Comparing Ifrs to Gaap Essay

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Comparing IFRS to GAAP Essay University of Phoenix- Week 4 Kevin Waters ACC/291 IFRS8-1 What are some steps taken by both the FASB and IASB to move to fair value measurement for financial instruments? In what ways have some of the approaches differed? * Fair value measurements provide users of financial statements with an accurate picture of value of a company's assets. Both GAAP and IFRS require firms to include information regarding fair value measurement practices in the notes of financial statements. Under either system, companies will be required to report assets at either book value or fair value, depending on the situation. As a general rule of thumb, all assets in the same class must receive the same valuation treatment. In regards to the value of receivables, IRFS uses a two tiered method that first analyzes individual receivables, and then looks at receivables as a whole to determine if there is any impairment. IFRS 9-1 What is component depreciation, and when must it be used? * Component depreciation happens when an asset has fundamentally different parts that should be depreciated with different treatment. Under IFRS, firms are required to use component depreciation if the parts of the asset offer varying patterns of benefit. The reasoning behind this is that it provides a clearer picture of the assets book value. This method is also permitted under GAAP, but U.S companies rarely use it in practice. (Ernst & Young 2012). IFRS 9-2 What is revaluation of plant assets? When should revaluation be applied? * The revaluation of plant assets can be defined as the process of change values from book value to fair value. This process is required in the event that there have been substantial economic changes in the market which have occurred. For example, if a company purchased a building 10 years ago and it
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