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An Executive Guide to IFRS: Content, Costs and Benefits to Business by Peter Walton

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CHAPTER 8

COMPARISON WITH US GAAP

The aim of this chapter is to highlight some notable differences between US GAAP (the other most commonly found comprehensive basis of accounting in financial markets) and IFRS. It does not aim to be comprehensive. The first difference looked at is in the authoritative nature of their shared Conceptual Framework. Another major difference is in determining the scope of consolidation and interpreting the ‘power’ criterion. The chapter also looks at financial instruments, and related to that, offsetting of derivatives. It goes on to non-financial assets and impairment and a number of other differences.

Much of the first decade of the IASB’s activities has been directed towards convergence with US GAAP. We will not know until the end of 2011 whether the US will adopt IFRS. If it does so, this will not take effect until 2014 or later, so US GAAP is not likely to disappear very soon. It seemed therefore potentially useful to review the major differences between IFRS and US GAAP as a guide to what work remains to be done if full convergence were to be reached, and as a guide to differences when both comprehensive bases of accounting exist along side each other.

Comparisons with US GAAP have been a bone of contention over many years. People who were against the use of international standards used to deploy such comparisons to show that US GAAP was much better. Supporters could argue that the differences might be many at a detailed level but were not that ...

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