Question

Review the sections on international accounting (IFRS) (See pages 9, 10, 59, 184, 267, 339, 376, 431, 489, 556, 568, 571, 668, 701. Discuss the major similarities and differences between U.S. GAAP and IFRS. Which of the differences do you find most interesting? If there is a convergence between U.S. GAAP and IFRS, would you choose the U.S. GAAP or IFRS method? Why?

Answer 1

SIMILARITIES:

With regard to recognizing stock-based compensation a. IFRS and U.S. GAAP follow the same model, dilutive securities, and earnings per share IFRS and U.S. GAAP are substantially the same in the terms of accounting because both follow the same model for recognizing stock-based compensation which is the fair value of shares and options awarded to workers is recognized over the period to which the workers’ services relate.

DIFFERENCE:

A main difference between GAAP and IFRS is the accounting for securities with characteristics of debt and equity, such as convertible debt. Under U.S. GAAP the total amount of the proceeds of convertible debt are recorded as long term debt. Under IFRS, convertible bonds are separated or "bifurcated" into the equity component, that is the value of the conversion option of the bond issue and the component of debt.

Related to employee share-purchase plans, under IFRS, all employee share-purchase plans are deemed to be compensatory; and is recorded for the amount of the discount. Conversely under GAAP such plans are generally considered non-compensatory and thus no compensation is recorded.

EPS reporting IFRS approach states that share settlement must be used in this situation. FASB permits companies to rebut the presumption that contracts that can be settled in either way i.e. cash or shares will be settled in shares

Furthermore, there are an EPS differences in relation to the treasury stock method and how the proceeds from extinguishment of a liability have to be accounted for and how to calculate for the weighted-average of contingently issuable shares

　

I would recommend IFRS because the motive behind is that International Financial Reporting Standards (IFRS) developed by the International Accounting Standards Board (IASB) are becoming the global standard for the preparation of public company financial statements, therefore would reduce the reporting dilemmas and the complications. The target of the International Financial Reporting Standards is to report the long term assets at uniform high-quality accounting standards to ensure that the financial statements will be comparable to those in foreign countries. GAAP ignores other cost considerations such as replacement cost, fair value, or current market value. Only the original amount paid is considered