Comparing Ifrs to Gaap
Comparing IFRS to GAAPMark ZiebellAAC/29111/24/2014Lori Haines Comparing IFRS to GAAPThe International Financial Reporting Standards that are developed by the International Accounting Standards Board have many similarities to the Generally Accepted Accounting Principles that have been developed by the US based Financial Accounting Standards Board. And while there are differences, they are generally on the application of a technicality. The two standards are coming together, and evidence of this can be seen in the assigned text where in different chapters we see that the IFRS is aligning with the GAAP on certain points of order, and the GAAP is moving to align with the IFRS on others.  Specific Similarities and DifferencesThe FASB and IASB have tried to implement fair value measurement for financial instruments, but they have both faced opposition to the change. They were able to gain some ground by requiring a note about the fair value information in the financial reports. They also give the option to companies to use the fair value of some items in their financial statements.Component depreciation is where there are any major components of a depreciable asset that have different useful life time frames, then they must be depreciated individually according to their useful life. This is mandated for use under the IFRS but not GAAP. GAAP allow its use though it is rare.

Some of the advantages of this approach are that one can better assign cost to the useful life of the different components. If you have a large piece of machinery that is designed to be robust and have a 10 year working life, but it is controlled by a computer system that interfaces with design systems that are continually seeing upgrades for power and functionality, then it is fair to assume and account for the fact that while the machine continues to function the controller will become obsolete and will need upgrading in half the life time of the machine. A disadvantage to this approach is the added work in tracking various nested values of one piece of plant. This added complexity has to add cost in the tracking of the different depreciations. Revaluation of plant assets allows a company to change the depreciation amount on a class of assets if their market value is rising or dropping considerably compared to the book value. All the assets in the class need to be revalued if this approach is taken. If a class of assets is changing their value rapidly, then an annual revaluation needs to take place. Unlike GAAP, IFRS allows revaluation on intangible assets.     Some product development expenditures are recorded as development expenses and others are recorded as costs. The reason for this separation is that under IFRS the development costs that are incurred after the company proved technological feasibility of the product become capital costs and can be depreciated. Before that point they are expenses.

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International Financial Reporting Standards And Fair Value Measurement. (July 16, 2021). Retrieved from https://www.freeessays.education/international-financial-reporting-standards-and-fair-value-measurement-essay/