ANSWER POST 2

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As more countries begin to open its borders it is important to find some common ground between the General Accepted Accounting Principles (GAAP)  and the International Financial Reporting Standards (IFRS). Since these standards vary according to the country of residence steps have been made to try to converge GAAP and IFRS.

 

One of the major difference between the IFRS and GAAP, is how a company reports its development cost. Forgeas (2008) indicates "under IFRS the development cost is capitalized if certain criteria are met while under GAPP the cost is expensed". Development cost criteria are met for IFRS if it is probable that future economic benefits of the assets will flow in the entity and the cost of the assets can be measured (website www.iasplus.com). For IFRS the development cost is recognized as an intangible asset which is capitalized and amortized over a period of time while GAAP will deferred the cost as an expense.

 

Since 153 countries have already adopted IFRS I think that for financial accounting purpose this standard is better than the GAAP. Seeing that IFRS provides a principal based approach it is easier to compare the financial statement with that of a foreign company. If the accounting practices are different it would be difficult for investors to measure the financial performance of a company.

 

References

 

Deloitte. IAS-38-Intangible Assets. Retrieved from http://www.iasplus.com/en/standards/ias/ias/38

 

Forgaeas, Remi. (2008, June 16). Is IFRS that different from U.S. GAAP? Retrieved from http://www.ifrs.com/overview/General/differences.html

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