Comparison Between IFRS and GAAP


Added on  2019-09-16

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Comparison Between IFRS and GAAP_1

IntroductionIn this present paper, we will discuss the comparison between IFRS and GAAP. The comparison has been made on the basis of the format of a statement, conceptual framework, commonly used the term of IFRS are synonyms with common stock and balance sheet, considering issues of SEC, rules of revenue recognition, and competitive implications of SOX. The international business increases those with the financial responsibilities that should be well versed in the two main methods of accounting, namely, GAAP and IFRS. The GAAP is set by the financial accounting standard board which is mainly used in the United States, and the IFRS is used in many countries. Both the methods has shared some similarities, and some differences are also there which results in the different style of reporting. The high understanding of both methods is necessary to take an effective decision.Difference in formatAccording to the GAAP, the accounted are listed on the basis of liquidity due to which the cash is reported firstly as a current asset whereas the shareholder's equity is listed in the last. On the other hand, IFRS method does not require the list of accounts on the basis of any criteria due to which majority of company's reports in reverse order of liquidity (Sedki et al., 2014). The bottomline is to offer the clear understanding of assets to the users of the financial statement.Objective of financial reporting The conceptual framework of GAAP and IFRS are same in terms of the objective in financial reporting because both are giving similar value and financial reporting frequency. The financial
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reporting should comply with the standards and norms of industry which are agreed by both the methods. Both are providing useful information to the users, but GAAP provides information to the investors and decision making related to credit whereas IFRS provides the information related to the changes and financial performance of the company to the various users which help to take economic decisions of the company. The GAAP is focusing on maintaining the standards with the businesses of the United States whereas IFRS is focusing on maintaining the standard with various countries (Krishnan et al., 2012). Common term used under IFRS are synonyms with common stock & balance sheetThe opposed term of common stock which is used by the IFRS is "Shared Capital Ordinary". The common stock is defined as the value of equity which is acquired in return for cash. The shared capital ordinary is mainly used in Europe, so it is selected by the IFRS as the common term (Smith et al., 2012). The opposed of a balance sheet is "Statement of financial position" which is used by the IFRS. It is used by the IFRS because the purpose of the statement is to determine the financial position of the company. Whereas the formats of the balance sheet and statement of financial position have a different format in which both compare asset to equity and liability. Issues considered by SECIf the IFRS accounting method is considered by the United States, then the companies in the United States will be highly impacted because they are familiar with the GAAP reporting standard. The training is required for the boards and management of the company in order to
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