Because the global market is increasingly going to the U.S., providers of capital from other countries, and as many investment opportunities abroad. There is a need for a set of accounting standards for all companies in the global economy growing. It was one of the standards allows companies and individuals to compare the financial statements of companies located worldwide. There are two main sets of accounting standards, I will focus on. An American G.A.A.P. The acronym for the (generally accepted accounting principles), and an acronym for IFRS (International Financial Reporting Standards). IFRS accounting standards in over 100 countries worldwide. To help U.S. companies enter the global market, the SEC has to make a decision to adopt IFRS or GAAP and IFRS together. There are many similarities between GAAP and IFRS, and my article focuses on some of the similarities and differences.
When it comes to the financial statements of many similarities between U.S. GAAP and IFRS, which is a good thing, when converting or adopting financial statements about the same thing for the United States and accountants International. In both standards include a complete set of financial statements balance sheet, income statement and a question of income tax and operating costs can not. In preparing the declaration, to require both GAAP and IFRS are prepared in an accrual basis (expenses and revenues reported in the period they are incurred) as opposed to cash. Both GAAP and IFRS require companies to use the same accounting policies as in the previous year, no less an information document for all new policies. In addition, companies do not prepare interim reports.
In the case of two stocks IFRS and the cost of using GAPP as basic accounting principles. The same level of definition of the inventory. Inventory held for sale in the ordinary course of business or move into the production of goods or services. Both approaches allow different standards as a way of standard cost method and cost method of retailing. Also under its expenses, including standards of inventory worst materials, direct labor and overhead, while not selling expenses and general administrative costs into account.
There are significant differences in the methods of inventory costs. With U. S. the last in, first out or GAAP "LIFO" method is an acceptable method under IFRS, it is not. IFRS should be the same method will be applied to all stocks. stock assessment in accordance with GAAP, at a cost below market cost. Whereas under IFRS inventory is the lowest cost, or it may be cost pricing on the net realizable value. GAAP inventory can be reduced, inventories under IFRS can be written pre-determined circumstances.
The definition of long-lived assets are similar in nature under GAAP and IFRS U. S.. Both define certain tangible long-term and lived for their use, use for more than one accounting period. The long-lived assets are depreciated according to GAAP and IFRS
GAAP and IFRS that have a division for special items listed on the tax return. Other items are gains or losses on ordinary activities that are important for its unusual and infrequent and not a society on continuing operations. Extraordinary items can be modified by industry and region. With GAAP exceptional items are presented separately, and contribute to IFRS other gains and losses included in operations.
Fixed assets are treated in accordance with GAAP and IFRS, but not even exactly the same. Both of their factory owned by the state-defined and equipment as tangible assets, held on the use of production or storage of goods, or for rental to others, or administration. They are supposed to be used for more than one accounting period. They can both the value of assets at their original cost and using the same depreciation methods. GAAP is the main application of historical cost asset values during the same life. On the other hand IRFS can be re-valuation of assets at year end if a significant change in the market cost. When the fair value of assets under IFRS depreciation will be recalculated with the new value of the asset.
There are many obstacles to overcome to merge GAAP and IFRS or directly, but to adopt IFRS, but it must do. Differences create barriers to doing business internationally. The inability to accurately compare and financial companies that use U.S. GAAP analysis and those using the IFRS slow globalization. Investors will not and those wishing to do business internationally, so a set of uniform standards are needed.
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