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 globally. Key differences include revenue recognition, measurement of assets, and the treatment of leases.

How do these differences affect global businesses?

The differences can lead to challenges in financial reporting and comparability for global businesses. Companies operating in multiple countries may need to reconcile their financial statements to comply with both standards.

Are there any efforts to converge GAAP and IFRS?

Yes, there have been ongoing efforts by the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) to converge the two standards, but full convergence has not yet been achieved.

What impact does this have on investors?

Investors may find it difficult to compare financial statements across companies using different standards, which can affect investment decisions and market efficiency.

Can you give examples of companies affected by these differences?

Sure! Companies like Coca-Cola and Unilever operate in both the U.S. and international markets, and they must navigate the differences in reporting under GAAP and IFRS.