IFRS vs US GAAP

Introduction

• This presentation focuses on the key differences between IFRS (International Financial Reporting Standards) and US GAAP (Generally Accepted Accounting Principles).
• Both are accounting frameworks used to prepare financial statements, but they have distinct principles and applications.

Key Differences

1. Governance and Development

• IFRS: Developed by the International Accounting Standards Board (IASB).
• US GAAP: Established by the Financial Accounting Standards Board (FASB).

2. Principles vs. Rules

• IFRS: More principles-based, allowing for interpretation and flexibility.
• US GAAP: More rules-based, providing detailed guidance and specific standards.

3. Revenue Recognition

• IFRS: Revenue is recognized when risks and rewards are transferred.
• US GAAP: Revenue is recognized when it is realized or realizable, and earned.

4. Inventory

• IFRS: Does not allow LIFO (Last In, First Out) method.
• US GAAP: Allows LIFO method.

5. Intangible Assets

• IFRS: Intangibles should be recognized if it’s probable that future economic benefits will flow and the cost can be measured reliably.
• US GAAP: Intangible assets are recognized at fair value.

6. Financial Statement Presentation

• IFRS: Requires a classified statement of financial position.
• US GAAP: Does not require a classified balance sheet.

7. Leases

• IFRS 16: All leases are treated as finance leases.
• US GAAP: Distinguishes between operating and financing leases under ASC 842.

Applications and Global Use

• IFRS: Widely used internationally, especially in over 140 countries including those in the European Union.
• US GAAP: Predominantly used in the United States.

Final Thoughts

• Companies must carefully understand and apply the appropriate standards relevant to their financial reporting context.
• Conversion from US GAAP to IFRS (or vice versa) can be complex and requires careful planning and execution.

Resources

• Links to videos and articles discussing further details about IFRS vs US GAAP.

These notes summarize the main aspects of the differences between IFRS and US GAAP, helping in understanding their application in financial reporting.