The accounting standards guide the accounting and reporting of a company’s revenues, expenses, assets, and liabilities. In the accounting of non-financial assets under the Generally Accepted Accounting Principles (GAAP) and International Reporting Financial Standards (IFRS), there are perceived similarities and significant differences with far reaching implications in the accounting practice. Consequently, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) are focusing on the convergent efforts of the two standards on the identified key areas they perceive to have the greatest requirement for improvement. However, differences between the accounting frameworks will continue to prevail as promulgated by the FASB and IASB despite the efforts to converge the standards.
In the accounting of inventories, both GAAP and IFRS utilize the historical cost basis. However, IFRS allows the use of revaluation model when accounting for inventories in certain industries, in the measurement of property, plant and equipment (PP & …show more content…
Further, the exchanges of similar nonmonetary productive assets under both standards are treated the same. Another similarity between GAAP and IFRS is perceived in the capitalization of borrowing costs. Under both the frameworks, entities capitalize borrowing costs that are directly associated with the purchase and production of an eligible asset (KPMG.com, 2015). The used criteria under both the set standards defining the qualifying assets are similar. However, there are differences between the accounting models in the quantification of qualified borrowing costs for capitalization. Under GAAP, differences in the exchange rate are not included in the qualified borrowing costs whereas, under IFRS, the differences in exchange rates are included in the qualified borrowing costs (KPMG.com,
In the accounting of inventories, both GAAP and IFRS utilize the historical cost basis. However, IFRS allows the use of revaluation model when accounting for inventories in certain industries, in the measurement of property, plant and equipment (PP & …show more content…
Further, the exchanges of similar nonmonetary productive assets under both standards are treated the same. Another similarity between GAAP and IFRS is perceived in the capitalization of borrowing costs. Under both the frameworks, entities capitalize borrowing costs that are directly associated with the purchase and production of an eligible asset (KPMG.com, 2015). The used criteria under both the set standards defining the qualifying assets are similar. However, there are differences between the accounting models in the quantification of qualified borrowing costs for capitalization. Under GAAP, differences in the exchange rate are not included in the qualified borrowing costs whereas, under IFRS, the differences in exchange rates are included in the qualified borrowing costs (KPMG.com,