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milestone_2.pptxThe differences in reporting between IFRS and GAAP
Southern New Hampshire University
Robert Shulzinsky
7/21/2017
The differences in reporting between IFRS and GAAP
Intangibles
The acquired intangible assets treatment assists to explain the reason why IFRS is considered to be principles-based. Intangible assets are things such as advertising costs, R&D and goodwill. Under the GAAP, the acquired intangible assets are recognized at fair value while it is only recognized under the IFRS if there will be future economic benefit with the asset and has measured reliability (Cook, D. (2005).
The IFRS is one of the accounting standards that is used in several countries almost 110 countries. The IFRS has several significant differences from GAAP. In contrast to GAAP, IFRS is principles-based accounting standard unlike GAAP which is rules-based.
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LIFO
Inventory
The last-in, first-out accounting method for inventory costs is not permitted under the IFRS. While on the GAAP, either first-in, first-out or LIFO estimates of inventory can always be used.
The LIFO method provides a better measurement of current earnings by matching most recent costs against current revenues.
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Write Downs
If inventory is written down under the IFRS, the write down can always be reversed in the future periods as long as particular criteria have been followed. Any reversal is prohibited once inventory has been written down under GAAP.
This is the reduction of the value of an assets book value to reflect its current market valuewhich has dropped below book value
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The most appropriate reporting standards for my company
IFRS will be the most appropriate reporting standard for my company because it does not allow the last-in, first-out accounting method for the inventory costs. It also allows the reversal of the write downs in future as long as the inventory has been written down under IFRS. It is also considered principle-based resulting to economic benefits. Therefore, IFRS becomes the most favorable reporting standards
Disclosure difference between IFRS and GAAP
This is the act or the process of releasing information that is important which is related to a company and it is done with an objective to influence investors’ mind. The best form of disclosure that can be used by the company is the use of the footnotes. The use of footnotes displays all the important information to both the public and investors to help them make a right decision out of it. The company should have all the relevant information to the investors since the company is listed in different stock exchange. The information will make the investor either to invest in the company or not.
Disclosure standards to be used for my company
The disclosure interest is the best standard that will be used. This is because; the investors will be given an opportunity to invest depending on their interests not through coercion. This will improve the number of investors in the company.
The impact of convergence of GAAP and IFRS on Investors
The impact that will be created by convergence will be a reduction cost for a company that is joining a foreign a market. This is simply because the new company will be operating under the control of the similar rules which will enable global competition of markets.
The impact of convergence of GAAP and IFRS on firms
There will be long process involved and complicated. There will be change that will be brought as a result of the existing standards and this will force the firms to have all the keys that are necessary to learn the required international standards.
The role of International Accounting Standards Board (IASB) in harmonization
The issuance of permit which allows the use of IFRS is the role of the IASB. It has the mandate over its members because it was formed by very strong economies. In 2003, it was reorganized and then acquired a new name and since then, it has operated independently up to now. Any company will be impacted by this in the sense that it will effectively compete since there is IFRS. Therefore, in the society, the market will effectively operate (Floyd, 2012).
The role of IASB
The full discretion in pursuing and developing its technical agenda
The Issuing and preparation of IFRS and the exposure drafts by adhering to the due process given in the constitution
Issuing and approving the interpretations that are developed by the committee of the IFRS Interpretations.
For all the IFRS technical matters of the foundation, it is the IASB that has a total complete responsibility.
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Reference
Cook, D. (2005). IFRS TM, US GAAP comparison: A comparison between International Financial Reporting Standards and US GAAP by the Financial Reporting Group of Ernst & Young. London: Ernst & Young.
Floyd N. (2012) The case for global accounting. The New York Times
