Azahel Internet CAFE & Accounting Service"

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Accounting and Finance Advisory_ that is accountancy system installation based in Peach-tree & Quick-books- SAGE Software for Small and Middle Sized Businesses!

22/06/2020

Good Evening!

In Accounting and auditing there are two terms which confuse sometimes. I have tried to give some major differences between GAAP and IFRS.

*Difference between GAAP and IFRS.*

GAAP( also known as US GAAP) and IFRS differ in several ways

(1). *MEANING*

GAAPS:- Generally Accepted Accounting Principles.

IFRS:- International Financial Reporting Standards

(2). *USAGE/APPLICATIONS.*

GAAPs:- They are compulsory applied by Public Limited Companies Registered in the US and trading in the stock market

IFRS:- Accepted and applicable in more than 140 states inclusive of common Wealth States.

3. *INVENTORY VALUATION.*

GAAP:- Accept usage of LIFO as a method of stock valuation.

IFRS:- Doesn't allow LIFO method of stock valuation.

4. *INVENTORY REVALUATION REVERSALS.*

Both GAAP and IFRS allows revaluation of stock under certain market circumstances. When the market normalize, IFRS allows reevaluation reversals while GAAP doesn't allow for such Reversals.

5. *ASSET REVALUATION.*

GAAP:- GAAP doesn't allow for revaluation of Fixed asset especially upward valuation of the Assets which leads to creation of revaluation reserve.

IFRS:- Allows reevaluation Fixed Assets and creation of reevaluation reserve.

6. *PREPARATION.*

GAAPs:- Prepared by FASB (Financial Accounting Standards Board.)

IFRS:- Prepared by IASB (International Accounting Standards Board.)

7. *CAPITALIZATION OF DEVELOPMENT COSTS.*

GAAP:- Doesn't allow for capitalization of Deelopment costs.

IFRS:- Allows capitalization of development costs.

According to codification done in 2008 GAAPs were summed up to 90.

IFRS are rapidly changing with the most recent major change happening in 2008 where new IFRS 17- Acounting for Insurance Contracts was issued and given an effective date of 1 January 2021 with early adoption allowed.

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