Ifrs vs. Gaap

IFRS vs. GAAP

Zachary Kittell

Principles of Accounting 1/ACC/290

January 26, 2015

Gary Foote

IFRS vs GAAP

Businesses worldwide are required to follow a certain set of accounting guidelines and principles to ensure that every business reports their financial status in the same way. This also helps keep businesses honest when reporting the financial health of said business. The United States uses a system called the Generally Accepted Accounting Principles, or GAAP, which is set by the Financial Accounting Standards Board, or FASB, and is enforced by the Securities and Exchange Commission, or SEC. Most other countries, upwards of a about 115, use a set of standards called International Financial Reporting Standards, or IFRS, developed by the International Accounting Standards Board (IASB). Both the GAAP and IFRS are very similar in expectations of what should be reported and what should not. This paper will explore some of the differences and similarities between the GAAP and IFRS. (Kimmel, Weygandt, & Kieso, 2013)

Statement of Financial Position/Balance Sheet Format

IFRS does not mandate a specific order or classification on the statement of financial position. Most companies using the IFRS statement of financial position report their assets in reverse order of liquidity. You would see accounts such as Long-Term assets, Current assets, Shareholder Equity, Long-Term Liabilities, and Current Liabilities. Again, IFRS has no mandate in which order they should appear. (Kimmel, Weygandt, & Kieso, 2013)(Santoro & Munter, 2012)

Under GAAP standards, the SEC has prescribed a specific format they want all businesses in the United States to follow. GAAP requires that accounts be listed in order of their degree of liquidity. This means the business would list its most liquid asset first, cash and non-current assets would be reported last. A balance sheet following GAAP standards would be ordered Current Assets, Long-Term Assets, Current Liabilities,...