What are the key differences between GAAP and IFRS?

What are the key differences between GAAP and IFRS?

GAAP (Generally Accepted Accounting Principles) is primarily used in the U.S., while IFRS (International Financial Reporting Standards) is used internationally. Key differences include revenue recognition, measurement of assets, and the treatment of leases.

Can you explain how revenue recognition differs between the two?

Sure! Under GAAP, revenue is recognized when it is earned and realizable, while IFRS allows for more flexibility, recognizing revenue when control of the goods or services is transferred to the customer.

What about the treatment of leases?

In GAAP, leases are classified as either operating or capital leases, affecting how they are reported. IFRS has a single model where most leases are recognized on the balance sheet, impacting financial ratios.

Which standard is more widely accepted globally?

IFRS is more widely accepted globally, as it is used in over 140 countries, while GAAP is primarily used in the United States.