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Gaap Vs Ifrs
Gaap Vs Ifrs
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IFRS
Similarities
Purpose
of
Framework
Management
is
explicitly
required to prioritize the IASB
framework if there is no
standard
or
interpretation
available.
Objectives
financial
statement
Underlying
assumptions
Qualitative
Characteristics
Approach
of
for
Elements
are
revenues,
expenses, gains, losses, and
comprehensive income.
Financial
Position
elements
Recognition of
elements
Measurement
of elements
FASB
generally
prohibits
revaluations except for certain
categories which must be
carried at fair value (discussed
in later topics).
Revaluation
is
usually
permitted (discussed in later
topics)
CFA Level-I
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IFRS
Revenue
Recognition
Revenue
Recognition
(Service)
Similarities
CFA Level-I
Long
term
Contracts
Barter
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Depreciation
Amortization
Discontinued
Operations
Extraordinary
Items
Under
U.S.
GAAP,
an
extraordinary item is one that is
both unusual in nature and
infrequent in occurrence.
Earnings
share
Per
CFA Level-I
Treasury Stock
Method
Comprehensiv
e Income
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Balance sheet
illustrations
U.S. GAAP
IFRS
Measurement
basis
Inventories
Similarities
The
notes
to
financial
statements
and
managements discussion and
analysis are integral parts of
the U.S. GAAP and IFRS
financial reporting processes.
LIFO is allowed under U.S.
GAAP along with FIFO, specific
identification and weighted
average
CFA Level-I
Specifically
identifiable
intangible
assets
U.S.
GAAP
prohibits
the
capitalization as an asset of
almost
all
research
and
development costs. All such
costs
usually
must
be
expensed.
Generally, under U.S. GAAP,
acquired intangible assets are
reported
as
separately
identifiable
intangibles
(as
opposed to goodwill) if they
arise from contractual rights
(such
as
a
licensing
agreement), other legal rights
(such as patents), or have the
ability to be separated and
sold (such as a customer list).
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Under
IFRS,
specifically
identifiable intangible assets
are
recognized
on
the
balance sheet if it is probable
that future economic benefits
will flow to the company and
the cost of the asset can be
measured reliably (externally
purchased).
IFRS prohibits the capitalization
of costs as intangible assets
during the research phase.
Instead, these costs must be
expensed on the income
statement. Costs incurred in
the development stage can
be capitalized as intangible
assets if certain criteria are
met.
Goodwill
IFRS
Similarities
Interests
received
Interest paid
Dividends
received
Dividends
paid
Bank
overdrafts
Considered
equivalent
Taxes paid
Operating
No
such
requirement
provide any reconciliation
to
Disclosures
be
the
Previous Years
Statements
flow
Format
statement
of
flow
part
of
cash
CFA Level-I
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Segment
Reporting
U.S. GAAP
IFRS
Similarities
IFRS
of
Inventory
Valuation
Methods
LIFO is permitted
Measurement
of
Inventory
Value
Inventories
should
be
measured at lower of cost and
NRV (net releasable value).
Reversal
of
Write-down
U.S.
GAAP
prohibits
reversal of write-down.
any
Mark
to
Market
(presenting on
fair value)
Disclosures
Similarities
CFA Level-I
Changes
inventory
valuation
method
in
Under
U.S.
GAAP,
a
company
making
a
change
in
inventory
valuation
method
is
required to explain why the
newly adopted inventory
valuation
method
is
superior and preferable to
the old method.
If a company changes from
LIFO to any other method
retrospective application is
necessary.
If a company changes to
LIFO
method
then
prospective application is
necessary
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IFRS
Acquisition of
Long
lived
Assets
Intangible
assets
developed
internally
U.S. GAAP
requires both
research and development
costs to be expensed except
for software development
Intangible
assets
acquired in a
Business
Combination
Depreciation/
Amortization.
of Long lived
assets
Revaluation
method
Reviewing
estimates
Component
Method
Under
U.S.
GAAP
the
component method is allowed
but is seldom used
Similarities
CFA Level-I
Impairment of
Assets
Impairment
Test
Reversal
of
Impairment
Disclosures
(Tangible
Asset Class)
Under
U.S.
GAAP
the
requirements
are
less
exhaustive. Disclosure includes:
Periods
depreciation
expense
Balance of major classes of
depreciable assets
Accumulated depreciation
by major class or in total
General description of the
depreciation method
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CFA Level-I
Disclosures
(Intangible
asset class)
Disclosures
(Impairment
losses)
Under IFRS
The amount of impairment
loss
Reversal of impairment
losses
Where they are recognized
on financial statements
Main classes affected by
impairment
loss
and
reversal
Main
events
and
circumstances leading to
impairment
loss
and
reversal.
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IFRS
Deferred Tax
Assets
and
Liabilities
Economic
Benefit does
not match
Similarities
CFA Level-I
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Tax Base of a
Liability
Differences
between
Taxable
&
Accounting
Profit
Deductable
Temporary
Difference
Recognition of
Tax Charged
directory to
Equity
IFRS
Similarities
Bond Issuance
Accounting
Method
for
bond issuance
Reporting
Interest
Payments
of
10
CFA Level-I
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Reporting
Option
Derecognition of
Debt
Lease
terminology
Capital
lease
terminology
Finance
lease
terminology
Classification
as Finance/
Capital Lease
Ownership is transferred to
the lessee by the end of
the lease term
Option to purchase the
asset at price sufficiently
less than the fair price
Lease term extended to
major part of economic life
of the asset, even the title is
not transferred
At inception the present
value of minimum lease
payments be equal to the
fair value of the asset
Asset can only be used by
lessee
unless
major
modifications are made
Generally is all the risks and
rewards associated with the
asset are transferred, both the
lessee and the lessor record
finance lease
Interest
portion
lease
payment
Reporting
the Lessor
of
by
Actuarial
gains/losses&
Prior
Service
Costs
is
the
is
the
11
CFA Level-I
Net
Pension
Obligation
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U.S. GAAP
U.S. GAAP requires the use of
equity method for accounting
interests in equity method
U.S. GAAP uses a dual model
based on voting control and
economic control in
accounting for investment in
another area
IFRS
IFRS permits the use of
proportionate or equity
method in joint ventures.
IFRS uses voting control
method to determine need for
consolidation in accounting
for investment in another area
Similarities
12