Accounting
Approach to Valuation by GAAP and IFRS: Key Differences
When it comes to valuation by U.S. GAAP and IFRS, there exists a number of differences in terms of the approaches used. To begin with, in regard to inventory valuation, both FIFO and LIFO are permitted in the case of U.S. GAAP. On the other hand, IFRS do not permit the usage of LIFO. However, in the latter case, FIFO is permitted alongside the weighted average method. Next, under GAAP, historical cost is used for the valuation of PP&E. Further, though assets cannot be written up, they can be written down. However, when it comes to IFRS, fair value is used for PP&E revaluation. Upward revaluation is allowed in those instances where there is an active market in existence for intangibles. Hence under IFRS, there is the likelihood of an increase in book values. Lastly, under each method, financial liabilities and assets are measured differently.
A Distinction between an Asset and an Expense (Expired Cost)
According to Tulsian (2002), when an expense is consumed during an entity's current accounting period, then such an expense is referred to as an expired cost or expense. Thus in such a case, the cost is already recognized as an expense. A good example of an expired cost in this case could be the depreciation expense. On the other hand, an asset is something owned by an entity. Hence in this context, assets include all those things a business entity has acquired over time and which possess a measurable future economic value. It can also be noted that a cost which has been paid in advance is regarded as an asset. Other examples of assets include but are not in any way limited to plant and machinery, cash, goodwill etc.
Distinction between Current and Long-term Assets
Current assets can be defined as all those resources and cash an entity expects to either use up or turn to cash within a period of less than one year (Needles and Powers, 2010). Examples in this...
Accounting Approaches: Deductive vs. Inductive Approaches Two major divisions exist regarding the classification of accounting approaches: the inductive and deductive method. "In the deductive or judgmental approach, relevant environmental factors are identified, and, by linking these to national accounting practices, international groupings or development patterns are proposed. In the inductive or empirical approach, individual accounting practices are analyzed, development patterns or groupings are then identified, and finally explanations keyed to a
Financial Statement from GAAP to IFRSFinancial statements are prepared either in GAAP or IFRS. The translation of the financial statements from GAAP to IFRS implies that items within the incomes statement as well as the balance sheet will be treated in a different way. The items within the income statement and the balance sheet are treated using different rules and approaches under the different accounting approaches. The item selected in
GAAP vs. IFRS As globalization begins to hit full stride, new rules and customs must be addressed with older and more established practices. The International Financial Reporting Standards (IFRS) represents a global perspective on the accounting rules for global organization. The United States has followed their Generally Accepted Accounting Principles (U.S. GAAP) to dictate the regulations dealing with domestic companies. The purpose of this essay is to examine both of these
However, they have also changed the face of the accounting profession in a way that will affect the education and conduct of accountants in the future. In the future, the accountant will have to do more than to balance the books. In order to understand the potential educational requirements for accountants in the future, we will examine how they have changed historically and then apply the changes that have
Another factor that should be taken into consideration is that of overall strategy. Financial statements are snapshots, and sometimes it can be difficult to discern from looking at a small sample of them the firm's overall direction. Key strategic decisions can have a significant impact on the financial statements for a limited period of time. For example, during the period studied FedEx was having trouble absorbing Kinko's which it had
That was the year that significant changes were made in the Securities Act and the rules for bringing class action lawsuits were adjusted and modified. Because of those changes, it became more important from a litigation standpoint to ensure that conservatism was used in accounting valuation. Because there are empirical differences between the contracting and litigation perspectives, there have been many discussions regarding them in the past and that
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