Question

How does IFRS differ from GAAP regarding accounting changes? Are there any major issues?

Answer 1

The main difference between the two systems is mainly that IFRS is principles-based while GAAP is rules-based. These are discussed as below:

Consolidation: IFRS can be defined as a control model and on other hand U.S. GAAP favors a risks-and-rewards model. Few entities consolidated as per with FIN 46(R) under IFRS can be depicted separately.

Statement of Income: The extraordinary items under IFRS would not be segregated in the income statement, and on contrast under US GAAP extraordinary items are depicted below the net income.

Inventory: The inventory method LIFO (Last in, first out) under IFRS is not allowed while U.S. GAAP allows the choice between FIFO and LIFO to the companies

Earning-per-Share: The computations of the earning-per-share under IFRS would not average the individual interim period computations however under U.S. GAAP the calculations averages of the individual interim period incremental shares.

Development costs: Under IFRS development costs would be capitalized when specific criteria are met, and under U.S. GAAP these will be considered as “expenses”.