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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 participants at the measurement date" (FASB and IASB issue common fair value measurement and disclosure requirements, 2011). Although the GAAP and IFRS are working toward a common meaning for this term, no agreement has been made to date.

Component depreciation
Although the GAAP and IFRS work similarly regarding depreciation, the IFRS implies component depreciation to assets. ”IFRS

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