US GAAP vs IFRS

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US GAAP versus IFRS
Due to the controversy economies have had towards which method to use for accounting, there has been a compromise to converge the two most commonly used methods – GAAP and IFRS. However, these two methods are still very different. The convergence project has yet to be completed; in the meantime, more and more countries are running towards the IFRS since it is more reliable and relevant. The main difference between these two methods is the US GAAP is rule-based while the IFRS is principle-based; this means that the US GAAP makes its decisions based on research and literature, while the IFRS bases its decisions on patterns that result in facts. A deeper look into the differences between these two methodologies shows …show more content…

Another variation is the extraordinary items. They are recognized in GAAP’s income statement, while prohibited in IFRS (Grant Thornton, 2010).
Changes of accounting policies and correction of errors have different impacts on GAAP and IFRS. When a correction of error is necessary, GAAP needs to go back to prior periods to adjust the error and reissue the statements, while IFRS includes errors of prior periods in the upcoming statements of the current period. GAAP has more literature to what needs to be done when changes of accounting policies occur, which do not exist for IFRS (Grant Thornton, 2010).

References
Ernest & Young, LLC. (2011a). Impairment of long-lived assets, goodwill, and intangible assets. Retrieved from http://www.ey.com/Publication/vwLUAssets/Impairment_of_long_lived_assets,_goodwill_and_intangible_assets/$FILE/ME_Impairment%20goodwill%20and%20intangible.pdf
Ernest & Young, LLC. (2011b). US GAAP versus IFRS the basics. Retrieved from http://www.ey.com/Publication/vwLUAssets/US_GAAP_v_IFRS:_The_Basics/$FILE/US%20GAAP%20v%20IFRS%20Dec%202011.pdf
Forgeas, R. (2008). Is IFRS that different from U.S. GAAP? Retrieved from http://www.ifrs.com/overview/General/differences.html
Grant Thornton, LLC. (2010). Comparison between U.S. GAAP and International Financial Reporting Standards. Retrieved from

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