Key differences between International Financial Reporting Standards and US GAAP across revenue recognition, leases, and inventory valuation.
33 cards · basic cards · AI-written, checked twice. Edit anything.
- What is the primary difference in how IFRS and GAAP approach financial reporting standards?
- IFRS uses principles-based standards; GAAP uses rules-based standards with more detailed prescriptions.
- Which organization sets IFRS standards?
- The International Accounting Standards Board (IASB).
- Which organization sets GAAP standards in the United States?
- The Financial Accounting Standards Board (FASB).
- Under IFRS, how are leases classified?
- All leases are accounted for using the right-of-use asset model; the terms 'operating' and 'finance' leases are not used.
- Under IFRS, does a lessee recognize an operating lease on the balance sheet?
- Yes, all leases are recognized on the balance sheet as a right-of-use asset and lease liability.
- What is the key principle behind IFRS revenue recognition?
- Revenue is recognized when control of goods or services transfers to the customer, using the five-step model.
- Under IFRS, what is the lower of cost or market for inventory?
- Inventory is valued at the lower of cost or net realizable value (NRV).
- Under GAAP, what is the lower of cost or market for inventory?
- Inventory is valued at the lower of cost or market (replacement cost), with market bounded by net realizable value and floor.
- Does IFRS permit LIFO inventory valuation?
- No, IFRS prohibits LIFO; only FIFO and weighted-average cost are permitted.
- Does GAAP permit LIFO inventory valuation?
- Yes, GAAP permits LIFO, FIFO, and weighted-average cost methods.
- Under IFRS, how are development costs treated?
- Development costs are capitalized as an intangible asset if specific criteria are met (technical feasibility, intention to complete, probable future benefits).
- Under GAAP, how are research and development costs treated?
- R&D costs are expensed as incurred; they are not capitalized.
- What is the key difference in how IFRS and GAAP handle property revaluation?
- IFRS permits revaluation of property, plant, and equipment to fair value; GAAP requires historical cost (with limited exceptions).
- Under IFRS, can goodwill be amortized?
- No, goodwill is not amortized; it is tested for impairment annually.
- Under GAAP, can goodwill be amortized?
- No, goodwill is not amortized; it is tested for impairment annually (same as IFRS).