IFRS and US GAAP: Differences, Similarities, and Justification for Continued Use of GAAP

RUNNING HEAD:IFRS AND GAAP 1
Student name
University
Course
date

IFRS AND US GAAP 2
EXECUTIVE SUMMARY
The purpose of this report is to examine the use of US GAAP and IFRS reporting standards and
prepare financial statements using the IFRS method. Including finding the differences between
GAAP balance sheet and IFRS. Justification for use of GAAP methods as opposed to IFRS
method is discussed in detailed comparing its advantages over the other method.
Similarities between the two methods is discussed in depth including how to prepare the two
using GAAP and IFRS.

IFRS AND US GAAP 3
Table of Contents
HOW DIFFERENT ITEMS IN ADDITIONAL INFORMATION IMPACT THE BALANCE SHEET.............................4
DIFFERENCES...............................................................................................................................................5
SIMILARITIES................................................................................................................................................6
JUSTIFICATION FOR CONTINUED USE OF GAAP...........................................................................................7
INTANGIBLE ASSETS.....................................................................................................................................8
LETTER TO DIRECTORS.................................................................................................................................9
REFERENCES..............................................................................................................................................11

IFRS AND US GAAP 4
HOW DIFFERENT ITEMS IN ADDITIONAL INFORMATION IMPACT THE
BALANCE SHEET.
Information in the additional information side include
 impairments and market values. At the end of 2012, the statement of financial position
has this balances under GAAP: Goodwill is 12,000, Copyright is 7,000, and Trademark is
17,000. FMV in 2012 for Goodwill is 15,000, Copyright is 10,000, and Trademark is
20,000. Impairments were: In 2010, Copyright 4,400, Goodwill 5,400 in 2011, and
Trademark 6,400 in 2009. To compare, GAAP and IFRS both methods accepts asset
impairment. but, the difference among the two is that IFRS allows for recovery of prior
period impairments as long as the FMV of the intangible increase. According to IAS 36,
impairment of Goodwill is prohibited from being reversed under IFRS, but is allowable
for Trademarks and Copyrights (Impairments: Key differences between U.S. GAAP and
IFRS, n.d.). Using IFRS, both Copyright and Trademark have appreciated by 3,000 as
seen in the balance sheet. This amount is the difference between the fair market value and
the book value of the intangible. The recorded entry for this transaction is to increase
intangible assets by 3,000 for Copyrights and 3,000 for Trademarks. There will also be
an increase in Taxes to be paid of 2,100 and an offset of 3,900 for Retained Earnings.
 Available for Sale-The additional information reveals, short-term investments of 4000
attributed to return with exchange rate. This was included in beginning value under both
U.S. GAAP and IFRS; this amount would be recorded the same way on the balance sheet.
Since they are treated the same way, they are listed on the balance sheet at the same
amount. The predominant difference between GAAP and IFRS in regards to gains in short-
term investments is with the way they are recorded on the income statement as other
comprehensive income under GAAP. Beginning in 2018, IFRS 9 will also require
recording as other comprehensive income (Horton, & Serafeim, 2010).
 Long-term lawsuit. The given information reveals that, long-term lawsuit might end in
award of 10,000. Even though it is not specifically stated, an assumption is made that this