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GAAP vs. IFRS

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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.

Comparison chart

GAAP IFRS
Stands for Generally Accepted Accounting International Financial Reporting
Principles Standards

Introduction Standard guidelines and structure Universal financial reporting

for typical financial accounting. method that allows international
businesses to understand each
other and work together.

Used in United States Over 110 countries, including

those in the European Union

Performance Revenue or expenses, assets or Revenue or expenses, assets or

elements liabilities, gains, losses, liabilities
comprehensive income

Required Balance sheet, income Balance sheet, income

documents in statement, statement of statement, changes in equity,
financial comprehensive income, changes cash flow statement, footnotes
statements in equity, cash flow statement,
footnotes

Inventory Last-in, first-out; first-in, first-out; First-in, first-out or weighted-

Estimates or weighted-average cost average cost
 Inventory Prohibited
Reversal
Purpose of the US GAAP (or FASB) framework
framework has no provision that expressly
requires management to consider
the framework in the absence of
a standard or interpretation for an
issue.
Objectives of In general, broad focus to provide
financial relevant info to a wide range of
statements stakeholders. GAAP provides
separate objectives for business
and non-business entities.
Underlying The "going concern" assumption
assumptions is not well-developed in the US
GAAP framework.
Qualitative Relevance, reliability,
characteristics comparability and
understandability. GAAP
establishes a hierarchy of these
characteristics. Relevance and
reliability are primary qualities.
Comparability is secondary.
Understandability is treated as a
user-specific quality.
Definition of an The US GAAP framework defines
asset an asset as a future economic
benefit.
Contents: GAAP vs IFRS
1 Objectives of Financial Statements
2 Presentation of Earnings
3 Documents
4 Disclosure
5 Intangibles
6 Accounting for Assets
6.1 Fixed Assets
7 Underlying Assumptions
8 How IFRS impacts US companies
9 References
Permitted under certain criteria
Under IFRS, company
management is expressly
required to consider the
framework if there is no standard
or interpretation for an issue.
In general, broad focus to provide
relevant info to a wide range of
stakeholders. IFRS provides the
same set of objectives for
business and non-business
entities.
IFRS gives prominence to
underlying assumptions such as
accrual and going concern.
Relevance, reliability,
comparability and
understandability. The IASB
framework (IFRS) states that its
decision cannot be based upon
specific circumstances of
individual users.
The IFRS framework defines an
asset as a resource from which
future economic benefit will flow
to the company.