It is not surprising that many people who follow the development of worldwide accounting standards today might be confused.
While the US and international standards do contain differences…the areas of divergence seem to have disproportionately overshadowed the similarities.
Yet much is still made of the many differences that exist between US GAAP as promulgated by the FASB and International Financial Reporting Standards (IFRS) as promulgated by the IASB, suggesting that the two GAAPs continue to speak languages that are worlds apart.
This apparent contradiction has prompted many to ask just how different are the two sets of standards? And where differences exist, why do they exist, and when, if ever, will they be eliminated?
In this guide,we take a top-level look into these questions and provide an overview, by accounting area, both of where the standards are similar and also where they diverge.
While the US and international standards do contain differences, the general principles, conceptual framework and accounting results between them are often the same or similar, even though the areas of divergence seem to have disproportionately overshadowed these similarities.
We believe that any discussion of this topic should not lose sight of the fact that the two sets of standards are generally more alike than different for most commonly encountered transactions, with IFRS being largely, but not entirely, grounded in the same basic principles as US GAAP.
No publication that compares two broad sets of accounting standards can include all differences that could arise in accounting for the myriad of business transactions that could possibly occur.
The existence of any differences — and their materiality to an entity’s financial statements — depends on a variety of specific factors including: the nature of the entity, the detailed transactions it enters into, its interpretation of the more general IFRS principles, its industry practices and its accounting policy elections where US GAAP and IFRS offer a choice.
This guide focuses on those differences most commonly found in present practice and, when applicable, provides an overview of how and when those differences are expected to converge. This publication does not, however, address the accounting differences between US GAAP and IFRS for SMEs — the international standard for “small or medium-sized entities” that meet the defined scope of that standard.
