GAAP vs IAS

To talk about differences between GAAP and IAS, we first need to have an understanding of the two concepts. For a layman, GAAP refers to General Accepted Accounting Principles that are a framework within which financial statements of any company are prepared, summarized and analyzed. They reflect the standards, rules and conventions that are traditionally followed by chartered accountants and accounting firms while recording and presenting the financial results of any company in any country. Different nations have their own versions of GAAP which are slightly different from each other. IAS on the other hand is International Accounting Standards which is an initiative of International Accounting Standards Committee (IASC). IASC aims to standardize accounting all over the world so that accounting principles are same everywhere and the results of different companies can be compared easily. GAAP GAAP is not a single rule but a bundle of rules that form a framework under which chartered accountants in any area compute income, assets, liabilities and expenses of firms and record and summarize their financial results. Government does not direct companies as to how they should present their financial statements. Basic objective of any GAAP is to present financial information about the company to potential investors and banks so that they can base their decisions reading this information. Each country has its own GAAP which is used by companies while presenting their financial statements. These rules have evolved over centuries of accounting practices and are easily understood by financial experts, banks, investors and tax authorities. IAS With globalization and emergence of multinational companies, GAAP started to present difficulties and even caused resentment and disappointment among parent companies as they found different accounting principles in different countries. International Accounting Standards is the initiative of International Accounting Standards Committee with the objective of having same accounting principles all over the world which will reflect fair and similar financial results of companies wherever they may be located. Though IAS is not binding, most countries try to incorporate changes adopted by IASC in their GAAP to come closer to IAS.

Difference between GAAP and IAS

It is easy to see that both GAAP and IAS are accounting principles that are used to record, summarize and analyze financial results of companies. But these accounting practices have evolved in different countries in different ways which means there are differences that make it difficult to assess and compare the financial performances of two companies operating in different countries. To offset these differences and to have uniformity in these accounting principles and to make financial results as transparent as they could be, IAS was introduced. If we look closely, there is not much of a difference between different GAAP being practiced, and the only difference lies in the way results are interpreted. It is the aim of IASC to finally have the same accounting principles across the globe to let people have a fair analysis and comparison of performance of different companies. Recap: (1) GAAP refers to General Accepted Accounting Principles; IAS refers to International Accounting Standards. (2) Both GAAP and IAS are accounting principles that are used to record, summarize and analyze financial results of companies.

(3) GAPP is specific to a country; IAS is an internationally accepted standard. (4) IAS is an initiative of International Accounting Standards Committee (IASC). (5) GAAP differ from country to country, but most countries try to incorporate changes adopted by IASC in their GAAP. (6) IAS was introduced to have uniformity in the accounting principles across the world and thereby to have a fair analysis and comparison of performance of different companies.

What is the difference between IAS and GAAP?

To answer this question, we must first define what IAS and GAAP are, in order to get a better grasp of the function they serve in the world of accounting. The acronym "IAS" stands for International Accounting Standards. This is a set of accounting standards set by the International Accounting Standards Committee (IASC), located in London, England. The IASC has a number of different bodies, the main one being the International Accounting Standards Board (IASB), which is the standard-setting body of the IASC. The acronym "GAAP" stands for Generally Accepted Accounting Principles. The IASC does not set GAAP, nor does it have any legal authority over GAAP. The IASC can be thought of as merely a very influential group of people who love making up accounting rules. However, a lot of people actually do listen to what the IASC and IASB have to say on matters of accounting. When the IASB sets a brand new accounting standard, a number of countries tend to adopt the standard, or at least interpret it, and fit it into their individual country's accounting standards. These standards, as set by each particular country's accounting standards board, will in turn influence what becomes GAAP for each particular country. For example, in the United States, the Financial Accounting Standards Board (FASB) makes up the rules and regulations which become GAAP. The best way to think of GAAP is as a set of rules that accountants follow. Each country has its own GAAP, but on the whole, there aren't many differences between countries - interpretations might vary from country to country, but everyone tends to agree that a company can't simply make up billions of dollars worth of revenue and put it on its books. Every country, in turn, influences the other countries that follow GAAP.

Difference between the U.S.GAAP Vs IFRS GAAP means general accepted accounting principles and IFRS means International Financial Reporting Standards. GAAP is used in India as Indian GAAP and also used in USA as US GAAP. Because, Indian accounting standards are made by ICAI on the basis of International accounting standards. So, except few confusion, almost same rules are used both Indian GAAP and US GAAP. But following are the major difference between GAAP and IFRS. 1. Inventory Measurement GAAP explains that inventory value is measured on the basis of FIFO, LIFO and weighted average method but IFRS does not allow using LIFO method. We cannot use last in first out for calculation the value of closing stock under IFRS. 2. Recognition of Revenue from Services GAAP accepts the money as revenue when total services are provided and contract of services is completed. But if there is work is pending under service contract, we cannot recognize the revenue from service. But IFRS allows showing the revenue even some parts of services are pending. IFRS also use zero profit model in case if we cannot be reasonably calculate the revenue. 3. Difference in Construction Contract's Revenue Recognition a) In GAAP : We can show the % of completed work and recognise its revenue for showing in our financial statement. b) In IFRS : IFRS uses only revenue approach of % of completion method but it does not use the gross profit approach of % completion method.

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International Terminology: