Accounting Standards: GAAP and IFRS

12 Questions

What is the most common approach to learning U.S.GAAP and IFRS?

Learn U.S.GAAP and then IFRS

What is the main issue with the use of different accounting rules and reporting mechanisms in the global economy?

The lack of comparability between financial statements

What is the proposed solution to the issue of different accounting rules and reporting mechanisms in the global economy?

For the entire global community to use IFRS

What is the main focus of the unit in which this topic is being discussed?

Accounting topics, including revenue recognition, fixed assets, and more

What is the main concern with the use of IFRS?

Whether the use of IFRS increases financial statement information quality

What is the analogy used to describe the issue of different accounting rules and reporting mechanisms in the global economy?

A soccer game with different rules in each country

What is the name of the accounting standards used by over 120 countries worldwide?

International Financial Reporting Standards (IFRS)

Which of the following is a characteristic of U.S.GAAP compared to IFRS?

More rules-based

What is the main difference between U.S.GAAP and IFRS?

The underlying philosophy of principles versus rules

What is the result of the difference in philosophy between U.S.GAAP and IFRS?

Delays in U.S. convergence with IFRS

What is the relationship between U.S.GAAP and IFRS?

IFRS is based on U.S.GAAP

What is the number of countries that use IFRS?

Over 120 countries

Study Notes

GAAP vs IFRS

U.S. Generally Accepted Accounting Standards (GAAP) are considered the 'gold standard' of accounting rules and processes.
International Financial Reporting Standards (IFRS) and U.S. GAAP are very similar, making it easier to learn one and then discuss the similarities and differences between them.
Many college-level textbooks use this approach to teach accounting standards.

Background of IFRS

Over 120 countries use the International Financial Reporting Standards (IFRS).
IFRS is highly based on U.S. GAAP, which is a detailed, well-developed set of accounting standards.

Key Differences

One distinct theoretical difference between U.S. GAAP and IFRS is the debate over principles versus rules.
U.S. GAAP is more rules-based, while IFRS is more principles-based.
This underlying difference has caused many delays in U.S. convergence with IFRS.

Importance of IFRS

The use of IFRS increases financial statement information quality.
Many argue that the entire global community should use IFRS to improve comparability.
Comparability is not easily obtainable due to different accounting rules and reporting mechanisms used in various countries.

Accounting Topics

Revenue recognition
Fixed assets
Intangible assets
Financial instruments
Deferred taxes
Consolidation issues