IFRS Essay Example | Topics and Well Written Essays - 250 words

IFRS - Essay Example U.S. GAAP consist the accounting standards whose history date back since 1930s. The standards were put in place by the American Institute of Accountants following the stock market crash in 1929. Between 1938 and 1939, U.S. GAAP was established under the pressure of the chief accountant of Securities and Exchange Commission (SEC). The chief accountant required AIA to provide substantial standards to be observed when performing accounting practices. A special committee was formed thereby recommending several accounting and reporting standards as well as introduced the concept of â€Å"financial statements.† This paper summarizes the difference between IFRS and US GAAP as well as gives you an understanding of what these two set of standards are. 1. Under US GAAP Inventory is carried at the lower of cost or market, where market is current replacement cost. LIFO permitted. Under IFRS Inventory is carried at a lower of cost or realized value. Realizable value is the best estimate of the amount expected to be realized considering the business purpose. LIFO is prohibited 2. Under US GAAP Inventory write downs are write down to lower of cost or market creates a new cost basis. Reversal of previously written down amounts are prohibited. Under IFRS previously written down amounts can be reversed up to the original impairment loss if the reason for impairment no longer exists. 3. When determining a method for long lived asset impairment under US GAAP you must use the two step approach. Must perform the recovery test and if not met you must then perform the impairment test. Under IFRS you can use a one-step approach. 4. Under financial documents, US GAAP required financial statements to incorporate a balance sheet, income and cash flow statements, changes in equity and footnotes. Also, US GAAP required that current and non-current assets be separated while interests are incorporated in liabilities on a separate entry