Generally Accepted Accounting Standards Board (FASB)

Financial reporting communicates what a company’s financial and operational condition is at any specific time. To make the reporting clear and concise, the Financial Accounting Standards Board (FASB) created the Generally Accepted Accounting Principles (GAAP) which is a set of standards that includes a set of codes that provide structure and organization. (Spiceland, Sepe, & Nelson, 2013, pg. 10) Similarly, international countries have created their own set of accounting standards. However, in the past few decades, the United States and other countries have been getting into business with each other. The accounting standards between countries were not organized the same way and it made it difficult to compare international company’s financial …show more content…
This makes it imperative to know both the U.S. GAAP and the IFRS when reporting a company’s financial information…especially if that company is conducting business internationally. Currently, U.S. companies are only required to report using GAAP while international companies can choose between either GAAP, IFRS, or both. Since the GAAP is focused on the detailed requirements of the U.S. accounting environment, it is unlikely that it will converge with the IFRS anytime soon. (Spiceland et al., 2013) Perhaps this is the reason why it is taking so long for there to be a definite decision on the conversion in the United States. There are several similarities between the GAAP and the IFRS. One such similarity is the separation of the current and non-current assets and current and non-current liabilities on the balance sheet. (Putra, 2008) For example, having a current asset or liability means that they will be converted into cash within one year or by the end of the present financial period. Whereas, the non-current asset or liability is for the long term which is longer than one period. The items for the assets and liabilities as well as the equity are basically the same except for their order placement on the balance sheet. (Putra, …show more content…
GAAP and the IFRS that will be discussed here. One of the biggest differences between the two is their philosophy. The U.S. GAAP are rules-based standards that provide structure in order to meet the requirements of the U.S. accounting environment. GAAP may not have all the answers to every situation, though. (Gnanarajah, 2015, pg. 2) The IFRS are standards that are based upon substance and principle. (Lew, 2005, pg. 131) The difficulty with the IFRS is that it could create different interpretations of similar transactions which would need to be explained further in the notes. It does provide an avenue for discussion but not necessarily a specified guidance to a situation. (Gnanarajah,