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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 with different treatment. Under IFRS, firms are required to use component depreciation if the parts of the asset offer varying patterns of benefit. The reasoning behind this is that it provides a clearer picture of the asset’s book value. This method is also permitted under GAAP, but U.S. companies rarely use it in practice. Take for example, a large piece of manufacturing machinery...

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