Detailed Differences Between IFRS and GAAP

IFRS and GAAP are two of the most widely used accounting frameworks in the world. Their

differences affect how financial statements are presented. Below are some detailed differences

between these two sets of standards:

1. Conceptual Framework:

- IFRS: Has a single conceptual framework.

- GAAP: Has multiple frameworks for different types of entities.

2. Revenue Recognition:

- IFRS: IFRS 15 standardizes revenue recognition across different industries.

- GAAP: ASC 606 aligns with IFRS but has specific differences in implementation.

3. Financial Instruments:

- IFRS: IFRS 9 uses a single model for financial asset classification.

- GAAP: Uses various models based on the type of financial asset.

4. Inventory Costing:

- IFRS: Does not allow Last-In, First-Out (LIFO) method.

- GAAP: Allows LIFO.

5. Asset Valuation:

- IFRS: Allows revaluation of property, plant, and equipment and intangible assets.

- GAAP: Does not allow revaluation, must use the cost model.

Page 1
 Detailed Differences Between IFRS and GAAP

6. Impairment of Assets:

- IFRS: Uses a single-step approach for impairment write-downs.

- GAAP: Uses a two-step approach for the impairment of assets.

7. Lease Accounting:

- IFRS: IFRS 16 requires lessees to recognize most leases on the balance sheet.

- GAAP: ASC 842 also requires lease recognition but has exceptions for short-term leases.

8. Consolidation:

- IFRS: Focuses on control as the basis for consolidation.

- GAAP: Uses both risk and rewards and voting rights models for consolidation.

9. Foreign Currency Transactions:

- IFRS: The effect of changes in foreign exchange rates is recognized in other comprehensive

income.

- GAAP: Some foreign currency exchange gains and losses are recognized directly in income.

10. Presentation of Financial Statements:

- IFRS: Requires a statement of changes in equity.

- GAAP: Does not require a separate statement of changes in equity.

11. Earnings Per Share:

- IFRS: Requires retroactive adjustment to EPS for rights issues.

Page 2
 Detailed Differences Between IFRS and GAAP

- GAAP: No such requirement.

12. Development Costs:

- IFRS: Can be capitalized if certain criteria are met.

- GAAP: Typically expensed as incurred.

Please note, this is not an exhaustive list, and there are many other differences between IFRS and

GAAP, each with varying implications for the presentation and interpretation of financial statements.

Page 3