Difference between GAAP v/s. IFRS

GAAP v/s IFRS

GAAP (US Generally Accepted Accounting Principles) is the accounting standard used in the US, while IFRS (International Financial Reporting Standards) is the accounting standard used in over 110 countries around the world. GAAP is considered a more “rules based” system of accounting, while IFRS is more “principles based.” The U.S. Securities and Exchange Commission is looking to switch to IFRS by 2015.

What follows is an overview of the differences between the accounting frameworks used by GAAP and IFRS. This is at a broad, framework level; differences in accounting treatments for individual cases may also be added as this gets updated.

Comparison chart

	GAAP	IFRS
Stands for:	Generally Accepted Accounting Principles	International Financial Reporting Standards
Introduction (from Wikipedia):	Generally accepted accounting principles (GAAP) refer to the standard framework of guidelines for financial accounting used in any given jurisdiction; generally known as accounting standards or standard accounting practice.	International Financial Reporting Standards are designed as a common global language for business affairs so that company accounts are understandable and comparable across international boundaries.
Used in:	United States	Over 110 countries, including those in the European Union
Performance elements:	Revenue or expenses, assets or liabilities, gains, losses, comprehensive income	Revenue or expenses, assets or liabilities
Required documents in financial statements:	Balance sheet, income statement, statement of comprehensive income, changes in equity, cash flow statement, footnotes	Balance sheet, income statement, changes in equity, cash flow statement, footnotes
Inventory Estimates:	Either last-in, first-out or first-in, first-out	Only first-in, first-out
Inventory Reversal:	Prohibited	Permitted under certain criteria
Purpose of the framework:	US GAAP (or FASB) framework has no provision that expressly requires management to consider the framework in the absence of a standard or interpretation for an issue.	Under IFRS, company management is expressly required to consider the framework if there is no standard or interpretation for an issue.
Objectives Of financial statements:	In general, broad focus to provide relevant info to a wide range of stakeholders. GAAP provides separate objectives for business and non-business entities.	In general, broad focus to provide relevant info to a wide range of stakeholders. IFRS provides the same set of objectives for business and non-business entities.
Underlying assumptions:	The "going concern" assumption is not well-developed in the US GAAP framework.	IFRS gives prominence to underlying assumptions such as accrual and going concern.
Qualitative characteristics:	Relevance, reliability, comparability and understand ability GAAP establishes a hierarchy of these characteristics. Relevance and reliability are primary qualities. Comparability is secondary. Understand ability is treated as a user-specific quality.	Relevance, reliability, comparability and understand ability The IASB framework (IFRS) states that its decision cannot be based upon specific circumstances of individual users.
Definition of an asset:	The US GAAP framework defines an asset as a future economic benefit.	The IFRS framework defines an asset as a resource from which future economic benefit will flow to the company.