Comparing IFRS To GAAP Paper Essay

There are several differences surrounded by the International Financial Reporting Standards (IFRS) and the U.S. Gener whollyy Accepted Accounting Principles (generally accepted accounting principles). The IFRS is looked more of a principles based chronicle standard in contrast to U.S. generally accepted accounting principles which is considered more rules based. By being more principles based, IFRS, arguably, represents and captures the economic science of a transaction better than U.S. GAAP. As a team me collaborated to answer the following seven questions. IFRS 2-1 In what ways does the format of a statement of financial of position under IFRS often differ from a balance sail presented under GAAP? IFRS does not mandate a specific lay or classification of accounts on the statement of financial position. In most cases, companies report assets in reverse order of liquidity. An example of the order of accounts on the statement of financial position is as followsLong Term Assets i ncumbent AssetsShareholder EquityLong Term LiabilitiesCurrent LiabilitiesGAAP specifically requires that all accounts be logical based on their degree of liquidity. Therefore, cash is usually report first and non-current assets will be reported last. Below is an example of the order typically found on a GAAP balance sheetCurrent AssetsLong Term AssetsCurrent LiabilitiesLong Term LiabilitiesShareholder EquityIFRS 2-2 Do the IFRS and GAAP conceptual frameworks differ in terms of the objective of financial reporting? Explain. No, GAAP and IFRS maintain truly similar viewpoints on the objectivity of financial info. Both of these authoritative bodies agree that financial reporting data should be relevant and faithfully represented. Information that is relevant is anything that could be viewed as useful in the eye of an investor, creditor, or regulator. Information that is faithfully represented should conform toindustry standards and any estimates should be conservative in nature. IFR S 2-3 What terms commonly used under IFRS is synonymous with common stock and balance sheet? oddment Sheet is synonymous with the Statement of Financial Position and Common parentage is typically labeled as Share Capital Ordinary on IFRS financial statements. IFRS 3-1 Describe some of the issues the SEC moldiness consider in deciding whether the united States should adopt IFRS. The SEC has several aspects to consider when it comes to the adoption of IFRS in the United States.First, the SEC should consider the overall speak tos impact this will have on businesses. It is likely that it would cost billions of dollars in new reporting expenses for U.S corporations to implement IFRS. It would also require accounting firms to vastly change their tuition requirements. Second, the SECs main job is to protect investors from fraud on public exchanges. The commission must determine whether IFRS does a better job of protecting investors from unlawful activity. IFRS 4-1 Compare and contrast the rules regarding revenue enhancement erudition under IFRS versus GAAP. to a lower place GAAP, it is possible to use cash-basis or accrual basis accounting for revenue recognition. Under cash basis, revenue is recognized with payment is received. Under accrual basis, revenue is recognized when it becomes economically signifi postt. GAAP has specific requirements for various industries on when an event qualifies to be recognized as revenue.IFRS has fewer requirements on revenue recognition, but follows the same basic principle of economic significance. Revenue can be recorded when t is probable that any future economic benefit associated with the item of revenue will flow to the entity and it can be measured reliably. IFRS 4-2 Under IFRS, do the definitions of revenues and expenses include gains and losses? Explain. Under IFRS, revenue is used to constitute the total amount of economic benefits arising from the ordinary operating activities of a business. Therefore, it does not include non-operating gains. This principle applies as to expenses, which do not include losses from non-operating activities. FRS 7-1 Some people argue that the internal program line requirements of the Sarbanes-Oxley Act (SOX) put U.S. companies at a combative disadvantage to companies outside the United States. Discuss the competitive implications (both pros and cons) of SOX.When it was implemented in 2002, SOX created an array of new reporting requirements for publically traded companies. While it is true that this costs Americanbusinesses additional capital in compliance expenses, it also creates a more stable financial system. The major(ip) frauds of Enron and WorldCom were much more damaging the financial system. Overall, it reduces the risks for investors in public companies and encourages foreign direct investment. After all of the information was gathered, I could say that I have a much better understanding of the differences in the midst of the International Financia l Reporting Standards (IFRS) and the U.S. Generally Accepted Accounting Principles (GAAP).ReferencesTerms Synonymous with Common Stock and Balance Sheet IFRS2-3. (n.d.). Retrieved January 16, 2015, from http//octotutor.com/terms-synonymous-with-common-stock-and-balance-sheet-ifrs2-3/Still in flux Future of IFRS in U.S. remains unclear aft(prenominal) SEC report. (n.d.). Retrieved January 16, 2015, from http//www.journalofaccountancy.com/Issues/2012/Sep/20126059.htm