Question

Describes the similarities and differences between at least 4 International Financial Reporting Standards and US GAAP. Discuss why you believe any differences exist and whether you believe these differences will be resolved.

Answer 1

1. GAAPs in general, are contextualised versions of the IFRS, when and where IFRS is applicable. A significant part of the countries in the world did not adapt to IFRS, but their companies still comply to their own GAAPs.
2. IFRS is a general framework of agreed best practices and principles adopted as the ruling standard by most countries in the world. The International Accounting Standards Board is charge of the oversight of the IFRS.
3. At a high level, US GAAP (there are many different versions of GAAP internationally) is more rules-based, whereas IFRS is principles based. US GAAP is much more detailed and geared toward sticking to the letter of the law, whereas IFRS allows for more judgment in applying it’s principle
4. GAAP is a common set of accepted accounting principles, standards, and procedures that companies and their accountants must follow when they compile their financial statements.
5. IFRS is a set of international accounting standards, which state how particular types of transactions and other events should be reported in financial statements.
6. Some accountants consider methodology to be the primary difference between the two systems; GAAP is rules-based and IFRS is principles based