Acc 290 Comparing Ifrs to Gaap

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Comparing IFRS to GAAP

Serge Baptiste and Team

January 15, 2015

ACC/290 Principles of Accounting I

University of Phoenix

Louann Schloss

Comparing IFRS to GAAP

The differences and similarities between IFRS and GAAP can be tremendous. Our team discussed a bunch of topics to help compare both subjects.

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 110 countries around the world. GAAP is considered a more “rules based” system of accounting, while IFRS is more “principles based.” The U.S. Securities and Exchange Commission is looking to switch to IFRS by 2015. Both GAAP and IFRS aim to provide relevant information to a wide range of users. However, GAAP provides separate objectives for business entities and non-business entities, while the IFRS only has one objective for all types of entities.

According to Kimmel, P. (2013) “The format of statement of financial position information is often presented differently under IFRS. Although no specific format is required, most companies that follow IFRS present statement of financial position information in this order: Noncurrent assets, Current assets, Equity, Noncurrent liabilities, Current liabilities. Under IFRS, current assets are usually listed in the reverse order of liquidity. For example, under GAAP cash is listed first, but under IFRS it is listed last.”

IFRS does not require a specific order classification of accounts for the statement of financial position. It is loosely recommended that companies reports assets in reverse order of liquidity. The main goal is to give users of financial statements a clear understanding of the company’s asset structure. Most companies today just report their assets in reverse order based off their liquidity. GAAP on the other hand requires that all the accounts are in a specific ordered based on the liquidities...