ACC 290 GAAP vs IFRS

Topics: Financial statements, Generally Accepted Accounting Principles, Income statement Pages: 7 (1287 words) Published: November 27, 2014


Comparing IFRS to GAAP
ACC/ 291
11/3/2014
Lori Haines

Comparing IFRS to GAAP
GAAP Revenue Recognition
GAAP rules for recognition are detailed regarding specific industries, such as real estate and software. It uses the "complete contract method" and has special rules for rendering software services. Organizations can recognize revenue from the sale of goods made delivery from a definitive agreement for a fixed fee that they are reasonably sure they will collect. Under GAAP, companies must wait until the whole process of the contract is complete to recognize revenue. GAAP also has specific types of transactions, and it required public companies to follow rules that are set by the Securities and Exchange Commission. IFRS Revenue Recognition

IFRS revenue recognition states that revenue can be recorded when it becomes economically significant: IFRS revenue recognition can be defined as "not as strict" as opposed to GAAP. IFRS is considered universal; standard 18 sets forth general principles and examples applicable to all industries. IFRS allows recognition when the rewards and risk of ownership is transferred, giving the buyer control of the goods, revenue is understood and the economic benefits will flow to companies or in other words, you will get paid. IFRS bans the "completed contract method" and under certain circumstances will allow the percentage of completion method. IFRS allows you to combined contracts. However, applies different criteria compared to GAAP. (Ref. Eric Bank, Demand Media). IFRS Order of liquidity

IFRS does not require a specific order of classification on the Statement of financial position. IFRS provides the same set of objectives for business and non-business entities. The separation of assets and liabilities is required, and deferred taxes are shown on a separate line item on the balance sheet. Minority interests are included in equity as a separate line item. The financial statements include an income statement, balance sheet, changes in equity, footnotes and a cash flow statement. IFRS main goal is to give a financial statement with a clear understanding of the company's asset structure. GAAP Order of Liquidity

GAAP has a specific requirement that all accounts are measured by liquidity. The framework has no provision that the expressly requires management to consider the framework in the absence of a standard or interpretation for an issue. GAAP requires a balance sheet, income statement, statement of comprehensive income, changes in equity, cash flow statement and footnotes. The difference, as opposed to IFRS, is that deferred taxes are shown with the assets and liabilities. IFRS Commonly used Terms

IFRS terms that are commonly used together are statement of financial position, balance sheet and share capital ordinary to common stock. The statement of financial position and balance sheet are synonymous. The formats may be different. It is made to show a comparison of liabilities and equity to assets. IFRS picked the term "financial position" because it describes the purpose of the statement. The heading stands for the position of receivables and assets on one side and all the liabilities and equity on the other side which can be done at any given date. These statements provide how financial strong the company is. IFRS terms that are commonly used together are share capital ordinary and common stock. IFRS uses the term share capital ordinary to explain the stakes of the ownership. Common stock is identical to share capital ordinary which shows the equities values that the owners have in exchange for cash. The European Union utilizes the term share capital ordinary which is why it was chosen by the IFRS as the norm. The heading shows the equity shareholders what the capital value is. The heading is equity of net worth subheading. Understanding Gains, Losses

GAAP defines expenses, revenues, losses, and gains as it correlates with the income statement. The losses and gains...

References: Goodbye GAAP. (2008, April). CFO Magazine, Retrieved from:
 http://ww2.cfo.com/accounting-tax/2008/04/goodbye-gaap/
Hanna, J. (2014, March 10). The Costs and Benefits of Sarbanes-Oxley. Retrieved
October 30, 2014.
KPMG cutting through complexity. (2014). Retrieved from
http://www.kpmg.com/global/en/issuesandinsights/articlespublications/ifrs-guide-to-financial- statements/pages/default.aspx
Chapter 4 Income Statement and Related Information. (n.f.). Retrieved from
http://higheredbcs.wiley.com/legacy/college/kieso/0470587237/ifrs_supp/ch04.pdf
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • ACC 290 IFRS v. GAAP Essay
  • IFRS Vs US GAAp Essay
  • U.S. Gaap vs. Ifrs Essay
  • Gaap vs Ifrs Essay
  • GAAP vs. IFRS comparison Essay
  • U.S GAAP vs IFRS Essay
  • Essay about Financial Statements Ifrs vs. Gaap
  • IFRS vs. U.S. GAAP Research Paper

Become a StudyMode Member

Sign Up - It's Free
8 oz Leather Jacket Leather Conditioner Restoration Kit by Leatherique | VirtualBox v4.2. | SterJo Chrome History 1.0