What are the key differences between IFRS and GAAP?

What are the key differences between IFRS and GAAP?

The main differences include revenue recognition, asset valuation, and the treatment of leases. IFRS is more principles-based, while GAAP is more rules-based.

Can you explain revenue recognition under both standards?

Under IFRS, revenue is recognized when control of the goods or services is transferred to the customer. GAAP has more specific criteria, often requiring evidence of an arrangement and delivery.

How do they differ in terms of lease accounting?

IFRS requires lessees to recognize most leases on the balance sheet, while GAAP has different criteria for operating and finance leases.

Which standard is more widely used globally?

IFRS is used in over 140 countries, while GAAP is primarily used in the United States.

What are the implications of these differences for multinational companies?

Multinational companies may face challenges in financial reporting and compliance, as they need to reconcile differences when operating in multiple jurisdictions.