Ifrs Vs Gaap Analysis

When a company owns a majority stake in a foreign subsidiary, the accounting processes and procedures can be complicated and require the use of many resources to prepare accounting documentation that is required by law. Specifically, the Generally Accepted Accounting Principles (GAAP) and the International Financial Reporting Standards (IFRS) which are the standing guidelines for accounting, differ enough to make the processes redundant. GAAP is the U.S. standard for accounting while IFRS which is governed by the International Accounting Standards Board (IASB) is commonly adopted as the standard around the world. Recently there has been a push to remove differences in the accounting principles and to converge the GAAP and IFRS, for one, to simplify procedures in an ever growing global economy and to standardize practices for U.S. companies with dealings around the world. In 2009 there were two unique revisions to the GAAP standards that enabled the GAAP and IFRS to be more embedded and less far apart. FAS 160 “Noncontrolling interest in …show more content…
Some of the differences between GAAP and IFRS are the definition of control, shares considered for determining control, calculation of noncontrolling interest, calculation of goodwill at the time of interest, and the goodwill impairment test (Marianne, 2010). One of the main variances lies in the theoretical approach; GAAP is rule-based, whereas IFRS is principle-based (IFRS.com, n.d.). IFRSs principles-based framework can lead to different interpretations in the principles. The distinction between these two approaches is on the procedures to regulate accounting. GAAP requires specific formatting in accounting and balance sheets whereas IFRS requires one to be available, no format is