Hi all, Knowing when and where to use hese 3 standards seem pretty tough to remember. Does anyone out there know the best way to differentiate between them? E.g. sometimes one allows LIFO & the other dont, while some requires the use of CFO or CFF or CFI on B/S items while some lets you choose. THanks in Advance.
GIPS has nothing to do with the the other two. what exactly do you want to know about it? IFRS is the worldwide mandatory accounting standards, whereas US GAAP applies to US entities (or entities reqporting in the US) only a few major differences that we would be required to know for the exam (from http://www.iasplus.com/usa/ifrsus.htm): in general: IFRS: More ‘principles-based’ standards with limited application guidance. US: More ‘rule-based’ standards with more specific application guidance. Comprehensive income IFRS: Statement of changes in equity is required. A grand total of “comprehensive income” is permitted but not required. Comprehensive income is net income plus gains and losses that are recognised directly in equity rather than in net income. US: Must present grand total of “comprehensive income”. Can present in income statement, statement of comprehensive income, or statement of changes in equity. Inventory: IFRS: LIFO is prohibited. US: LIFO is permitted. Extrordinary items: IFRS: Prohibited. US: Extraordinary items are permitted but restricted to items that are both infrequent in occurrence and unusual in nature. Reversal of inventory write-downs IFRS: Required, if certain criteria are met. US: Prohibited. Reversal of inventory write-downs IFRS: Required, if certain criteria are met. US: Prohibited. Borrowing costs related to assets that take a substantial time to complete IFRS: Capitalisation is an available accounting policy choice. US: Capitalisation is mandatory. Construction contracts when the percentage of completion cannot be determined IFRS: Cost recovery method. US: Completed contract method. Change in depreciation method for existing assets IFRS: Change in estimate (prospective). US: Change in accounting policy (cumulative effect in net profit or loss). hope this helps
Does the CFA expect us to know/memorize these differences between IFRS And USGAAP?
Would also add how each views cash flows: - Interest and dividends received IFRS : operating or investing CF US GAAP : operating CF - Dividend paid IFRS : operating or financing US GAAP : financing - Interest paid IFRS: operating or financing US GAAP: operating - Taxes IFRS: operating or financing or investing US GAAP: operating