International Accounting - Must-Know Differences Between IFRS and US GAAP
Today IFRS and US GAAP are the two most widely used accounting frameworks worldwide. Despite ongoing work towards convergence of these two major accounting frameworks, some material differences remain. Accounting practitioners around the globe are daily challenged dealing with converting financial statements from US GAAP to IFRS and vice versa.
In the following article, Alexandra Supper, Knowledge Consultant at LucaNet AG, will pro-vide you with a brief overview of the must-know similarities and differences between the US GAAP and IFRS Standards. Finance professionals will find some hints and tips on how the LucaNet software can assist them in preparing multi-GAAP financial statements.
Globalization is shaping the world in many ways. It is also changing the world of accounting and financial reporting. International Financial Reporting Standards (IFRS) are becoming the common standard for financial reporting around the globe. In approximately 120 countries they are either permitted or required for domestic public companies.
Since the differences between the multitude of national accounting standards will probably never disappear, the standard setting bodies focus on convergence between the major frameworks IFRS and US GAAP. A common set of global accounting standards would not only improve investors’ comparisons between different international investment opportunities and facilitate cross-border mergers and acquisitions, it would also reduce complexity in financial reporting of large global entities. On the negative side, conversion is often costly for companies. Trust is another crucial factor in the convergence agenda. IFRS critics often emphasize that the IASB is a largely privately funded organization laying the ground for potential biases. These critics therefore urge for the IASB’s economic independence. In the United States, some professionals are opposed to convergence with IFRS, because they fear losing the standard-setting authority to an organization outside the U.S. On the other hand, investors are more likely to trust financial statements of a potential emerging market investee following international accounting standards rather than national standards. [...]
- Must-know similarities between US GAAP and IFRS
- Key differences between US GAAP and IFRS
- Hints and tips on preparing multi-GAAP financial statements