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GAAP (GENERALLY ACCEPTED ACCOUNTING PRINCIPLES)

GAAP is a term which comprises of the definition of concept and values and also takes into
consideration the industrial rules. GAAP generally functions in order to ensure that the financial
report of an organization is transparent and reliable. The GAAP standards are not universal and
generally vary from one country to another country. In United States it is mandatory for the
organization to prepare their financial statements according to GAAP standards. GAAP is overall
stipulated by The Financial Accounting Standards Board (FASB) along with the Governmental
Accounting Standard Board which overall stipulates the GAAP in favor of both states along with
local government. SEC and GAAP are required and must be complied by the companies which
are publicly traded.

IFRS (INTERNATIONAL FINANCIAL REPORTING


STANDARDS)
IFRS is a set of account related standards developed by the International Accounting Standards
Board (IASB) which is a sovereign, non profitable organization.
The statement of financial issues are prepared and disclosed by multifarious companies for
which the goal of IFRS is to provide a overall frame work for these preparations. In general IFRS
provide leadership in favor of preparing the financial statements relatively not setting specified
industrial reporting rules. The companies which are large in nature have their subsidiary
companies in various countries and thus it is especially important for them to have an
international standard. A single global set of principles are adopted in order to carry out various
simplifying the accounting dealings which are allowed by a company by making use of a single
language of reporting.
The difference between the GAAP (GENERALLY ACCEPTED ACCOUNTING PRINCIPLES)
and IFRS (INTERNATIONAL FINANCIAL REPORTING STANDARDS) are as follows:
POINT OF
DIFFERENCE

GAAP

IFRS

A)STANDS FOR

Generally Accepted Accounting

International Financial Reporting

Principles.

Standards.

B)INTRODUCTIO
N

International Financial Reporting


Generally Accepted Accounting

Standards is a common globalised

Principles is a customary structure of

language in support of interactions

financial accounting guideline used in

performed in a business so that the

every jurisdiction; which is also called

accounts of the company are easily

accounting standards or standard

understood.

accounting practice.
Over 110 countries, including
United States

European Union.

C)USED IN
Either revenue or loss, either
Income or expenses, assets otherwise
D)ELEMENTS OF

liabilities, profits, losses along with

PERFORMANCE

comprehensive income.

assets or liability.

Balance sheet, statement of


Financial statement, statement of

income, equity variations,

E)DOCUMENT

income, comprehensive income

statement of cash flow along with

NEEDED IN

statement, equity variation, statement of footnotes.

FINANCIAL

cash flow along with footnotes.

STATEMENT

F) ESTIMATED

Last in, first out, first in, first out, cost

First in, first out, cost according to

according method of weighted average.

method of weighted average.

It is prohibited.

Certain criteria are there under

INVENTORY
G) REVERSAL
INVENTORY

which it is permitted.

Non attendance of a standard or

On the other hand Under IFRS, the

H)FRAMEWORKS

analysis applied for an issue has no

management of the company

INTENTION

stipulation which clearly requires

clearly requires the framework to

management under US GAAP or

mull over.

(FASB) framework.
I) FINANCIAL

Wide ranges of specifically focused

It also provides relevant

STATEMENTS

information are provided to the

information which is broadly

OBJECTIVES

shareholders with help of GAAP.

focused to stakeholders who are


widely ranged. Same methods are
placed as objectives for IFRS on
behalf of Commercial and Non
commercial entities.

J)FUNDAMENTAL

In the US GAAP outline the GOING

GOING CONCERN AND

CONCERN conjecture is undeveloped.

ACCRUAL is assumptions which

ASSUMPTION

are underlying and it fames the


IFRS.
GAAP has established a command of

K)QUALITATIVE

chains of certain characteristics like

According to the IASB framework

UNIQUENESS

comparability along with

it states that the purpose about the

understandability, reliability,

decision which cannot be mean t

significance.

upon circumstances which are

The primary qualities are significant

specific in favor of individual

and reliable. Comparability is

users with significance, reliability,

secondary. User specific quality treats

comparability along with

the understandability.

understandability.

According to US GAAP frame an asset

The IRFS structure defines an

may be defined as a gain through future

asset as out looked economic

economic aspects.

benefit which acts as a source

L)DEFINITION OF
AN ASSET

through which the companies


acquire gains.