Gaap Vs. Ifrs Standards Essay
GAAP generally accepted accounting principle
The Financial Accounting Standard Board issues GAAP, which focus on the practices of US companies. GAAP is known as the common set of rules, standards and procedures for accounting used in financial reporting. “GAAP is the combination of authoritative standards (set by policy boards) and the commonly accepted ways of recording and reporting accounting information” (Investopedia LLC, 2016). Companies follow GAAP rules to clarify the communication of financial information. Generally accepted accounting principle ensures the minimum level of consistency in a company’s financial statements. Moreover, these principles makes it really easy for the investors to analyze and observe the useful information as well as make comparisons between companies across the industry. Companies must follow the rules established by Security Exchange Commission (SEC) and GAAP when trading their stock publically. Under GAAP companies covers revenue recognition, balance sheet items classification and outstanding share measurement.
IFRS International Financial Reporting Standards
The alternative to GAAP is the IFRS focus on the financial practices of international companies issued by International Accounting Standard Board (IASB). “International Financial Reporting Standard (IFRS) are set of international accounting standards stating how particular types of transaction and other activates should be reported in financial…