understanding Difference in Format According to the GAAP

Added on - 16 Sep 2019

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IntroductionIn this present paper, we will discuss the comparison between IFRS and GAAP. The comparisonhas been made on the basis of the format of a statement, conceptual framework, commonly usedthe term of IFRS are synonyms with common stock and balance sheet, considering issues ofSEC, rules of revenue recognition, and competitive implications of SOX.The international business increases those with the financial responsibilities that should be wellversed in the two main methods of accounting, namely, GAAP and IFRS. The GAAP is set bythe financial accounting standard board which is mainly used in the United States, and the IFRSis used in many countries. Both the methods has shared some similarities, and some differencesare also there which results in the different style of reporting. The high understanding of bothmethods 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 cashis reported firstly as a current asset whereas the shareholder's equity is listed in the last. On theother hand, IFRS method does not require the list of accounts on the basis of any criteria due towhich 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 reportingThe conceptual framework of GAAP and IFRS are same in terms of the objective in financialreporting because both are giving similar value and financial reporting frequency. The financial
reporting should comply with the standards and norms of industry which are agreed by both themethods. Both are providing useful information to the users, but GAAP provides information tothe investors and decision making related to credit whereas IFRS provides the informationrelated to the changes and financial performance of the company to the various users which helpto take economic decisions of the company. The GAAP is focusing on maintaining the standardswith the businesses of the United States whereas IFRS is focusing on maintaining the standardwith 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. Theshared capital ordinary is mainly used in Europe, so it is selected by the IFRS as the commonterm (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 todetermine the financial position of the company. Whereas the formats of the balance sheet andstatement of financial position have a different format in which both compare asset to equity andliability.Issues considered by SECIf the IFRS accounting method is considered by the United States, then the companies in theUnited States will be highly impacted because they are familiar with the GAAP reportingstandard. The training is required for the boards and management of the company in order to
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