IFRS vs GAAP

Question 1

Impracticality of Retrospective Application

Answer 1

GAAP: Change in accounting estimate

IFRS: Change in accounting estimate and correction of errors. If impractical, apply to the earliest date it is practicable

Question 2

Statement of Cash Flows

Answer 2

IAS 7, Cash Flow Statements, is similar to the GAAP statement except that:

bank overdrafts are presented as operating activities for IFRS and financing activities in U.S. GAAP,

interest and dividends received are presented as operating or investing activities for IFRS and only as operating activities in U.S. GAAP, and

the most recent two years (i.e., comparative periods) must be presented.

Question 3

Statement of Changes in Equity

Answer 3

IAS 1 contains an example of a “Statement of Changes in Equity” very similar to the GAAP statement. Differences under IFRS include:

a. use of the term “reserve” for comprehensive income items and for transactions related to convertible debt and stock option contracts.
b. use of the term “revaluation surplus” for revaluation of property, plant, and equipment; mineral resources; and intangible assets.
c. use of the account title “Share Capital” rather than “Common Stock” and “Preference Shares” for preferred stock.

Question 4

Balance Sheet Presentation - Assets

Answer 4

The categories of assets, liabilities, and stockholders’ equity are quite similar within U.S. GAAP and IFRS (International Financial Reporting Standards). However, IFRS statements may present property, plant, and equipment first in the balance sheet.

Question 5

Footnotes

Answer 5

IFRS requires mores disclosure since it is principals based. US GAAP is more rule based

Question 6

Short-term lease exemption

Answer 6

GAAP: lessee excludes only those purchase options that it is reasonably certain to exercise

IFRS: lessee excludes all purchase options from determination of the lease term