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US GAAP vs IFRS: Principles Based or Rules Based

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List and explain two IFRS regulations that you consider to be principle based.

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Solution Summary

This solution first gives an overview of what the IFRS and the US Generally Accepted Accounting Principles are. It also highlights the main similarities and differences between the US GAAP and IFRS, before providing information and examples on two IFRS regulations that are considered principles based. Note, the solution is adequately referenced.

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Hello Student,

Before I suggest two International Financial Reporting Standard Regulations that are principle based, let me give you a brief overview of what the IFRS and the US Generally Accepted Accounting Principles are. The U.S. Generally Accepted Accounting Principles are defined as, "accounting regulations used to prepare, present, and report financial statements for all types of companies in the United States." On the other hand, the goal of IFRS is to provide a global framework for how public companies prepare and disclose their financial statements. Therefore, the International Financial Reporting Standards exists so as to allow countries from around the world to follow similar accounting standards and allow for uniformity. As it is now, "approximately 120 nations have adopted IFRS and require it for their domestic companies." You may also want to note the main similarities and differences between the US GAAP and IFRS given below in the following excerpt:

"One big similarity between the two relates to financial statement presentation. Both GAAP and IFRS require a balance sheet, income statement, other comprehensive income for US GAAP or statement of recognized income or expense for IFRS, along with a statement of cash flows and notes to the financial statements. Also, both require that the financial statements be prepared on an accrual basis. One difference when it comes to financial presentation is that U.S. GAAP requires companies to report expenses ...

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