Gaap vs. Ifrs

In: Business and Management

Submitted By KatKat123456789
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The generally accepted accounting principal (GAAP) and international financial reporting standard (IFRS) are principals that regulate how economic events are reported. The Securities and Exchange Commission (SEC) relies on the FASB to develop accounting standards that the public entities must follow when publishing financial statements.
The number of countries around the world that require or allow the use of IFRS for preparation of financial statements by public entities is increasing day to day. Countless of US corporations have businesses in different continents of the world and would benefit using the same financial reporting across the board. As a result of using different standards users will most likely face increased compliance costs and insufficiencies of preparing numerous sets of financial statements to comply with different accounting requirements. Due to the ongoing convergence projects, the level of the specific differences between IFRS and GAAP is decreasing. Yet significant differences still remain. For example: international financial reporting standard does not permit the use of LIFO as an inventory valuation whereas GAAP using LIFO and FIFO, IFRS allows the readjustment of assets in certain situations. “The common set of accounting principles, standards and procedures that companies use to compile their financial statements. GAAP are a combination of authoritative standards (set by policy boards) and simply the commonly accepted ways of recording and reporting accounting information.” (
“GAAP are imposed on companies so that investors have a minimum level of consistency in the financial statements they use when analyzing companies for investment purposes. GAAP cover such things as revenue recognition, balance sheet item classification and outstanding share measurements. Companies are expected to follow GAAP rules when…...

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