Ifrs vs Gaap Essay

1351 Words Nov 23rd, 2011 6 Pages
Craig Stroderd
9/27/11
Acct-461V
GAAP vs. IFRS

Over a decade ago, it was believed that the whole world would likely adopt the Generally Accepted Accounting Principles (GAAP). At the point in time, the International Financial reporting Standards (IFRS) was only about ten years old. In the last decade, the IFRS has been adopted in many growing countries. Currently, it is anticipated that the U.S. will converge its GAAP with the international IFRS, leaving behind only a modified IFRS. This may occur as early as 2014. The GAAP/IFRS convergence will require U.S. corporations to rework their financial statement presentation. If GAAP principles were to be listed in a book, it would be nine inches thick. IFRS fits into a book only
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The same company’s balance sheet will potentially look quite different if a large amount of value is predetermined on a marketable intangible asset.
A major area of convergence is in revenue recognition. “The general concepts and principles used for revenue recognition are similar between U.S. GAAP and iGAAP. Where they differ is in detail.” (Intermediate Accounting 13th edition, 960) IASB uses revenue and gains, where GAAP has two definitions to look at, adding more elements to consider when determining revenue recognition. The completed contract method is not acceptable by international standards. One may assume this is the case because the percentage of completion method will more accurately reflect the costs incurred on a long term project in years prior to completion. Less variation in acceptable practices will almost certainly increase compatibility between different company’s financial statements. If the amount of a project completed cannot be determined, the project is realizable only up to the cost. Realizing no profit could be viewed negatively by U.S. companies. It is, however, more important that all financial statements be viewed on even ground. It is common for inventory to be a very large part of the assets on a company’s balance sheet. Because of this, it is important that GAAP and IFRS come to an agreement about

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