IFRS vs. GAAP: Comparing and Contrasting Financial Statement Requirements

Description

Over 110 countries submit financial statements using IFRS, while entities in the United States predominantly apply U.S. GAAP. There are similarities and substantial differences between these reporting methods. Both IFRS and GAAP permit FIFO and weighted average inventory. However, only GAAP allows LIFO, which results in significantly different cost of sales and inventory amounts. GAAP requires reporting fixed assets at historical costs, while IFRS allows revaluation of these assets resulting in considerably different depreciation and asset costs. These differences alone can substantially alter the financial results reported.

IFRS 1, First-Time Adoption of International Financial Reporting Standards, provides guidelines for preparing a company's first IFRS-based financial statements. This is a challenging process that requires applying IFRS principles retroactively, with few exceptions. There are many unique disclosure requirements for the initial IFRS statements as well.

Preparing compliant financial statements under two sets of guidelines is a complex process for practitioners who must thoroughly understand IFRS and GAAP reporting requirements. U.S. multinational investors, cross-border companies, and anyone wanting to be able to interpret non-U.S. financial statements need to be able to compare these financial statements as well.

Listen as our panel of international reporting experts identifies key balance sheet, income statement, and disclosure differences in U.S. GAAP and IFRS to enable CPAs to comply with these standards and allow multinational investors to analyze financial statements better.