US GAAP (rules-based, used in the US) and IFRS (principles-based, used internationally) differ primarily in their approach to flexibility, inventory valuation, and asset treatment. Key distinctions include IFRS prohibiting LIFO, allowing revaluation of intangible assets, and capitalizing development costs, while GAAP strictly forbids LIFO for inventory and capitalizes R&D.
IFRS allows companies to elect fair value treatment of fixed assets, meaning their reported value can increase or decrease as their fair value changes. In addition, IFRS requires separate depreciation processes for separable components of PP&E. US GAAP allows but does not require such cost segregations.
IFRS has a de minimus exception, which allows lessees to exclude leases for low-valued assets, while GAAP has no such exception. The IFRS standard includes leases for some kinds of intangible assets, while GAAP categorically excludes leases of all intangible assets from the scope of the lease accounting standard.
The four pillars of IFRS S1 and S2 are governance, strategy, risk management and metrics and targets.
Unlike IAS/IFRS, which provide guidelines, US GAAP sets out exactly how financial statements should be prepared. From a growth perspective, it is therefore essential for Italian companies belonging to internationally active groups to have a thorough understanding of the main IAS IFRS and US GAAP accounting standards.
However, while this might lead one to ask what is the difference between GAAP and IFRS, the biggest difference between US GAAP vs IFRS is IFRS standards are principle-based while GAAP is a rule-based framework.
When will the changes come into effect? The FRC has decided to apply the new regime for financial years beginning on or after 1 January 2015, which will require 2014 comparatives to be restated. What is FRS 102? FRS 102 will replace almost all current UK accounting standards from 2015.
IFRS 5 applies to a non-current asset (or disposal group) that is classified as held for distribution to owners. A discontinued operation is a component of an entity that has either been disposed of or is classified as held for sale.
The Ps refer to People, Planet, and Profit, also often referred to as the triple bottom line. Sustainability has the role of protecting and maximising the benefit of the 3Ps.
According to IFRS, there are 5, namely Income Statement which aims to determine the profit or loss of a company, Statement of change in Equity which aims to determine changes in the capital of a company within a certain period, Statement of Financial Position which aims to show the financial position of a company in a ...
The 90% rule in leasing is an accounting guideline for classifying leases, stating that if the present value (PV) of a lessee's minimum lease payments equals or exceeds 90% of the leased asset's fair market value (FMV), the lease should be treated as a finance lease (or capital lease) rather than an operating lease, reflecting essentially a purchase for accounting purposes. This rule helps determine if the lease transfers substantially all the risks and rewards of ownership, requiring balance sheet recognition of the asset and liability.
IFRS offers broader international adoption and flexibility, while US GAAP provides strict, detailed rules—useful in highly regulated environments.
A prime difference between GAAP and IFRS is in how they account for inventory expenses. If you're using GAAP, you can choose either the LIFO (Last-In, First-Out) or FIFO (First-In, First-Out) method for calculating inventory. Whereas IFRS only allows the use of the FIFO method, the LIFO method is strictly prohibited.
Incompatibility with Local Tax Regulations
One of the major drawbacks of IFRS adoption is its frequent misalignment with local tax laws and reporting requirements. Many countries have tax systems closely tied to national accounting standards, where taxable income is directly derived from financial statements.
Under IFRS, depreciation of an asset is charged on the difference between the assets cost (or revalued cost) less its residual value over its estimated useful life. Estimates of residual values reflect prices at the reporting date given the condition the asset is expected to be in at the end of the useful life.
The "Big 4" in ESG standards generally refers to the leading, complementary frameworks: GRI (Global Reporting Initiative) for broad stakeholder impact, SASB (Sustainability Accounting Standards Board) for investor-focused financial materiality, TCFD (Task Force on Climate-related Financial Disclosures) for climate risks, and CDP (formerly Carbon Disclosure Project) for environmental performance disclosure, often used together for comprehensive reporting, with newer ISSB standards gaining prominence.
The triple bottom line is an accounting framework that incorporates three dimensions of performance: social, environmental, and financial. These three facets can be summarized as "people, planet, and profit."2.
ESG, the 3 dimensions for a sustainable future
In 1987, the Brundtland Report (“Our Common Future: The World Commission on Environment and Development”) introduced the three pillars or principles of environmental, social, and economic sustainability, also known as ESG (Environmental, Social, Governance).
Non-current assets may be tangible (like physical property) or intangible (like intellectual property). Key categories of non-current assets include property, plant & equipment (PP&E); investments; goodwill; and “other” intangible assets.
Disclosure checklists
Our disclosure checklist outlines the minimum disclosures required by IAS 34 'Interim financial reporting' and other IFRS Acocunting Standards published by the International Accounting Standards Board (IASB). It is intended for the use of existing preparers of IFRS financial statement.
IFRS 10 retains established principles on consolidation procedures, including • elimination of intra-group transactions and the parent's investment: • uniform accounting policies • the need for financial statements used in consolidation to have the same reporting date • the allocation of comprehensive income and equity ...
In April 2024, the International Accounting Standards Board (IASB) issued IFRS 18 – Presentation and Disclosure in Financial Statements. IFRS 18 replaces IAS 1 – Presentation of Financial Statements.
IFRS reports DTAs and deferred tax liabilities only as long term, while U.S. GAAP would distinguish short and long term. Under U.S. GAAP, if a parent/subsidiary relationship exists, then the company must prepare consolidated statements.
Declaring (and rightfully so) that their main goal is to protect US investors' interests, the SEC notes that IFRS lacks consistent application, allows too much leeway with judgment, and is underdeveloped in many specific areas, for which the US GAAP has detailed and accepted guidance and established practice ( ...