Ifrs vs. Gaap

IFRS vs. GAAP

Chris Norton

University of Phoenix

Principals of Accounting I

ACC/290

Heather Bain

February 24, 2015

The International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP) are the two primary, global accounting systems. GAAP provides industry, standard guidelines for financial accounting that includes conventions, standards, and rules that accountants use to summarize and prepare financial statements (Shamrock, 2012). The Generally Accepted Accounting Principles, or GAAP, method of accounting, which is primarily utilized in the United States, is considered a rules-based system of accounting that analyze balance sheet items such as, revenue recognition, assets and liabilities, gains and losses, and comprehensive income. The International Financial Reporting Standards, or IFRS, were developed as a global, communal language that assists companies and corporations with the ability to communicate financially across international borders. This global accounting system, which is used in over 110 countries, is more of a principle based system that provides financial information towards financial statements. The objective of IFRS reports revenues or expenses, assets, and liabilities (Shamrock, 2012).

* IFRS 2-1: Within the IFRS, this statement does not specify a required classification of accounts, but recommends reporting assets in reverse order of liquidity. Whereas, GAAP systems maintain specific requirements that accounts must be listed by their liquidity (Shamrock, 2012).

* IFRS 2-2: IFRS and GAAP maintain a similar position on the objectivity of financial reporting relevant and faithful representation of information. IFRS places special emphasis on maintaining applicable data between independent entities, while GAAP primarily focuses on U.S. businesses (Sedki, Smith, & Strickland, 2014).

* IFRS 2-3: Under IFRS, the statement of financial position is synonymous with the Balance Sheet....