otes to writer: I have attached a work document for easier review. Please write this as a forum post but also include references.
Suppose a store sells a MP3 player in December to a customer who agrees to pay for it in January. Should the business recognize (report) the sale as a December transaction or as a January transaction? It really does not matter as long as the storeowner discloses the rule the decision is based on and applies it consistently to other transactions. Because businesses may use different reporting rules, however, clear communication also requires full and fair disclosure or the accounting rules chosen.
Communicating business results would be simpler if each type of business activity were reported using only one measurement method. World economies and financial reporting practices, however, have not evolved uniformly. Even in highly sophisticated countries such as the United States, companies exhibit significant diversity in reporting methods. Providers of accounting reports assume that users are educated about accounting practices.
What is U.S. GAAP? What is IFRS? Comment on the differences between these two measurement rules and discuss the application of each.
Do research on the Internet and show the reference for the information.
Professor’s Note: In addition to searching the Internet for text related to this discussion, please watch the following videos (click on the following link to access these videos) and post your comments.
Grading Criteria: Try to add information not previously discussed by others. Please, provide factual information (not merely opinions) backed up by details or examples. Your comments should be in your own words and include references.
Module 1 Discussion
Module 1 Discussion
There has been a concern over the use of different rules employed by companies in financial disclosure. The two main applied standards of disclosure by companies are IFRS and the US. GAAP. The General Accepted and Accounting Policies (GAAP) represents an accounting structure with a set of laws, standards and procedures primarily applied by companies in USA (Shamrock, 2012). The International Financial Reporting Standards (IFRS) also represents a set of accounting procedures developed by the International Accounting Standard Board (IASB) with an aim to offer a consistent basis of financial reporting globally (IASB, 2016).
There are many differences between the IFRS and GAAP although this paper considers a few of them. The first difference is that although IFRS and GAAP may use some vocabularies that are similar, they have different definitions. Moreso, some differences exist in the time and the way of recognizing items in the financial statements. There are also variations on presentation and disclosure of items in the financial statements. There is a discrepancy on whether some items should be in the financial statements or the footnotes (Whittington & Delaney, 2010).
The GAAP and the IFRS are applied depending on how the standards are organized. The GAAP are used to prepare the financial statements on accrual basis. The books of accounts are also made in a manner that would allow reconciliation with the financial statements. Different IFRSs provide guidelines on the recognition, disclosure, presentation, classification and how the transactions should be measured and presented in the accounts. Investors in the US have invested in other countries, and the accountants need to have knowledge of GAAP and IFRS. The current huge challenge is to align the flexibility and comparability in the financial reporting and disclosure (Anonymous, 2012).
Anonymous (2012). Quarter close, Q4 2012: Eurozone, FASB disclosure, and other financial reporting updates [Video File]. Retrieved from https://owl.english.purdue.edu/owl/resource/560/10/
IASB (2016). IFRS – What are IFRS?. Ifrs.org. Retrieved 8 January 2016, from http://www.ifrs.org/About-us/Pages/What-are-IFRS.aspx
Shamrock, S. E. (2012). IFRS and US GAAP: A comprehensive comparison. Hoboken, N.J: John Wiley.
Whittington, R., & Delaney, P. R. (2010). Wiley CPA exam review 2011. Hoboken, NJ: Wiley.