The purpose of this assignment is to examine the similarities and differences be

Question

The purpose of this assignment is to examine the similarities and differences between GAAP and IFRS.What is the purpose of the convergence project between GAAP and IFRS? What has been the progress of the convergence project? What are the obstacles to completion of the project? Describe in detail the similarities and differences between GAAP and IFRS in reference to the following accounting topics a) Leases b) Contingent liabilities c) Accounting for debt securities d) Accounting for treasury stock

Explanation / Answer

GAAP(US Generally Accepted Accounting Principles) is the accounting standard used in the US, while IFRS (International Financial Reporting Standards) is the accounting standard used in over 110 countries around the world. GAAP is considered a more “rules based” system of accounting, while IFRS is more “principles based.” The U.S. Securities and Exchange Commission is looking to switch to IFRS by 2015.

What follows is an overview of the differences between the accounting frameworks used by GAAP and IFRS. This is at a broad, framework level; differences in accounting treatments for individual cases may also be added as this gets updated.

GAAP Generally Accepted Accounting Principles

IFRS International Financial Reporting Standards

Introduction

GAAP Standard guidelines and structure for typical financial accounting.

IFRS

Universal financial reporting method that allows international businesses to understand each other and work together.

GAAP used United States

IFRS used in Over 110 countries including those in the European Union

Performance elements

GAAP or expenses, assets or liabilities, gains, losses, comprehensive income

IFRS Revenue or expenses, assets or liabilities

Required documents in financial statements

GAAP Balance sheet, income statement, statement of comprehensive income, changes in equity, cash flow statement, footnotes

IFRS Balance Sheet, income statement, changes in equity, cash flow statement, footnotes

Inventory Estimates

Last in first out,First in First out or weighted-average cost

First-in, first-out or weighted-average cost

Inventory Reversal

Prohibited

Permitted under certain criteria

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