Question

Write about the U.S. GAAP and IFRS and eplain the details about the harmonization of U.S. GAAP and IFRS in your own words.

Answer 1

GAAP-The standards that govern financial reporting and accounting vary from country to country. In the U.S., financial reporting practices are set forth by the financial accounting standards board (FASB) and organised within the framework of the generally accepted accountIng principles (GAAP). Generally accepted accounting principles refer to common set of accepted accounting principles, standards, and procedures that companies and their accountants must follow when they compile their financial standards.

IFRS- International financial reporting standards (IFRS) are a set of international accounting standards, which state how particular types of transactions and other events should be reported in financial statements. IFRS are issued by the international accounting standards board (IASB), and they specify exactly how accountants must maintain and report their accounts. IFRS  was established in order to have a common accounting language, so business and accounts can be understood company to company.

Harmonisation of U.S. GAAP and IFRS-

Both standards require the financial standards be prepared on Accrual Basis of accounting.

Under both set of standards, the components of financial statements includes; a statement of financial position (known as balance sheet previously), a statement of profit and loss & other comprehensive income, a statement of cash flows & accompanying notes to the financial statements.