Running Head: GAAP & IFRS 1
Research Paper
GAAP & IFRS
Jacob Mitchell
ACCT 301-B03
Liberty University
Dr. Felicia Olagbemi
June 30, 2014
GAAP & IFRS 2
Introduction
In today’s ever-changing business environment it is crucial to have a set of standards in
place to create a uniform system of checks and balances in the fields of accounting and finance.
With substantial national differentiations in economic, legal, and social systems, there has been a
rise in the number of different accounting systems in individual countries (Bohusova &
Nerudova, 2010). Currently there are two such sets of standards in place, which attempt to
regulate the accounting and financing fields. These are generally accepted accounting principles,
also known as U.S. GAAP, and International Financial Reporting Standards, commonly known
as IFRS.
The U.S. GAAP provides a “dynamic set of both broad and specific guidelines that
companies should follow when measuring and reporting the information in their financial
statements and related notes” (Spiceland, Sepe, & Nelson, 2013, p. 8). Also, the U.S. GAAP
provides these guidelines for companies and organizations within the United States. The IFRS
was endorsed by the International Accounting Standards Board (IASB), and as of late 2011, over
115 jurisdictions require or permit the use of IFRS or a local variant of IFRS. In fact, more and
more countries have begun to base their national accounting standards using IFRS (Spiceland,
Sepe, & Nelson, 2013).
The issue that has arisen is that the U.S. GAAP and IFRS do not quite see ‘eye to eye’ on
every situation. According to Bohusova and Nerduova (2010), “both systems are based on the
same principles, but currently there are significant differences between them” (p. 300). Due to
these differences it has made it very difficult to create a uniform set of standards and guidelines
for all to follow. This is especially difficult for organizations that have an international presence;
in this case they are forced to adhere to both U.S. GAAP and IFRS. In addition to following both
GAAP & IFRS 3
sets of guidelines, it is imperative that the organizations familiarize themselves with both sets of
standards to ensure there is no legal recourse if a rule or guideline is broken.
