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Homework answers / question archive / Discuss the similarities and differences between the US GAAP and International Financial Reporting Standards (IFRS) and how they relate to three different industries
Discuss the similarities and differences between the US GAAP and International Financial Reporting Standards (IFRS) and how they relate to three different industries. Cite the topic materials and outside resources to support the ideas presented. When replying to peers, provide additional examples that further compare and contrast these two sets of standards.
One similarity between the U.S. GAAP and International Financial Reporting Standards (IFRS) is that both principles determine how firms will prepare financial statements (Whalen, Baginski, & Bradshaw, 2018). By providing these principles for preparing statements, firms can provide standardized financial information for shareholders to understand how companies are performing financially. One difference between the GAAP and IFRS is which body of principles applies to which companies. According to the SEC, international companies can file financial statements to the SEC under IFRS. However, the SEC will not accept a U.S. company's filings under IFRS standards, only the GAAP standards due to differences in reporting assets, liabilities, and stockholder equity (Whalen et al., 2018). This difference allows U.S. shareholders to differentiate the financial reports of U.S. and non-U.S. companies.
This difference affects different industries, such as the beverage industry, the sporting goods industry, and the defense industry. For companies in both the beverage and sporting goods industries, the assets listed under IFRS may be different from the company in the defense industry filing under IFRS. For the former two industries, companies could list assets in terms of those that a company can convert quickly to cash, such as inventories (Whalen et al., 2018). While in the latter industry, companies may list their long-term assets, such as contracts before current assets (Whalen et al., 2018). Under the GAAP, all the industries would list their assets by how quickly the companies can convert them into cash (Whalen et al., 2018). By having U.S.-based industries report under the GAAP, the SEC enables shareholders to quickly compare the balance sheets of companies in different industries and different states.
Timothy
References
Whalen, J., Baginski, S., & Bradshaw, M. (2018). Financial reporting, financial statement
analysis and valuation (9th ed.). [Adobe Digital Editions version]. Retrieved from
https://www.gcumedia.com/digital-resources/cengage/2018/financial-reporting-financial-
statement-analysis-and-valuation_9e.php
