What Are Difference Between IFRS and GAAP

In today's post, we will know what is Gaap and IFRS and the Difference Between Gaap and IFRS What is the difference between Gaap and IFRS?

Difference Between GAAP and IFRS

IFRS vs GAAP This is the most debated topic in accounting. IFRS is known as the International Financial Reporting Standard, which means a principles-based set of standards. On the other hand, Generally Accepted Accounting Principles (GAAP) are the combination of rules, conventions, and procedures, which explain the accepted accounting practice.

Difference Between IFRS and GAAP

There are some important differences between GAAP and IFRS, which we will understand below through the Difference Table, but before that, let us better understand what GAAP and IFRS are.

What is GAAP in Account?

Generally Accepted Accounting Principles or GAAP refers to the standard framework, principles, and procedures used by companies for financial accounting. The principles are issued by the Financial Accounting Standards Board (FASB).

It is a set of accounting standards that includes standard methods and rules for recording and reporting financial data such as balance sheets, income statements, cash flow statements, etc.

What is IFRS in Account?

The full name of IFRS is the International Financial Reporting Standard which is a globally adopted method of financial reporting issued by the International Accounting Standards Board (IASB). Formerly, it is known as International Accounting Standard (IAS).

The standard is used for the preparation and presentation of financial statements i.e. balance sheet, income statement, cash flow statement, changes in equity and footnotes, etc.

IFRS ensures comparability and understanding of international business. Its objective is to provide users with information about the company's financial position, performance, profitability, and liquidity, to help them make rational economic decisions.

Currently, about 120 countries have adopted IFRS as a framework to govern accounting statements. With the adoption of IFRS, the presentation of financial statements will be better, simpler, and at par with foreign competitors.

Difference Between GAAP and IFRS

So far we have known what is Gaap and IFRS, if you have read all the above things carefully, then you must have come to know about the difference between Gaap and IFRS.

If you still have any confusion in understanding what is Gaap and IFRS and what is the difference, then now we are going to tell you some important differences between them below.

The key differences between GAAP and IFRS are explained as under:

• GAAP stands for Generally Accepted Accounting Principles. IFRS is an abbreviation for International Financial Reporting Standard.

• GAAP is a set of accounting guidelines and procedures that companies use to prepare their financial statements. IFRS is the universal business language adopted by companies when reporting financial statements.

• Financial Accounting Standards Board (FASB) issues GAAP while International Accounting Standards Board (IASB) issues IFRS.

• Extraordinary items are shown at the bottom of the statement of income in the case of GAAP. In contrast, in IFRS, such items are not segregated in the income statement.

• In GAAP the development cost is treated as an expense, whereas in IFRS, the cost is capitalized provided specified conditions are met.

• Inventory reversal is strictly prohibited under GAAP, but IFRS allows inventory reversal to be accomplished subject to specified conditions.

Conclusion

Here in this post, we add all the related information about Gaap and IFRS so if you want to know the difference between Gaap and IFRS then you should read our post till the end.