Acc 290

Comparing IFRS to GAAP

Monica Stelzenmuller

ACC290

February 12, 2015

Jorge A. Rivera

Comparing IFRS to GAAP

GAAP (Generally accepted accounting principles) are the rules, conventions and standards that set out accounting practices for companies established by the Financial Accounting Standard Board (FASB). IFRS (International Financial Reporting Standards is a set of principles and rules for reporting various transactions and items in the financial statements. Every country has its own version of GAAP as United States has US GAAP, Canada has Canadian GAAP and United Kingdom has UK GAAP, thus the world has its own GAAP, only it is called the IFRS.

Difference in the Balance Sheet Format

There are a few difference that can be noted in preparing a balance sheet between IFRS and GAAP. IFRS recommends but does not require the use of the title “statement of financial position” rather than the balance sheet. IFRS also uses the term “Share Capital Ordinary” rather than common stock. Although there is no particular format required under IFRS, most companies that follow IFRS present statement of financial position in reverse order of liquidity.

* Long-term asset

* Current asset

* Shareholders’ equity

* Long-term liabilities

* Current liabilities

GAAP on the other hand requires that all accounts be ordered based on the degree of liquidity.

* Current assets

* Long-term assets

* Current liabilities

* Long-term liabilities

* Shareholders’ equity

Conceptual Framework in terms of Objective Financial Reporting

The FASB and IASB (International Accounting Standards Board) developed a conceptual framework to serve as the basis for future accounting standards. The framework begins by stating that the primary objective of financial reporting is to provide financial information that is useful to investors and creditors for making decisions about providing capital. According to the FASB, useful information should possess two...