Differences Between IFRS And Generally Accepted Accounting Principles

GAAP (Generally Accepted Accounting Principles) are the policies and procedures accountants or companies need to use for all financial statements or records. These policies and procedures are not necessarily set in stone although need to be taken into consideration. “The GAAP is not a fixed set of rules. They are guidelines or, more precisely, a group of objectives and conventions that have evolved over time to govern how financial statements are prepared and presented” (All Business Editors, 2013). This helps keep consistency with financial statements or reports that are written by companies or accountants.

International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP) are different because the GAAP is a ruled based because they use a set of guidelines and objectives and IFRS is principal based and has a different set of standards that they follow. The GAAP being more of a rule based means that they follow a list of comprehensive rules and these rules must be followed in order to accurately prepare and report financial

The GAAP takes the approach where they examine a more focal point on the writing of the financial reports. The IFRS takes the approach of using and reviewing of the specific guidelines more thorough through the financial statements. There are differences between IFRS and GAAP through consolidation, statement of income, inventory, development costs, and earnings per share. Through consolidation IFRS prefers to have power over their representation of their financial statements and the GAAP prefers to have a risk and reward compensation of their financial statements. In statement of income the IFRS chooses to not separate out unexpected items in the income statement and the GAAP shows the items right below the net income as both shows a different ways of choosing how to report on the income