In: Accounting
IFRS has strict rules that if a liability is a current liability at the end of the accounting period then it is a current liability on the balance sheet. GAAP gives more leeway in that if a company has the ability and the positive intent to refinance a current liability then it can list it as a long term liability. Discuss the pros and cons of each approach. Choose the method you think is preferable and justify your choice.
In simple terms, all the liabilities under IFRS are to be treated as the current liabilities and it does not provide further classification in details such as current and non-current and long-term.
However, In case of GAAP the in detail classification of the disclosure can be made and like current and non-current bifurcations. This practice is allowed as per GAAP.
The pros and cons of each approach are as follows:
Hence from the above discussion, IFRS had more advantage and fair presentation in major circumstances over GAAP, in few circumstances the GAAP is more useful than IFRS.