Comparing Ifrs to Gaap Essay

754 Words4 Pages
Comparing IFRS to GAAP Sean Parson ACC/291 10/13/14 Joseph Bailey The International Financial Reporting Standards (IFRS) and the Generally Accepted Accounting Principles (GAAP) are the two main accounting systems. GAAP are set by the Financial Accounting Standards Board (FASB) and IFRS are developed by the International Accounting Standards Board (IASB). There are many similarities and differences in the principles and formats between the two standards board. In the following paragraphs, specific key points between the two will be discussed. Fair value measurements provide users of financial statements with an accurate picture of the value of a company’s assets. The main reason steps are being taken to move to fair value measurement in financial instruments is to reduce complexity and improve consistency in application. Another reason was to enhance disclosures for fair value. The IASB believe the new steps will help users to better assess the valuation techniques and inputs used to measure fair value. A third reason was to increase convergence with U.S. GAAP, which has also been amended by the FASB. The IASB and the FASB worked together to ensure that fair value has the same meaning in IFRS and in GAAP and that their respective fair value measurement and disclosure requirements are the same. According to "Component Depreciation" (2014), Component depreciation is a method in which the parts or sections of a property are individually depreciated at different rates (1). Under IFRS, firms are required to use component depreciation if the parts of the assets offer varying patterns of benefits. The reasoning behind this is that it provides a clearer picture of the asset’s book value. GAAP also permits this method, however U.S. companies rarely use it in practice. According to Depreciation, Impairments, And Depletion (2014), “IFRS requires that

More about Comparing Ifrs to Gaap Essay

Open Document