Scribd
Upload
130 views4 pages

NXU ACC6050 Assignment

The document discusses the key differences between IFRS and GAAP accounting standards. IFRS follows principles-based standards and allows certain items like inventory write-downs and impairment losses to be reversed, while GAAP takes a more rule-based approach and requires expensing of research costs. Understanding the differences is important for businesses operating globally to avoid issues and optimize their operations across countries. The revenue recognition method, inventory valuation, lease accounting, and other areas can significantly impact financial statements and metrics under IFRS versus GAAP. The IASB works to establish global accounting standards and convergence between IFRS and GAAP.

Uploaded by

Favour
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
130 views4 pages

NXU ACC6050 Assignment

The document discusses the key differences between IFRS and GAAP accounting standards. IFRS follows principles-based standards and allows certain items like inventory write-downs and impairment losses to be reversed, while GAAP takes a more rule-based approach and requires expensing of research costs. Understanding the differences is important for businesses operating globally to avoid issues and optimize their operations across countries. The revenue recognition method, inventory valuation, lease accounting, and other areas can significantly impact financial statements and metrics under IFRS versus GAAP. The IASB works to establish global accounting standards and convergence between IFRS and GAAP.

Uploaded by

Favour
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 4

FAVOUR BARUWA

MBA

BUS6050 MODULE 1 ASSIGNMENTS

Memo: GAAP Versus IFRS

3rd February, 2024


IFRS and GAAP differ in how items are recorded and presented on financial statements.

They are widely used accounting standards. IFRS is used by over 120 countries while the

United States government follows the country's GAAP, a set of accounting guidelines

(Polzer, T., Grossi, G., & Reichard, C., 2021). While IFRS is a principles-based set of

standards, prohibiting LIFO, allowing reversals of inventory write-downs but not subsequent

reversals, capitalizing development costs under specific criteria, and reversing impairment losses

for all assets except goodwill. (Nexford Learning Solution-BUS6001 MODULE 1, 2024).

Following a "statement of comprehensive income" format and requiring lessees to recognize all

leases on the balance sheet (Levanti, D., 2022). GAAP is generally a true rule-based set of

standards and requires the expensing of research and development costs (Liu, J., 2023)..

An understanding of the differences is important to businesses operating in the global

marketplace. Cultural sensitivity, marketing, and product adaptation, legal compliance,

operational efficiency, and gaining a competitive advantage are essential for businesses to

navigate the global marketplace effectively, These help in avoiding misunderstandings, tailoring

marketing strategies, complying with local laws, and optimizing operations (Kuhlmann &

Tallman, 2022).

The differences in reporting between IFRS and GAAP can significantly impact the overall

financial statements, affecting key financial metrics, profitability, asset values, and the overall

presentation of financial information such as revenue recognition, inventory valuation, lease

accounting, financial instruments, and presentation and disclosure (Nicholas & Syaiful, 2023).
The impact of the revenue recognition method used by a company is significant on its

financial statements, affecting reported revenue, profitability, cash flows, balance sheet items,

and financial ratios. Different revenue recognition methods can result in variations in revenue,

gross profit, net income, cash flow, accounts receivable, and contract liabilities, affecting the

overall financial health and performance of the company (Gierus, 2021).

The (IASB) established the IFRS by setting and maintaining accounting standards that

are recognized and used globally. (Vaidya Dheeraj 2021). This is to promote the development

and adoption of high-quality, globally accepted accounting standards, thereby enhancing the

transparency and comparability of financial reporting across international markets. Creating and

Maintaining a Global Convergence of accounting standards worldwide, establishing a due

Process for accounting reporting, Oversees the global Financial Reporting Interpretations

Committee (IFRIC), which provides guidance and Interpretations on the application of IFRS.

The (IASB) plays a critical role in converging accounting standards with the (FASB) to achieve

greater consistency and comparability in financial reporting by “Collaboration and

Coordination” to align accounting standards and reduce differences between IFRS and GAAP in

the US through ongoing communication, working together on “Joint Projects” to develop

converged accounting standards for both international and U.S. financial reporting, by seeking

input from stakeholders, through “Convergence Initiatives”, identifying divergence areas, and

developing common solutions, “Endorsement and Adoption” by promoting global convergence

through dialogue with regulatory authorities and standard-setting bodies.


REFERENCES

1. Polzer, T., Grossi, G., & Reichard, C. (2021). Implementation of the international public

sector accounting standards in Europe. Variations on a global theme. Accounting Forum, 46,

57-82.

2. Nexford Learning Solution-BUS6001 MODULE 1. (2024).

3. Levanti, D. (2022). Development of a Disclosure Index for Lease Accounting Policies:

Evidence from Romanian Banks. European Journal of Business and Management Research.

4. Liu, J. (2023). Non-GAAP Disclosure Following Going Concern Opinions. Journal of

Accounting, Auditing & Finance.

5. Kuhlmann, E. H., & Tallman, B. A. (2022). The Impact of Nurses’ Beliefs, Attitudes, and

Cultural Sensitivity on the Management of Patient Pain. Journal of Transcultural Nursing, 33,

624-631.

6. Nicholas, N., & Syaiful, S. (2023). Evaluation Of Revenue Recognition Method Construction

Contract PT. Wahana Multitron. Return: Study of Management, Economic and Business.

7. Gierusz, J. (2021). Revenue recognition and measurement in accordance with IFRS 15 and

the Polish GAAP – a comparison. Zeszyty Teoretyczne Rachunkowości.

8. FASB: Fischer, M. J., & Vega, V. S. (2023). Exploring the Application of FASB’S “Asset and

Liability View” in Standard-Setting. The BRC Academy Journal of Business.

9. IASB: Larson, R., Myring, M., & Orens, R. (2022). US comment Letter Writing to the IASB

and Evolving SEC Views on the Use of IFRS. Accounting in Europe.

10. Vaidya, D. (2021). The International Financial Reporting Standards (IFRS): A Review.

Journal of Accounting, Business and Management, 28(2), 45-58.

You might also like