News
IFRS and U.S. GAAP Frameworks
26-Mar-2012
The objective of this document is to highlight the major differences between U.S GAAP and IFRS, and to inform of their joint project to converge both frameworks into an ultimate accounting standard. This ensures the consistency of reporting where both bodies operate and allow universal understanding of the accounting methods applied.
The International Financial Reporting Standards Framework
The IFRS framework for the Preparation and Presentation of Financial Statements (referred to here as the "Framework") sets forth the concepts that underlie the preparation and presentation of financial statements for external uses. The framework is designed to assist the IASB in developing standards and to instruct preparers of financial statements on the principles of financial statement construction. Importantly, the Framework is also designed to assist users of financial statements- including financial analysts- in interpreting the information contained therein.
U.S. GAAP Framework
The FASB or its predecessor organizations have been issuing financial reporting standards in the United States since the 1930s. currently, the FASB is the primary body setting these standards. There are, however, several other organizations that have issued guidance in the past. These include the American Institute of Certified Public Accountants' (AICPA) Accounting Standards Executive Committee (AcSEC), the Emerging Issues Task Force (EITF), and the FASB staff. Since the introduction of the Sarbanes- Oxley Act, changes have been made that essentially limit these other bodies from providing any new guidance unless it is directly under the direction of the FASB. The EITF has come under the more formal oversight of the FSB. And the AICPA AcSEC will no longer issue new standards applicable to public companies.
Convergence of the U.S GAAP and IASB Framework
A joint IASB-FASB project was begun in October 2004 to develop a common conceptual framework. The project, which currently have a five- year timetable, is divided into seven phases. The initial focus is on achieving the convergence of the frame-works and improving particular aspects of the framework dealing with objectives, qualitative characteristics, elements recognition, and measurement. A December 2004 discussion paper presented the broad differences between the two frame- works. Additionally, under U.S. GAAP, there is not a single standard like IAS No. 1 that specifies the presentation of financial statements; instead, standards for presentation of financial statements are dispersed in many different FASB pronouncements and SEC regulations.
To read more about the summary of Differences between IFRS and U.S. GAAP Frameworks, click here