom House When it comes to accounting and dealing with finances, there is a lot to be knowledgeable when it’s in regards to International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP). IFRS is a set of accounting standards developed by an independent, not for profit organization called the International Accounting Standards Board (IABS). GAAP are the standard framework of guidelines for financial accounting used in a given jurisdiction, also known as accounting standards or standard account practice (FASB). The rule to these two terms falls under the double entry of accounting, where debits equal credits. The reason for IFRS and GAAP is the purpose which is reliable and useful to keep track of accounts. Assumptions for accounting determines monetary unit, meaning US currency. Economic entity what reports everything into a particular unit. Followed by the amount of time known as time period which is distinguished by economic life of a business divided into the artificial time period. Then after is the going concern assumptions. Principles are then put into play with revenue recognition, matching, full disclosure and cost principles. The format for IFRS and GAAP may differ from a statement of financial under IFRS or position and a balance sheet under GAAP because of the requirement...
Words: 863 - Pages: 4
...GAAP vs. IFRS Jose Vargas Phoenix Accounting 211 Dr. Freeman GAAP vs. IFRS Different accounting standards for business transactions are a problem in comparing financial results of different entities from different countries. As a solution, by our country accepting one standard, an international standard it would allow them to be assessed in a more comparable manner across the board. The United State of America with just a handful of other countries have in the past have used accounting guidelines based off the Generally Accepted Accounting Principles (GAAP) formulated by the Financial Accounting Standards Board. In order to bring about a accounting standard that can address the different accounting standards, the International Accounting Standards Board (IABS) has developed accounting guidelines called the International Financial Reporting Standards (IFRS). By every Country adopting these guidelines, it is expected that financial statements will be more comparable to different entities in other countries. When transitioning from GAAP to IFRS, there have been several differences identified in accounting and reporting financial transactions and records. The following are just a hand full which addresses some differences between the two reporting standards. * Extraordinary items; are the events that don’t occur on a regular basis, for IFRS they are simply prohibited and for GAAP, as long as they are unusual and indifferent they are allowed (Logue). * Bank...
Words: 492 - Pages: 2
...GAAP and IFRS Convergence Kenneth DeWitte Strayer University 1. Describe IFRS and GAAP and what convergence means. The International Financial Reporting Standards (IFRS) is the accounting framework used by the European Union, Japan, Canada, and other world economic leaders. The IFRS is based on the tenets of understandability, reliability, and comparability. It is based off the International Accounting Standards (IAS) and had the opportunity to be built from accounting ideas and principles used across the world. In recent years it also has had the chance to look at the United States Generally Accepted Accounting Principles (GAAP) and modify the rules to enhance clarity and consistency, intentionally setting itself apart from U.S. GAAP. United States GAAP is an aggregate of rules that show how to account for transactions and also present the transactions with reliability, consistency, and full disclosure. This amounts to a level of clarity that even someone not very knowledgeable about business can make a confident decision when investing. These rules were brought together by the Financial Accounting Standards Board (FASB). It is more specific than the IFRS requiring less interpretation and more consistent action taken by all businesses, leading to comparability through financial statements. The convergence of these two accounting frameworks is a must for both foreign and domestic businesses. There are some problems between the two systems coexisting. This has led to...
Words: 1121 - Pages: 5
...Apple case questions: 1. Explain GAAP, non-GAAP numbers and their impact on financial statements GAAP vs. IFRS affects financial statements in many different areas and must be adjusted accordingly. Revenue Recognition, extraordinary items, receivables, inventory, long-lived assets, and debt and equity would all have to be altered when switching between the two. For example, LIFO inventory valuation is not permitted under IFRS. Because of this, a company would have to recalculate under the FIFO method as well as adjust COGS and tax expenses. 2. Which method best reflects the economic reality? For investors, IFRS may present more approachable and comprehensive financial statements making them easier to analyze and understand. However when IFRS is applied, balance sheet differences in inventory, PPE, goodwill and other areas may pose shareholders in a better or worse position depending on what you are looking at. 3. Should Apple lobby for their non-GAAP numbers to be sanctioned by FASB? Yes; the impact of subscription accounting and deferred revenue under GAAP skews the company’s numbers to reflect a small portion of the company’s sales and net income making it a less accurate predictor of overall performance. Any company would obviously highlight on the method that shows the most favorable performance. 4. Does it matter if the revenue recognition rule for smartphones changes? Yes; the deferred revenues from the use of subscription accounting are adding...
Words: 279 - Pages: 2
...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
...Stanley from: Christopher Michael Yelvington subject: IFRS v. US GAAP: Business COMBINATIONS and Financial Statements. date: April 21, 2015 ------------------------------------------------- Dr. Stanley, When acquiring a foreign subsidiary, there are accounting differences that one must consider. Looking at the big picture U.S. GAAP is more rule based and IFRS is more principles based. Under IFRS, more emphasis is on the substance of transactions and more judgment is used. In this memo, I have identified key differences in U.S. GAPP v. IFRS with regards to the acquisition of a foreign entity and the financial statements. The following are the assumptions regarding your aquisition I have used in my analysis: 1. 80% Single Step Equity Purchase 2. Foreign entity currently reports under IFRS 3. Parent does not meet the definition of a investment entity under IFRS 4. Foreign entity’s functional currency is the Euro You as the parent company can continue to report your financials under US GAAP. Likewise, the foreign subsidiary will continue to report their financial statements under IFRS. For the reporting periods following the date of acquisition, you are required to consolidate the foreign subsidiary’s financial statements with the parent entities financial statements under US GAAP (Gannon & Ashwal, 2004). The consolidation model under US GAAP and IFRS differs. To start, the definition of control varies. Under US GAAP, control is based on controlling financial interested...
Words: 1829 - Pages: 8
