The International Financial Reporting Standard or the acronym IFRS was introduced by the IASB (International Accounting Standards Board) keeping in mind and with the objective of having a uniform framework and accounting practices when it came to reporting of the financial performance of the corporations across the globe. The IFRS emphasises and has an overriding impact when it comes to the fair presentation of the financial transactions and financial adjustments taking place across corporations globally. By the overriding impact, we mean to say that in rare cases, the entities may even override the standards so as present a fair and more appropriate picture of financial transactions and events.
US GAAP (Generally Accepted Accounting Principles) is literature that includes accounting and the reporting standards in The United States of America. The US GAAP has been developed and maintained by the Financial Accounting Standards Board.
While the IFRS has been designed as principal-based for the use by the profit-oriented entities, the US GAAP has been prepared and designed as rule-based in a way that it serves the need of both For-Profit as well as not-for-profit organisations.
An entity which claims compliance with the IFRS has to comply with all the applicable standards and interpretations, that also includes all the disclosure requirements. These set of standards makes it mandatory for the firm to issue an explicit declaration of compliance with these norms. However, an organisation claiming compliance with the US GAAP complies with all the statements and codifications stated in the literature including disclosure requirements, but it does not require the entity to issue a statement of compliance with the GAAP explicitly.
Under IFRS the assets are generally valued at the historical costs unless it becomes imminent to revalue the intangibles as well as the PPE (property, plant & equipment) and investment property at their fair values. Moreover, in the case of derivatives, biological assets and certain other securities the revaluation is done on the basis of fair values of the assets. However, under the US GAAP no sort of revaluation is permitted except in case of few financial instruments.
With regards to the preparation and presentation of the income statement and the position statements, the IFRS does not prescribe any particular format for the presentation purposes. A presentation based on the liquidity of assets and liabilities is prescribed in the place of a current & non-current presentation, only in the cases where such presentation provides a better depiction of financials & a more relevant and reliable information in the Balance Sheet. However, in the case of US GAAP, the items of the balance sheet are typically presented in decreasing order of liquidity; also, the public companies need to follow the SEC guidelines for the presentation purposes.
With regards to the Income statement, IFRS allows the presentation of expenses in either of the two formats, i.e. either on the basis of function or nature. However, in the case of GAAP, the expenditures are presented by functions, and the presentation of the statement needs to be in compliance with the SEC guidelines in case of publicly listed companies.
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