Concepts Statement 8—Conceptual Framework for Financial Reporting Chapter 4: Elements of Financial Statements Question: Compare and...

Concepts Statement 8—Conceptual Framework for Financial Reporting

Chapter 4: Elements of Financial Statements

Question:

Compare and contrast U.S. GAAP and IFRS with respect to the exposure draft topic.
Research the need for the new standard/amendment (include pros and cons).

Expert Solution

The primary difference between the two systems is that GAAP is rules-based and IFRS is principles-based. This disconnect manifests itself in specific details and interpretations. Basically, IFRS guidelines provide much less overall detail than GAAP. Consequently, the theoretical framework and principles of the IFRS leave more room for interpretation and may often require lengthy disclosures on financial statements.10 On the other hand, the consistent and intuitive principles of IFRS are more logically sound and may possibly better represent the economics of business transactions.

Perhaps the most notable specific difference between GAAP and IFRS involves their treatment of inventory. IFRS rules ban the use of last-in, first-out (LIFO) inventory accounting methods. GAAP rules allow for LIFO. Both systems allow for the first-in, first-out method (FIFO) and the weighted average-cost method. GAAP does not allow for inventory reversals, while IFRS permits them under certain conditions

ekkarill92 answered 1 year ago

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