A Comparative Analysis of IFRS and US GAAP Accounting Practices

This report provides a comparative analysis of International Financial Reporting Standards (IFRS) and US Generally Accepted Accounting Principles (US GAAP). It begins by defining both IFRS and US GAAP, explaining their purposes and origins. The report then details the key differences between the two accounting frameworks, including their geographical applicability, classification of accounts, treatment of the going concern concept, and policies regarding inventory reversal. The analysis emphasizes that IFRS aims for global harmonization and comparability, whereas US GAAP is primarily for US companies. The report concludes by recommending the adoption of IFRS for large organizations to improve the quality and comparability of financial statements. The report also includes references to relevant academic literature.

Running head: DIFFERENCES BETWEEN AND GAAP
Differences between IFRS and US GAAP
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1DIFFERENCES BETWEEN AND GAAP
Table of Contents
Concept of IFRS:.............................................................................................................................2
Concept of US GAAP:.....................................................................................................................2
Differences between IFRS and US GAAP:.....................................................................................2
References and bibliography:..........................................................................................................4

2DIFFERENCES BETWEEN AND GAAP
Concept of IFRS:
IFRS stands for International Financial Reporting Standards, which is issued by the
International Accounting Standard board. IFRS aims at harmonizing the accounting system
across the globe. The harmonization of accounting helps in making reports in standardized
formats, which in turn improves the comparability of the financial statement of various
organizations across the world. There are various accounting guidelines and disclosure and
reporting standards, which is specified by the IASB as known as IFRS.
Concept of US GAAP:
US GAAP means some accounting concepts and conventions, which is generally
accepted by various accounting authorities, business organizations and reporting entities. These
are mainly some set of principles and concepts, which are followed, in accounting practice to
record, classify and preparing the financial reports of an organization. For many years, it has
been very popular in US as well as internationally.
Differences between IFRS and US GAAP:
IFRS is applicable over 110 Countries around the world, for some specific companies it
has been made compulsory to adopt in reporting and accounting. US GAAP is applicable for
Companies in US only, it is not mandatory and compulsory to be followed in accounting and
reporting1. IFRS aims at universal financial reporting which makes the financial statements of
various companies easily comparable, on the other hand, the US GAAP is applicable for US
1 Barniv, Ran Ron, and Mark Myring. "How would the differences between IFRS and US GAAP affect US analyst
performance?." Journal of Accounting and Public Policy 34, no. 1 (2015): 28-51.

3DIFFERENCES BETWEEN AND GAAP
companies only2, it does not make the financial statement comparable with the statement of other
companies in the other country. In US GAAP accounts are classified as Revenue, Expense,
Assets, Liabilities, Gain, Losses and comprehensive income3. In IFSR it is classified as Revenue,
Expense, Assets and liabilities. The US GAAP takes into consideration the Going concern
concept only on the other hand, the IFRS give the option to chose the assumption as Going
concern or accrual basis of accounting. Inventory reversal is prohibited in US GAAP but it is
permitted in IFRS. The going concern assumption is not well developed and defined in US
GAAP but in IFRS it has been defined specifically and defined in terms of Accrual concept. As
far as the quality and accuracy of the accounting and reporting is concern, the US GAAP
provides accurate and adequate financial information but their report lacks the comparability4. As
various companies uses various assumptions and accounting policies, their presentation of
financial information differs from organization to organization. On the other hand, the IFRS sets
same standards for each and every organization in the same class of business or same industry
and hence, reports generated by each organization have some basic features and comparability.
From the above discussion, it can be concluded that, the US GAAP is a traditional
concept, which is used by most of the organization in the US, but to improve the quality,
accuracy, and comparability of the financial statement, the implementation of IFRS is necessary.
Thereof, it is recommended for big organizations to follow IFRS instead of US GAAP.
2 Stovall, Dennis, and Stephen R. Goldberg. "Transition to IFRS: What Can We Learn?." (2014).
3 Evans, Mark E., Richard W. Houston, Michael F. Peters, and Jamie H. Pratt. "Reporting regulatory environments
and earnings management: US and non-US firms using US GAAP or IFRS." The Accounting Review 90, no. 5
(2014): 1969-1994.
4 Liu, Chunhui, Chun Yip Yuen, Lee J. Yao, and Siew H. Chan. "Differences in earnings management between
firms using US GAAP and IAS/IFRS." Review of Accounting and Finance 13, no. 2 (2014): 134-155.

4DIFFERENCES BETWEEN AND GAAP
References and bibliography:
Barniv, Ran Ron, and Mark Myring. "How would the differences between IFRS and US GAAP
affect US analyst performance?." Journal of Accounting and Public Policy 34, no. 1 (2015): 28-
51.
Evans, Mark E., Richard W. Houston, Michael F. Peters, and Jamie H. Pratt. "Reporting
regulatory environments and earnings management: US and non-US firms using US GAAP or
IFRS." The Accounting Review 90, no. 5 (2014): 1969-1994.
Liu, Chunhui, Chun Yip Yuen, Lee J. Yao, and Siew H. Chan. "Differences in earnings
management between firms using US GAAP and IAS/IFRS." Review of Accounting and
Finance 13, no. 2 (2014): 134-155.
Stovall, Dennis, and Stephen R. Goldberg. "Transition to IFRS: What Can We Learn?." (2014).