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GAAP vs IFRS for ETIF Issue

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For Issue No. 09-D
Application of the AICPA Audit and Accounting Guide, Investment Companies, by Real Estate Investment Companies - Evaluate the difference in accounting treatment between GAAP and IFRS in this area and how the exposure draft recommendation may impact these differences.

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Difference in Accounting Treatment
The accounting treatment for the investment companies, by real estate companies is different as per the IFRS and US GAAP. These differences could affect the financial results of the investment companies (Financial Accounting Standard Board, 2011). Under GAAP, investment companies do not require comparative financial statements as they just need a financial statement of assets and liabilities along with the schedule of investments (Benjamin, 2011). On the other hand, under IFRS, investment companies are required to have two year income statements, balance sheet, cash flow statements, statement of change in equity, and financial notes (Bellandi, 2012). For the investment companies, under GAAP and IFRS the interest income is recognized on accrual basis with effective interest method and dividend income is recognized, when right for receiving payment has been established. But under IFRS, investment companies are not required to separate interest from the fair value movements of instruments.

As per GAAP, net realized gains (losses) and the net ...

Solution Summary

An application of GAAP versus the IFRA for ETIF issues are examined. The differences in accounting treatment is determined.

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