StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...
Free

Financial Accounting and Reporting - Essay Example

Cite this document
Summary
This essay "Financial Accounting and Reporting" discusses International financial reporting standards that stem from the establishment of the International accounting committee board founded in 1973 which included a number of European countries…
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER95.9% of users find it useful
Financial Accounting and Reporting
Read Text Preview

Extract of sample "Financial Accounting and Reporting"

U.S. GAAP consists the accounting standards whose history dates back to the 1930s. The standards were put in place by the American Institute of Accountants following the stock market crash in 1929. Between 1938 and 1939, U.S. GAAP was established under the pressure of the chief accountant of the Securities and Exchange Commission (SEC). The chief accountant required AIA to provide substantial standards to be observed when performing accounting practices. A special committee was formed thereby recommending several accounting and reporting standards as well as introducing the concept of “financial statements.”  This paper summarizes the difference between IFRS and US GAAP as well as gives you an understanding of what these two sets of standards are.

Differences:

  1. Under the US GAAP Inventory is carried at the lower cost or market, where the market is the current replacement cost. LIFO permitted. Under IFRS Inventory is carried at a lower cost or realized value. Realizable value is the best estimate of the amount expected to be realized considering the business purpose. LIFO is prohibited
  2. Under US GAAP Inventory write-downs are written down to lower-cost or the market creates a new cost basis. Reversal of previously written down amounts is prohibited. Under IFRS previously written down, amounts can be reversed up to the original impairment loss if the reason for impairment no longer exists.
  3. When determining a method for long-lived asset impairment under US GAAP you must use the two-step approach. Must perform the recovery test and if not met you must then perform the impairment test. Under IFRS you can use a one-step approach.
  4. Under financial documents, US GAAP required financial statements to incorporate a balance sheet, income and cash flow statements, changes in equity, and footnotes. Also, US GAAP required that current and non-current assets be separated while interests are incorporated in liabilities on a separate entry line. Similarly, IFRS requires similar trends to be followed but deferred taxes should be included on a separate entry line on the balance sheet (Ball, 2006).
  5. Although IFRS requires the presentation of detailed analyses of significant accounting policies, including the basis of measurement used for financial reporting, today US GAAP also requires the accounting personnel to disclose relevant information to stakeholders to enhance transparency (Wiecek & Young, 2009).
  6. Although the U.S.GAAP aspect of “going concerned” was not clear, today’s US GAAP has a clear framework of “going concerned”. IFRS has a prominent framework underlying the assumptions of “going concern” that is in terms of accrual (Gibson, 2012).
  7. When defining assets, U.S.GAAP delineates an asset as having a future economic advantage while IFRS defines an asset in terms of wherewithal from which prospective economic advantages are drawn and flow to the company.
  8. Another difference that resides today in both standards is in the operating section of the report of cash flows. For U.S.GAAP, interest paid or received is an operating item. FAS 95 took the position that cash flows from in-service activities should reflect the effect of cash dealings and other events that enter into the determination of net income (Elliott & Elliott, 2006:2008). IFRS allows interest paid to be classified as financing or operating and interest received to be investing or operating.



Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“IFRS Essay Example | Topics and Well Written Essays - 250 words”, n.d.)
Retrieved from https://studentshare.org/business/1664291-ifrs
(IFRS Essay Example | Topics and Well Written Essays - 250 Words)
https://studentshare.org/business/1664291-ifrs.
“IFRS Essay Example | Topics and Well Written Essays - 250 Words”, n.d. https://studentshare.org/business/1664291-ifrs.
  • Cited: 0 times

CHECK THESE SAMPLES OF Financial Accounting and Reporting

Spreadsheet Modelling in Financial Accounting and Reporting

6 Pages (1500 words) Essay

Company Financial Accounting and Reporting Is Regulated by a Variety of Sources

In the UK, the accounting standards are popularly known as Financial reporting Standards (FRS).... The author describes the accounting standards which assisted the accountants and auditors to resolve different controversies related to different accounting practices.... Even the managers consider these accounting policies while developing various strategies and policies to be followed by the company.... accounting standards are a set of uniform rules that are required to be followed while making the financial reports....
6 Pages (1500 words) Term Paper

TACC203 Financial Accounting and Reporting

All the assets such as plant, equipment and land have been taken at their market value for the purpose of computation of goodwill.... Darren Limited has.... ... ... This fee will be treated as direct cost of acquisition and it will not be considered for the purpose of computation of consideration paid. ...
5 Pages (1250 words) Assignment

Critique of the Usefulness of Spreadsheet Modelling in Financial Accounting and Reporting

The paper "Critique of the Usefulness of Spreadsheet Modelling in Financial Accounting and Reporting" is a great example of a finance and accounting essay.... The paper "Critique of the Usefulness of Spreadsheet Modelling in Financial Accounting and Reporting" is a great example of a finance and accounting essay.... It is done to comply with the rules and regulations of Financial Accounting and Reporting.... Spreadsheets are very much useful in modelling situations in financial accounting and help in various decision-making processes....
6 Pages (1500 words) Essay

Should financial accounting and reporting be regulated through accounting standards

Financial Accounting and Reporting Need to Be Regulated by Accounting Standards Companies report their financial ments every now and then.... As a result, standardization of financial accounting will allow more investment to different economies.... Financial reporting is regulated by standards which are both used internationally and locally.... There is a need for all countries in the world to use standardized reporting.... This is being achieved by the International Financial reporting Standards (IFRS). ...
3 Pages (750 words) Essay

Financial Accounting and Reporting: Case of JB HI-FI Company Limited

The paper "Financial Accounting and Reporting: Case of JB HI-FI Company Limited" is a perfect example of a case study on finance and accounting.... The paper "Financial Accounting and Reporting: Case of JB HI-FI Company Limited" is a perfect example of a case study on finance and accounting.... The paper "Financial Accounting and Reporting: Case of JB HI-FI Company Limited" is a perfect example of a case study on finance and accounting.... How many ordinary shares have been issued by the company at financial year-end?...
11 Pages (2750 words) Case Study

The Social Economic Context of Financial Accounting and Reporting

The paper "The Social Economic Context of Financial Accounting and Reporting" is a perfect example of a finance and accounting essay.... The paper "The Social Economic Context of Financial Accounting and Reporting" is a perfect example of a finance and accounting essay.... The paper "The Social Economic Context of Financial Accounting and Reporting" is a perfect example of a finance and accounting essay.... HE SOCIAL ECONOMIC CONTEXT OF Financial Accounting and Reporting ...
10 Pages (2500 words) Essay
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us