1. Identify three major accounting issues on which IFRS and US GAAP currently differ. For each, outline briefly the nature of the divergence, and discuss the potential impact if the IFRS position is adopted in the US.© BrainMass Inc. brainmass.com October 25, 2018, 5:08 am ad1c9bdddf
There are many accounting issues on which IFRS and US GAAP differ. Some of the differences would not be apparent from glancing at the financial statements themselves and others would be.
Financial Statement Presentation.
Let's start with the differences that would likely be noticeable upon inspecting the statements side-by-side. US GAAP and IFRS do not report items on the face of the income statement the balance sheet in the same way. For instance, US GAAP allows for the possibility of an extraordinary gain or loss, one that is infrequent and unusual, and allows it to be reported, net of tax, after the tax provision. IFRS does not permit unusual and infrequent gains and losses to get this special treatment. Gains and losses, regardless of their frequency or rarity, are all reported in the same manner, that is, before the tax provision. IFRS requires that the amount of net income attributable to non-controlling interests be reported on the income statement while US GAAP does not require this. Both US GAAP and IFRS require the reporting of discontinued operations, net of tax, after the tax provision, however, IFRS defines a discontinued operation more narrowly. Under IFRS, companies must classify expenses either by nature or by function. US GAAP does not have that requirement. Under IFRS, there are a certain minimum number of items that should be presented on the income statement. US GAAP has no such minimum information requirements. Publicly traded companies (issuers) do have minimum information requirements when reporting to the Securities and Exchange Commission (SEC) but that is only applicable to a subset of the firms and this specific, regulated information is not generally included in companies' annual reports that are distributed to shareholders. It is, however, publicly available through the SEC's website.
On the balance sheet, IFRS recommends but does not require the title "Statement of Financial Position" rather than the balance sheet. Under IFRS, assets are usually presented in REVERSE order of liquidity while US GAAP presents assets in order of liquidity. So the balance sheets are upside down of each other. IFRS requires a classified balance sheet. That is, you must separate current and non-current assets and liabilities. ...
Your tutorial is 1,345 words (about four pages double spaced) plus a reference and discusses the differences in financial statement presentation, methods for depreciating and impairing long-lived assets, and reporting of certain liabilities. After each section, there is a discussion of the potential impact if the IFRS position is adopted in the US.
GAAP and International Standards
Analyze the convergence of U.S. Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS).
Explain why accounting rules differ from country to country?
Discuss the advantages of a single set of financial statements worldwide. Are there any disadvantages, particularly to the U.S.?
Identify and explain some of the key differences between U.S. GAAP and IFRS standards.
Offer an opinion on whether you personally feel convergence with IFRS is a good idea for the U.S. Support your opinion.