What are the key differences between GAAP and IFRS?

What are the key differences between GAAP and IFRS?

GAAP (Generally Accepted Accounting Principles) and IFRS (International Financial Reporting Standards) differ in several ways, including revenue recognition, measurement of assets, and the treatment of leases. Would you like to know more about a specific area?

Yes, can you explain how revenue recognition differs?

Certainly! Under GAAP, revenue is recognized when it is earned and realizable, while IFRS uses a principle-based approach that focuses on the transfer of control. This can lead to differences in timing and amount of revenue recognized.

What about lease accounting?

In GAAP, leases are classified as either operating or capital leases, affecting how they are recorded. IFRS has a single model where most leases are recognized on the balance sheet, which can significantly impact financial statements.

Are there any other major differences I should be aware of?

Yes, there are differences in areas like inventory valuation, impairment of assets, and financial statement presentation. Each framework has its own guidelines that can affect how financial health is reported.