Question

There are several differences between IFRS and GAAP in regards to revenue recognition. First, there are differences in the conditions that must exist to recognize revenue from the sale of goods. For example, under IFRS, one of the conditions is that “The entity has transferred to the buyer the significant risks and rewards of the goods.” Where as one of the GAAP conditions is simply that “Delivery has occurred.” Second, there are differences in recognizing revenue from construction contracts. For example, in GAAP, “If certain criteria are met, the percentage-of-completion method is used. If those criteria are not met, the completed contract method is used.” In IFRS, “The completed contract method is prohibited. If the percentage-of-completion method is not used because the final outcome cannot be reliably estimated, revenue is limited to the amount of recoverable costs incurred.” Third, there are differences in recognizing revenue involving contingent consideration. For example, under IFRS, if there is “the probability that economic benefits associated with the transaction will flow to the entity…revenue might be recognized prior to resolution of the contingency.” However, with GAAP, “Revenue related to contingent consideration should not be recognized until the contingency is resolved.” Lastly, in regards to customer loyalty programs, “there is not specific guidance related to accounting for customer loyalty programs. However, IFRS states that “Credits awarded to program participants must be treated as a separately identifiable component of a sales transaction.” PLEASE COMMENT ON THIS POST

Answer 1

Indeed, there is a difference in the way of registering and managing through the IFRS and the GAAP common to each country, given that globalization made it necessary to establish guidelines that companies in global expansion must adapt to maintain accounting principles and accountability. to the diverse governmental organisms of each country, for that reason there are several differences as they are mentioned between the main ones we have:

With respect to revenue recognition, detailed GAAP for different standards for local accounts of standard organizations; however, in IFRS, they mention two main income standards together with a couple of interpretations related to the recognition of income as guidance

With respect to the expense, the GAAP must recognize the amount that must be recognized, whereas in the IFRS they recognize the expense of certain stock options, irrevocable for a period of time.