Ifrs vs Gaap Essay
Kelly J. Feuerhak
October 20, 2014
Comparing IFRS to GAAP
When dealing with the accounting world, one needs to take a look at not only GAAP (Generally Accepted Accounting Principles) but also needs to learn the IFRS (International Financial Reporting Standards). There are a number of differences between these two systems. For the purposes of this report, we will cover the difference associated with fair value measurements, depreciation, plant assets, contingent liabilities and the differences and similarities associated with accounting for liabilities.
Fair value measurements have been a topic of discussion for FASB (Financial Accounting Standards Board) and the IFRS. They have been …show more content…
IFRS uses contingent liability to refer to obligations that are not recognized in the financial statements but may be disclosed if certain criteria are met. Items that GAAP considers recordable continent liabilities are called provisions in IFRS. Significant differences are that GAAP a contingent liability is defined as a "loss must be "probable" defined as a high likelihood (e.g. 70% or higher). Discounting allowed only if timing and amount of future cash flows are fixed and determinable." (Seay, 2014). IFRS defines it as "loss must be "probable" defined as more likely than not (>50%). Discounting required" (Seay, 2014)
"The basic notion of comparability in the FASB's and IASB's conceptual frameworks for financial reporting underlying IFRS and US GAAP (FASB,2010; IASB, 2010) is that accounting amounts are comparable if, when two firms face similar economic outcomes, the firms report similar accounting amounts.