Tina Elder

Week 4 IP

The International Financial Reporting Standards (IFRS) are a set of accounting

standards issued by the International Accounting Standards Board (IASB). They are

used in over 120 countries and are the de facto global accounting standard. The IFRS is

based on a set of general principles, complemented by specific implementation

guidance, issued by the IASB. The IFRS is based on the concept of "true and fair"

reporting, which is a fundamental part of the accounting standards of many countries.

The IFRS provides a uniform set of rules and principles for businesses to use when

preparing financial statements.

IFRS is the global standard for financial reporting, used by companies in over 120

countries. IFRS is based on a set of principles and provides a framework for companies

to prepare their financial statements. The IFRS provides a comprehensive set of rules

and guidance for companies to follow when preparing their financial statements. IFRS

requires companies to provide clear and concise information in their financial

statements and to disclose any significant matters that could affect the accuracy or

reliability of those statements.

The main purpose of IFRS is to ensure that financial statements are comparable across

different countries and regions and that companies can provide similar information in

their reports. This allows investors and other stakeholders to better understand a

company's financial position and performance.

Several key differences between IFRS and U.S. GAAP are important to understand.

First, IFRS focuses more on the fair presentation of financial information, while U.S.

GAAP is more focused on the accuracy of the information. Additionally, IFRS utilizes

more principles-based accounting, while U.S. GAAP is more rules-based.

Income Statement:

Some of the major differences between IFRS and U.S. GAAP on the income statement

are:

•IFRS requires companies to report non-operating income separately from operating

income, whereas U.S. GAAP allows companies to include non-operating income within

operating income.

•IFRS requires companies to report revenue when it is realized or realizable and

earned, while U.S. GAAP allows companies to report revenue when it is earned and

realized or realizable.

•IFRS requires companies to report gross profits, while U.S. GAAP allows companies to

report net profits.

•IFRS allows companies to report certain expenses as expenses in the period in which

they are incurred, while U.S. GAAP requires companies to report certain expenses as

assets or liabilities.

Balance Sheet:

Some of the major differences between IFRS and U.S. GAAP on the balance sheet are:

•IFRS requires companies to report assets and liabilities at fair value, while U.S. GAAP

allows companies to report assets and liabilities at amortized cost.

while U.S. GAAP allows companies to report inventory at the lower of cost or market.

•IFRS requires companies to report long-term debt as current liabilities if they are due

within 12 months, while U.S. GAAP allows companies to report long-term debt as long-

term liabilities regardless of when they are due.

•IFRS requires companies to report leases as assets and liabilities, while U.S. GAAP

allows companies to report leases as operating leases.

Impact of IFRS Reporting on Inventory Account (IAS 2)

Under IFRS, companies are required to report their inventory at a lower cost or net

realizable value. This means that the company must measure the value of its inventory

based on the estimated price it will receive when it sells the inventory. This is different

from U.S. GAAP, which allows companies to report inventory at a lower cost or market.

The impact of this requirement is that companies must be more conservative in their

inventory valuation. Since the value of inventory is based on the estimated price it will

receive when it is sold, companies must be aware of market conditions and the current

value of the inventory. This requirement can result in companies having to take a write-

off of inventory if the current value is lower than the cost.

Differences between IFRS and U.S. GAAP Regarding Revenue Accounting

Under IFRS, companies are required to recognize revenue when it is realized or

realizable and earned. This means that companies must recognize revenue when the

product or service is delivered, and the customer can use it. This is different from U.S.
GAAP, which allows companies to recognize revenue when it is earned and realized or

realizable.

The impact of this requirement is that companies must be more conservative and

careful when recognizing revenue. Companies must assess their performance

obligations and make sure they have been fulfilled before they can recognize revenue.

This requirement can result in companies having to delay the recognition of revenue if

the performance obligations are not met.

Differences between IFRS and U.S. GAAP on Financial Instruments

Under IFRS, companies are required to classify and measure financial instruments at

fair value. This means that companies must measure the value of their financial

instruments based on the current market price. This is different from U.S. GAAP, which

allows companies to measure the value of their financial instruments at amortized cost.

The impact of this requirement is that companies must be more precise in their

measurement of financial instruments. Companies must be aware of market conditions

and the current value of their financial instruments to accurately measure them. This

requirement can result in companies having to take a write-off of financial instruments if

the current value is lower than the amortized cost.

The IFRS is the global standard for financial reporting, used by companies in over 120

countries. IFRS is based on a set of principles and provides a framework for companies

to prepare their financial statements. The IFRS provides a comprehensive set of rules

and guidance for companies to follow when preparing their financial statements. There

are several key differences between IFRS and U.S. GAAP, including differences in the
way income and balance sheets are reported, the way inventory is reported, and the

way revenue and financial instruments are accounted for. Companies must be aware of

these differences to accurately report their financial information.

References

CPA, J. (2015). Overview of the Differences Between IFRS and US GAAP. Retrieved October
8, 2020, from https://www.journalofaccountancy.com/topics/ifrs-us-gaap-
differences.html

KPMG. (2020). IFRS vs. US GAAP: The main differences. Retrieved October 8, 2020, from
https://home.kpmg/us/en/home/insights/2020/02/ifrs-vs-us-gaap-main-differences.html

McKinsey & Company. (2018). The global impact of IFRS: How the world's most widely
adopted accounting standards are changing the business landscape. Retrieved October 8,
2020, from https://www.mckinsey.com/business-functions/risk/our-insights/the-global-
impact-of-ifrs-how-the-worlds-most-widely-adopted-accounting-standards-are-changing-
the-business-landscape

U.S. Securities and Exchange Commission. (2022, October 31). EDGAR—Search and
access. Retrieved December 13, 2022, from https://www.sec.gov/edgar/search-and-
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