An accountant named Chris Gilmore was recently hired by the corporation called Ruckman, Inc. and his very first task was given to him by the controller Martha Green. The task Martha gave him was to convert all of the financial statements from the ones used in the United States that is Generally Accepted Accounting Principles (GAAP) to International Financing Reporting Standards (IFRS) that is used in over a 100 countries. Moreover, the corporation is willing to convert its financial statements from U.S. GAAP to IFRS in order to start sharing reports with its European stakeholders. As Chris began working, he looked at the financial statements and operations of corporation in order to have an idea of what differences and issues he needs to go
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GAAP does not prescribe a standard format. However, SEC Regulation S-X, Rule 5-02 does require specific line items to appear on the face of the balance sheet, where applicable.” (Thornton) One of the most important differences is current and non- current assets and liabilities used in the balance sheet of IFRS, in contrast GAAP only uses current assets and liabilities even though it recommends the use of both. Therefore, Chris will need to alter current assets and liabilities to current and non-current assets and liabilities in order to satisfy the requirements of IFRS balance sheet. Moreover, some of the terms and titles might be slightly different on two balance sheets but it is very important for him to know what each of them means. Another distinction is the use of different methods of calculating inventory costs such as LIFO and FIFO. U.S. GAAP allows the use of both methods for the estimates to be made, on the other hand IFRS only allows the use of FIFO, “For US- based operations, differences in costing methodologies could have a significant impact on reported operating results as well as on current income taxes payable, given the Internal Revenue Service (IRS) book/tax LIFO conformity rules.” (PWC) Thus, Chris will have to recalculate all of the numbers to make them fit the requirement of the IFRS and proceed with the …show more content…
(Thornton) Both of the standards have statements of cash flows included at the time it is proceeded, as well as using direct and indirect methods when presenting such activities. For the majority of operating activities, the two standards differ from each other just like for GAAP income taxes, dividends, and items of interest should be classified as operating activities. (KPMG) As mentioned previously, IFRS has a couple of classifications that are purposely made to make it fairy easy to get the analysis of the financial statements and compare them with one another, it is more difficult for GAAP because it has too much information that is off setting. Therefore, Chris will need to make sure he consults with the corporation and make decisions based the financial operations. Both GAAP and IFRS are representing cash flows as gross on the statements of cash flows, but in some instances for GAAP cash flows counterpart in limited situations. (KPMG) As Chris is following all of the information given, he can clearly see all of the issues and differences that need to be altered for the
GAAP does not prescribe a standard format. However, SEC Regulation S-X, Rule 5-02 does require specific line items to appear on the face of the balance sheet, where applicable.” (Thornton) One of the most important differences is current and non- current assets and liabilities used in the balance sheet of IFRS, in contrast GAAP only uses current assets and liabilities even though it recommends the use of both. Therefore, Chris will need to alter current assets and liabilities to current and non-current assets and liabilities in order to satisfy the requirements of IFRS balance sheet. Moreover, some of the terms and titles might be slightly different on two balance sheets but it is very important for him to know what each of them means. Another distinction is the use of different methods of calculating inventory costs such as LIFO and FIFO. U.S. GAAP allows the use of both methods for the estimates to be made, on the other hand IFRS only allows the use of FIFO, “For US- based operations, differences in costing methodologies could have a significant impact on reported operating results as well as on current income taxes payable, given the Internal Revenue Service (IRS) book/tax LIFO conformity rules.” (PWC) Thus, Chris will have to recalculate all of the numbers to make them fit the requirement of the IFRS and proceed with the …show more content…
(Thornton) Both of the standards have statements of cash flows included at the time it is proceeded, as well as using direct and indirect methods when presenting such activities. For the majority of operating activities, the two standards differ from each other just like for GAAP income taxes, dividends, and items of interest should be classified as operating activities. (KPMG) As mentioned previously, IFRS has a couple of classifications that are purposely made to make it fairy easy to get the analysis of the financial statements and compare them with one another, it is more difficult for GAAP because it has too much information that is off setting. Therefore, Chris will need to make sure he consults with the corporation and make decisions based the financial operations. Both GAAP and IFRS are representing cash flows as gross on the statements of cash flows, but in some instances for GAAP cash flows counterpart in limited situations. (KPMG) As Chris is following all of the information given, he can clearly see all of the issues and differences that need to be altered for the