IFRSvsGAAP2
Taking a Closer Look at IFRS & GAAP: A Comparative Analysis
Andrew Eubanks
ACC/291 Principles of Accounting II
May 18th 2015
Lee Guillory
Taking a Closer Look at IFRS & GAAP: A Comparative Analysis There has been a big debate brewing about the acceptable accounting standards used in the US, also known as the GAAP or General Accepted Accounting Principles and whether or not the US should adopt the International Financial Reporting Standards used by many international companies. The following is an answer to some of the most frequently asked questions that come up during the debate.
Answering the Big Questions
IFRS 8-1: What are some steps taken by both the FASB and IASB to move to fair value measurement for financial instruments? In what ways have some of the approaches differed? Both the FASB and IASB are having a tough time making this happen and have started with a slow but reasonable approach. The first step requires a disclosure of the fair value information in the notes. The second step is the fair market option. This option grants permission for companies to record some type of financial instrument at fair value in financial statements. (Kimmel, P. D., 2013).
IFRS 9-1: What is component depreciation, and when must it be used? Component depreciation is when an asset is depreciated differently based upon different parts. An example when this must be used would be in the case of large real estate holdings. The plumbing, HVAC, Roofing, etc… all have different usage periods, thus they can be depreciated separately.
IFRS 9-2: What is revaluation of plant assets? When should revaluation be applied? Revaluation of plant assets is the process of changing forms of values in terms of book value to fair market value. Real estate would be the perfect asset in this example as well. Perhaps you purchased a building 20 years ago and it has now appreciated. Revaluation of this asset could potentially affect your bottom line significantly and look better
Andrew Eubanks
ACC/291 Principles of Accounting II
May 18th 2015
Lee Guillory
Taking a Closer Look at IFRS & GAAP: A Comparative Analysis There has been a big debate brewing about the acceptable accounting standards used in the US, also known as the GAAP or General Accepted Accounting Principles and whether or not the US should adopt the International Financial Reporting Standards used by many international companies. The following is an answer to some of the most frequently asked questions that come up during the debate.
Answering the Big Questions
IFRS 8-1: What are some steps taken by both the FASB and IASB to move to fair value measurement for financial instruments? In what ways have some of the approaches differed? Both the FASB and IASB are having a tough time making this happen and have started with a slow but reasonable approach. The first step requires a disclosure of the fair value information in the notes. The second step is the fair market option. This option grants permission for companies to record some type of financial instrument at fair value in financial statements. (Kimmel, P. D., 2013).
IFRS 9-1: What is component depreciation, and when must it be used? Component depreciation is when an asset is depreciated differently based upon different parts. An example when this must be used would be in the case of large real estate holdings. The plumbing, HVAC, Roofing, etc… all have different usage periods, thus they can be depreciated separately.
IFRS 9-2: What is revaluation of plant assets? When should revaluation be applied? Revaluation of plant assets is the process of changing forms of values in terms of book value to fair market value. Real estate would be the perfect asset in this example as well. Perhaps you purchased a building 20 years ago and it has now appreciated. Revaluation of this asset could potentially affect your bottom line significantly and look better
References: What a Switch from GAAP to IFRS May Mean for Investors. (Nov. 2011). Retrieved May 16, 2015, from Yanrong, L. (2013). International Financial Reporting Standards - IFRS. Kimmel, Paul D. (2013). Financial Accounting: Tools for Business Decision Making (7th ed.). John Wiley & Sons, Inc.