Ifrs vs. Gaap Essay

947 Words Feb 27th, 2012 4 Pages
Within the accounting profession, there have been challenges to develop a set of standards that are generally accepted and universally practiced. Thus far, the main debate in setting accounting standards is “Whose rules should we play by, and what should they be?” While the answer is unclear, users of financial statements and reporting must find methods that has an universal objective, that allows “Grapes for Grapes” comparisons that clearly, fairly, and completely prepares a company financial statements. For years GAAP has been the common set of standards and procedures for the U.S, the core for establishing a principle of reporting but now IFRS an international friendly financial reporting system has become popular for its use globally. …show more content…
IASB and FASB are currently working on an assignment that would improve EPS accounting by simplifying the guidance and in so doing increasing the comparability of EPS data on an international basis. Another vital factor for financial statements is, accounting for leases, a contract between lessee and lessor, and is either used as a capital or operational lease for either party. IFRS accounting for leases, reports gain on sale/leaseback amortized over term of financing lease, but recognized at once if operating leaseback compared to US GAAP reporting gain on sale/leaseback are not recognized in current earnings. But earnings are deferred and amortized, unless seller retains use of much of asset, in which case gain is recognized. Similar to US GAAP, IFRS reports finance lease treatment if risks and rewards are transferred to lessee compared US GAAP reports for capital lease accounting that required if one of four defined conditions are met; otherwise, operating lease. Other minor distinctions, IFRS permits third-party guarantees as must be included in minimum lease payments to determine whether capital lease criteria are met whereas US GAAP does not recognizes it. The IASB indicated for its international purpose to reform the rules on accounting for leased assets, also assisting FASB on a project for lease-accounting standards. Last connection, both IGAAP and U.S. GAAP follow the same model for recognizing stock-based compensation.

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