IFRS and US GAAP, with Website: A Comprehensive Comparison

2

THE FRAMEWORK

The most significant difference between US GAAP and IFRS for a practitioner is the role that the underlying concepts play in day-to-day accounting and reporting. In simple terms, effective practice of US GAAP compels the user to find the best paragraph that fits a transaction or balance. Under IFRS, users are expected to apply the principles in a way that faithfully represents economic reality.

A visual representation could be envisioning US GAAP as a great wall of cubbies in which one finds the one that best fits the transaction at hand and places it in that space. Following this depiction, IFRS is more like an orderly shelf of jars which are taken out as needed, and the contents of those containers combined to create the best mixture that faithfully represents the transaction.

This is not to say that US GAAP does not aim to create financial statements that faithfully represent the combination of transactions that an entity is made up of. The two standards just take different paths to the same destination.

In order to use IFRS effectively, it helps to understand the different political environments under which the statements are designed and interpreted. The Securities and Exchange Commission alone has the statutory responsibility to promulgate accounting rules in the United States. While the SEC has delegated most of this authority to the Financial Accounting Standards Board, the commission can and does supplement accounting rules of public companies. Because ...