...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
...IFRS vs. GAAP: What are the differences, how does it affect net income reporting and what difficulties may exist in mandating IFRS in the U.S. Introduction I propose to write a paper on some of the major differences which still remain between IFRS and US GAAP. Although the FASB and IASB along with the SEC have been working to converge the two accounting systems, many differences still exist. In particular I plan to show the effects on the reported net income of companies and highlight the difficulties of mandating the use of IFRS in the U.S. Resources abound on this topic, some include: Hughes S, Sander J. A U.S. Manager's Guide to Differences Between IFRS and U.S. GAAP. Management Accounting Quarterly [serial online]. Summer2007 2007;8(4):1-8. Available from: Business Source Complete, Ipswich, MA. Accessed November 7, 2014 SMITH L. IFRS and U.S. GAAP: Some Key Differences Accountants Should Know. Management Accounting Quarterly [serial online]. Fall2012 2012;14(1):19-26. Available from: Business Source Complete, Ipswich, MA. Accessed November 7, 2014. de Mesa Graziano, C., & Heffes, E. M. (2008). IFRS Section: Definition of Fair Value, One of the Differences Between U.S. GAAP and IFRS. Financial Executive, 24(10), 14 Romeo, G., & Bao, D. (2012). TEACHING INVENTORY USING U.S. GAAP AND IFRS: A COMPARATIVE PERSPECTIVE. Journal For Global Business Education, 1225-34. Siegel J., & Shim J. (2010) Accounting Handbook, Barron’s Educational Services,...
Words: 988 - Pages: 4
...INTRODUCTION For more than a decade now, there has been a movement around the world to develop a common set of high-quality accounting standards that can be applied globally. Comparable accounting around the world, if high standards are instilled and application was consistent, would make markets more efficient by letting investors compare companies from different countries. In particular, the issue of American adoption of International Financial Reporting Standards (IFRS) is of importance because IFRS standards are used by companies in many countries around the world, including all the countries in the European Union, and some say that the best hope for assuring that the international standards are uniformly followed would be having The Securities and Exchange Commission (SEC), responsible for deciding what accounting rules apply in the United States, involved in enforcing them (Norris, 2012). But, efforts have been under way for years to accomplish this convergence and in a number of areas they have been unable to reach agreements. Because of the expansion of commerce worldwide by many businesses, other issues have arose in this process, such as the need for common global regulation of banks and a need for a global set of ethical standards. In the 1970s, the Foreign Corrupt Practices Act (FPCA) sent a chill throughout the business community by criminalizing the act of making payments outside the US in pursuit of contracts (George, 2008). Making payments to obtain business is...
Words: 2102 - Pages: 9
...of time (Camfferman and Zeff, 2006). In 1993, Daimler Benz AG aimed to list on the New York Stock Exchange (NYSE); hence, it needed to reconcile its financial statements to comply with US Generally Accepted Accounting Principles (US GAAP). Under German GAAP, the firm had re- ported a net income of 615 million Deutschmarks (DM) for the 1992 year, which turned into a net loss q We are grateful to Luis Fernández-Revuelta and Mikel Tapia for their helpful comments on earlier drafts of this paper. This project is partially funded by the Spanish Ministry of Education’s research Grant # SEJ2007-67582-C02-01. * Corresponding author. Tel.: +34 91 568 96 00; fax: +34 91 561 09 30. E-mail addresses: salvador.carmona@ie.edu (S. Carmona), marco.trombetta@ie.edu (M. Trombetta). 0278-4254/$ - see front matter Ó 2008 Elsevier Inc. All rights reserved. doi:10.1016/j.jaccpubpol.2008.09.003  456 S. Carmona, M. Trombetta / J. Account. Public Policy 27 (2008) 455–461 of DM1, 839 million under US GAAP (see also Ball (2004)). On November 15, 2007, the US Securities and Exchange Commission (SEC) allowed the operation of foreign private firms using International Financial Reporting Standards1 on the NYSE without first reconciling their financial statements to US GAAP. The financial press enthusiastically greeted this move; on November 19, 2007, the Financial Times wrote: ‘‘The goal of a single worldwide accounting language has long been a dream. Today it is fast becoming a reality—and the pace is...
Words: 866 - 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 vs IFRS Generally Accepted Accounting Principles verses International Financial Reporting Standards Laura Lance Financial Accounting, ACC211 Instructor Suzanne Lozano 12 November 2011 GAAP vs IFRS 1 Generally Accepted Accounting Principles verses International Financial Reporting Standards. The two accounting reporting systems used today are the International Financial Reporting Standards and the U.S. Generally Accepted Accounting Principles (GAAP). These two totally different accounting standards have a lot of differences and similarities. The IFRS leaves the decision making for the accountants, while the GAAP is very detailed in the measures in which it reports accounting. Many companies are operating under a global sort of accounting. Each different Country has different standards in accounting principles. In this document I will go over a few differences and similarities between the IFRS and GAAP accounting principles. Disclosure of Contingencies One of the most significant differences between GAAP and IFRS is the disclosure of potential liabilities. U.S. GAAP would like to increase the standard for disclosure of loss contingencies, such as lawsuits that are pending. The IFRS position on this is that...
Words: 541 - Pages: 3
...IFRS vs. GAAP ACC/291 June 1, 2015 Judith Bines IFRS vs. GAAP The International Financial Reporting Standards (IFRS) and the Generally Accepted Accounting Principles (GAAP) are rules used to ensure ethical reporting of financial information. During Accounting 291, we have learned how to apply these rules however the differences between the United States GAAP and the IFRS make it difficult to compare companies. Some of these differences appear in the measurement of “fair value”, component depreciation, the revaluation of plant assets, product development expenditures, contingent liabilities, and the accounting for liabilities. Moving to Fair Value Measurement To the average person, the meaning of “fair value” would seem to have one meaning but this is not the case under GAAP and IFRS. “Under IFRS 1-3, the fair value of a financial liability is the cost to transfer it to another market participant in an orderly transaction at the measurement date. This is subtly different to how the fair value of a financial liability is determined under the previous rules in IAS 39 where the fair value of a financial liability is the amount at which it could be settled between knowledgeable, willing parties in an arm's-length transaction” (McCarroll & Khatri, 2012). “The Accounting Standards Update (ASU) provides a converged meaning of "fair value," defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market...
Words: 1014 - Pages: 5
...GAAP vs IFRS GAAP vs IFRS: Opposing the Proposed Shift Kelsey Perez Author Affiliation There has been a growing demand over the past twenty years to unite the business world under one conceptual framework for reporting financial statements. Currently, there are two types of frameworks used throughout the accounting world. They are the General Accepted Accounting Principles ( GAAP) and International Financial Reporting Standards (IFRS), the SEC is currently considering a shift from United States GAAP to IFRS. My opposition to the United States shift from Generally Accepted Accounting Principles (GAAP) to International Financial Reporting Standards (IFRS) is based on the following three reasons; the cost of implementation, training requirements, and increased profit manipulation risk. Cost of IFRS Cost is another disadvantage of IFRS. Small and large businesses would be affected by the transition. “It is estimated that it would cost each business $32 million dollars to convert from GAAP to IFRS” (Paul & Burks, n.d. p. 4). The financial impact would be greater to small businesses compared to the large businesses. Large businesses have the available resources to train employees and implement the change. Small companies would have to bring in outside accountants or spend an exceptional amount of money to train employees and implement the change. Even if small companies used outside accountants, these accountants would be forced to retrain everything that they...
Words: 648 - Pages: 3
...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
...completely prepares a company financial statements. For years GAAP has been the common set of standards and procedures for the U.S, the core for establishing a principle of reporting but now IFRS an international friendly financial reporting system has become popular for its use globally. In the text Intermediate Accounting by C.P.A Kieso, GAAP also known as generally accepted accounting principles are standardized guidelines and procedures to financial accounting and reporting. There are three major parties that are involved in the standard setting where U.S companies must abide by. Securities and Exchange (SEC), established by the federal government to help create and regulate financial information presented to stockholders. American Institute of Certified Public Accountants (AICPA), an organization of practicing Certified Public Accountants (CPA’s) established to contribute to the effort. And the major operator Financial Accounting Standards Board (FASB), objective is to establish and improve standards of financial accounting and reporting for the guidance and education of the public, which includes issuers, auditors, and use of financial information. Transpired by the London-based International Accounting Standards Boards (ISAB); for international purposes U.S GAAP or (IFRS) International Reporting Standards, also known as IGAAP are two rules accepted for financial reporting. Requirements for IFRS;...
Words: 962 - Pages: 4
...GAAP VS. IFRS The International Financial Reporting Standard (IFRS) is becoming a global standard for the preparation of public company financial statements. More than 12,000 public companies in over 100 countries have adopted IFRS, including listed companies in the European Union. Other countries, including Canada and India, are expected to transition to IFRS in 2011. On the other hand, the U.S. Generally Accepted Accounting Principles (U.S. GAAP) is used primarily in the U.S. Proponents and considered as the "Golden Rule". The argument arises that should the U.S. Act as a good neighbor or should they go on their own way. To answer this question, we should clarify several issues concerning the adoption of IFRS in the U.S. First of all, the role of setting up accounting standards is to achieve high-quality and comparable financial reports . Whether the U.S. should adopt the new accounting rule rests with whether it can improve the quality and comparability of firms’ financial reporting and disclosure practices. One of the major differences between IFRS and GAAP is that IFRS is so-called principles-based, while GAAP is rules-based. Assuming that this assertion is correct (which may not be the case since IFRS is becoming more rules-based in certain area), it doesn't necessarily guarantee that IFRS is superior to GAAP. The newer, less-detailed IFRS provides accountants and managers with more reporting discretion, which may lead to different accounting treatments and...
Words: 613 - Pages: 3
...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
...IFRS vs U.S. GAAP Victoria Harris American Public University Acct 610 There are two sets of accounting standards that are used worldwide. One is the International Financial Reporting Standards (IFRS) and the U.S. Generally Accepted Accounting Principles (GAAP). There is a huge desire for there to one set of accounting standards worldwide with the increase of companies performing business in many different countries and global expansion. The International Financial Reporting Standards are issued by the International Accounting Standards Board. These set of accounting standards are international in more than 110 countries and the state how certain transactions and other events should be reported in the preparation of financial statements. This set of standards’ purpose is to make international comparisons easier. This is not an easy task, though, because there is already set rules in every country. U.S. Generally Accepted Accounting Principles are another set of accounting standards that is adopted by the U.S. Securities and Exchange Commission (SEC) and are the rules followed by companies in the United States when compiling financial statements. These set of standards was originally developed by auditors and regulated by the American Institute of Certified Public Accountants (AICPA) historically. The SEC is now considering changing the standards for the United States and going with the International Financial Reporting Standards in order to create a more constant...
Words: 1532 - Pages: 7
...Comparing IFRS to GAAP Teresa Shelton ACC/291 3/7/16 David Mobile Comparing IFRS to GAAP We’ve been learning, and comparing the differences between the IFRS and GAAP. How each is operated and the effects, it has in the accounting world nationally and internationally. Fair Value and Component Depreciation Fair value is the price that would be expected by the company to sell an asset or paid to change ownership of a liability in an orderly transaction between market members at the date of the measurement. All assets, liabilities, and equity instruments are measured at fair value. However the standards in which U.S. GAAP and IFRS require of fair value measurements are different. For instance an asset, liability, or equity instrument that is measured at fair value in U.S. GAAP will not always be measured at fair value in IFRS and likewise. The GAAP and IFRS have distinct developments to approach the measurement basis in other standards. There will be different accounting requirements used in the U.S. GAAP than IFRS for measuring the fair value of investments in investment company entities. Several of the disclosures about fair value measurements will be different for U.S. GAAP and IFRS. An example of this would be, IFRS does not require to distinguish between recurring and nonrecurring fair value measurements. In addition, because IFRS will generally not allow net presentation for products, the amounts that are disclosed...
Words: 939 - Pages: 4
... | |US GAAP vs IFRS | | | | | For decades the US financial market has stuck to accounting rules known as the Generally Accepted Accounting Principles, commonly abbreviated as U.S. GAAP, or simply GAAP. Just less than a year ago, there was the groundbreaking elimination of GAAP requirement for International Financial Reporting Standards (IFRS) reporting foreign issuers, due to a strong global support for IFRS. Then on August 27th 2008, the Securities Exchange Commission voted to publish for public comment a proposed Roadmap that could lead to the use of International Financial Reporting Standards (IFRS) by U.S. issuers beginning in 2014. Currently, U.S. issuers use U.S. Generally Accepted Accounting Principles (U.S. GAAP). The Commission would make a decision in 2011 on whether adoption of IFRS is in the public interest and would benefit investors. The proposed multi-year plan sets out several milestones that, if achieved, could lead to the use of IFRS by U.S. issuers in their filings with the Commission (Navigating). The transition from U.S. GAAP to IFRS reporting will have a huge impact for investors and businesses in...
Words: 1382 - Pages: 6
