IFRS and GAAP exam 1 stuff

historical cost principle, fair value principle, and full disclosure principle

GAAP

Similarities between IFRS and GAAP chapter 2

IFRS generally requires a classified statement of financial position similar to the classified balance sheet under GAAP. IFRS follows the same guidelines as this textbook for distinguishing between current and noncurrent assets and liabilities.

Differences between GAAP and IFRS ch 2

IFRS recommends but does not require the use of the title "statement of financial position" rather than balance sheet. The format of statement of financial position information is often presented differently under IFRS. Although no specific format is required, many companies that follow IFRS present statement of financial position information in this order: -Non‐current assets -Current assets -Equity -Non‐current liabilities -Current liabilities Under IFRS, current assets are usually listed in the reverse order of liquidity. For example, under GAAP cash is listed first, but under IFRS it is listed last. IFRS has many differences in terminology from what are shown in your textbook. For example, in the sample statement of financial position illustrated on the next page, notice in the investment category that stock is called shares.

Differences between GAAP and IFRS ch 3 (recording process)

IFRS relies less on historical cost and more on fair value than do FASB standards. Internal controls are a system of checks and balances designed to prevent and detect fraud and errors. While most public U.S. companies have these systems in place, many non‐U.S. companies have never completely documented the controls nor had an independent auditor attest to their effectiveness.

under IFRS, land is reported as

long term investment

order of financial statements on balance sheet IFRS

non‐current assets, current assets, equity, non‐current liabilities, current liabilities.

Similarities between GAAP and IFRS ch 4 accrual accounting

only can use accrual basis accounting Similar to GAAP, cash‐basis accounting is not in accordance with IFRS. both use the periodicity assumption Same general revenue recognition principle Revenue recognition fraud is a major issue in U.S. financial reporting and internationally

Similarities between GAAP and IFRS chapter 5 related to inventories

you can choose either perpetual or periodic inventory system same definition of inventories same basic accounting entries for merchandising companies Both GAAP and IFRS require that income statement information be presented for multiple years. For example, IFRS requires that 2 years of income statement information be presented, whereas GAAP requires 3 years.

differences between GAAP and IFRS ch 1

• International standards are referred to as International Financial Reporting Standards (IFRS), developed by the International Accounting Standards Board. Accounting standards in the United States are referred to as generally accepted accounting principles (GAAP) and are developed by the Financial Accounting Standards Board. • IFRS tends to be simpler in its accounting and disclosure requirements; some people say it is more "principles-based." GAAP is more detailed; some people say it is more "rules-based." • The internal control standards applicable to Sarbanes-Oxley (SOX) apply only to large public companies listed on U.S. exchanges. There is continuing debate as to whether non-U.S. companies should have to comply with this extra layer of regulation.

similarities between GAAP and IFRS ch 1

• The basic techniques for recording business transactions are the same for U.S. and international companies. • Both international and U.S. accounting standards emphasize transparency in financial reporting. Both sets of standards are primarily driven by meeting the needs of investors and creditors. • The three most common forms of business organizations, proprietorships, partnerships, and corporations, are also found in countries that use international accounting standards.

Similarities between IFRS and GAAP chapter 3

Transaction analysis is the same under IFRS and GAAP. Both the IASB and the FASB go beyond the basic definitions provided in the textbook for the key elements of financial statements, that is assets, liabilities, equity, revenues, and expenses. As shown in the textbook, dollar signs are typically used only in the trial balance and the financial statements. The same practice is followed under IFRS, using the currency of the country where the reporting company is headquartered. A trial balance under IFRS follows the same format as shown in the textbook.

Differences between IFRS and GAAP chapter 5 related to inventories

Under GAAP, companies generally classify income statement items by function. Classification by function leads to descriptions like administration, distribution, and manufacturing. Under IFRS, companies must classify expenses either by nature or by function. Classification by nature leads to descriptions such as the following: salaries, depreciation expense, and utilities expense. If a company uses the functional‐expense method on the income statement, disclosure by nature is required in the notes to the financial statements. Presentation of the income statement under GAAP follows either a single‐step or multiple‐step format. IFRS does not mention a single‐step or multiple‐step approach. Under IFRS, revaluation of land, buildings, and intangible assets is permitted. The initial gains and losses resulting from this revaluation are reported as adjustments to equity, often referred to as other comprehensive income. The effect of this difference is that the use of IFRS result in more transactions affecting equity (other comprehensive income) but not net income.

Differences between GAAP and IFRS ch 4 accrual accounting

Under IFRS, revaluation (using fair value) of items such as land and buildings is permitted. IFRS allows depreciation based on revaluation of assets, which is not permitted under GAAP. income under IFRS includes both revenues, which arise during the normal course of operating activities, and gains, which arise from activities outside of the normal sales of goods and services. Instead, under GAAP income refers to the net difference between revenues and expenses. Under IFRS, expenses include both those costs incurred in the normal course of operations as well as losses that are not part of normal operations. This is in contrast to GAAP, which defines each separately.

similarities between GAAP and IFRS chapter 6 inventories and cost flow assumptions

both use lower‐of‐cost‐or‐market Who owns the goods—goods in transit or consigned goods—as well as the costs to include in inventory are essentially accounted for the same under IFRS and GAAP.

differences between GAAP and iFRS chapter 6 related to inventories and cost flow assumptions

The requirements for accounting for and reporting inventories are more principles‐based under IFRS. That is, GAAP provides more detailed guidelines in inventory accounting. GAAP allows for LIFO, IFRS doesn't Both sets of standards permit specific identification where appropriate. In the lower‐of‐cost‐or‐market test for inventory valuation, IFRS defines market as net realizable value. GAAP, on the other hand, defines market as replacement cost.