© 2019 Intuit Limited. The wide conceptual difference between GAAP and IFRS is that GAAP is rules-based and IFRS is principles-based. Under IFRS, these same assets are initially valued at cost, but can later be revalued up or down to market value. IFRS is used in more than 110 countries around the world, including the EU and many Asian and South American countries. Recognising the loss immediately is one of the key features of IFRS as it is not only the benefit for the investors, but also for the lender and other stakeholders within the company. One of the significant advantages of IFRS compared to GAAP is its focus on investors in the following ways: 1. The new IFRS reflects on economic substance more than legal form. Regarding net income, non-GAAP use has increased 33% from 1998 to 2017 and 97% of the companies in the S&P 500 used non-GAAP adjustments in 2017, up from 59% in 1996. The following is the arguments against the lack of comparability and consistency of IFRS: Due to the strong national identity of IFRS reports, as the main effects of IFRS has been on how companies recognize, measure and disclose items. Pros and Cons of U.S.-GAAP and IFRS The broad conceptual difference between GAAP and IFRS is that GAAP is rules-based and IFRS is principles-based. IFRS has a de minimus exception, which allows lessees to exclude leases for low-valued assets, while GAAP has no such exception. In other words, IFRS is open to more interpretation than rules based GAAP, and can lead companies to … The U.S. is one of the last GAAP holdouts but that could change by 2014. GAAP tends to be more rules-based, while IFRS tends to be more principles-based. The existing IFRS guidance does not provide much guidance on non-GAAP performance measures. And even though the companies and countries are incurring huge transitional costs, the benefits of IFRS can not be seen until later point due to the fact that it takes some years for the harmonization and to have sufficient years of financial statements to be prepared under IFRS to improve consistency. One of the significant advantages of IFRS compared to GAAP is its focus on investors in the following ways: Based on information mentioned above, it can be assumed that because higher information quality reduces both the risk to investors from buying and owning shares and the risk to less informed investors due to wrong selection due to lack of understanding, it should lead to reduction in firms cost of equity capital. IFRS. The purpose of my research is to identify what are the differences between the two. This article is authored by the Intuit Firm of the Future team. Reducing international differences in reporting standards by applying IFRS, in a sense removes a cross border takeovers and acquisitions by investors. Keyboard Shortcuts ; ... International Financial Reporting Standards, or IFRS.…The IASB approach to accounting standards relies more…on the exercise of professional accounting judgment,…rather than on the use of a checklist. IFRS has no specific guidance for software. Exploring a buyout from potential investors who are unfamiliar with ASPE or who will require adoption of IFRS prior to acquisition; Reporting to a parent company that applies IFRS in their consolidated financial statements; or; Entering foreign markets or raising capital with institutions that require IFRS-compliant financial statements. There is another noticeable difference. IFRS has been adopted by more than 12,000 companies in over 100 nations and is becoming the global standard for the preparation of financial statements of public companies throughout the world. 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