Generally accepted accounting principles (GAAP) are defined as the common set of accounting principles, standards and procedures that companies must follow when they report their financial statements. It is aimed at improving the clarity of the communication of financial information.
International Financial Reporting Standards (IFRS) on the other hand, is referred to as a single set of accounting standards, created and enhanced by the International Accounting Standards Board (IAS) to provide all the users of financial statements with the ability to compare the financial performance of publicly traded companies.
IFRS 2-1: In what ways does the format of a statement of financial of position under IFRS often differ from a balance …show more content…
IFRS 2-2: Do the IFRS and GAAP conceptual frameworks differ in terms of the objective of financial reporting? Explain.
The main difference is that IFRS puts a focus in maintaining relevancy between multiple independent counties while GAAP is mainly concerned with the US business environment.
IFRS 2-3: What terms commonly used under IFRS is synonymous with common stock and balance sheet?
Under IFRS financial statements, the term ‘ordinary share capital’ is synonymous with the common Stock while the term ‘Statement of Financial Position’ is synonymous with the Balance Sheet.
IFRS 3-1: Describe some of the issues the SEC must consider in deciding whether the United States should adopt IFRS.
The SEC must consider the following factors in regard to adoption of IFRS in the United States.
i. Impact of overall costs on businesses.
It is possible that adoption of IFRS in United States would cost the country huge billions of dollars in reporting of its financial statements if implemented. It may also necessitate all accounting firms within the country to quickly change their education requirements to meet the IFRS …show more content…
Therefore, the SEC must determine whether IFRS will be in a better position of safeguarding or protecting the company investors from unlawful activities that may occur.
IFRS 4-1: Compare and contrast the rules regarding revenue recognition under IFRS versus GAAP.
GAAP maintains that revenue recognition principles that are highly targeted based on different industries, for example a construction company will face different revenue recognition principles than a pharmaceutical development company.
IFRS states that revenue is recorded when it becomes economic significant. In order for this to be achieved, revenue should be likely to result to the company in the near future and should be measurable with high levels of accuracy.
IFRS 4-2: Under IFRS do the definitions of revenues and expenses include gains and losses? Explain.
IFRS describes revenue as the gross inflow of economic benefits arising from different operating activities. Therefore gains and losses will not be included as part of revenue since they do not constitute operating activities.
This is also equally applied to expenses, where losses resulting from non-operating activities are not