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...

On the other hand, long-term assets are taken to be all those assets which are not expected (or intended) to be either consumed or converted into cash within a period of less than one year. Examples in this case could be given as goodwill (which is an example of an intangible asset), buildings, investments considered long-term, motor vehicles etc.
Distinction between Current and Long-term Liabilities

According to Needles and Powers (2010) current liabilities are essentially all those obligations which a business entity has to settle within a period of less than one year. However, it can be noted that in those instances where the operating cycle of an entity extends beyond one year, current liabilities are taken to be those obligations which an entity is expected to settle within the said operating cycle. Common examples of current liabilities include but are not limited to short-term loans, bank overdrafts and accounts payable. Long-term liabilities on the other hand are all those obligations an entity expects to settle within a period of more than one year (Needles and Powers, 2010). Hence any obligation payable after a one year balance sheet period is considered a long-term liability. Examples in this case could be listed as long-term loans, bonds payable etc.

Apple's Balance sheet: a Review

From a review of Apple's balance sheet or statement of financial position, it is possible to identify a number of examples relating to each of the above categories. To begin with, for the year ended September 24th 2011, Apple's expenses are listed as research and development as well as selling, general and administrative expenses. The company's assets (both long-term and current) are listed as vendor non-trade receivables, deferred tax assets, goodwill, marketable securities (long-term) etc. Most specifically, examples of current assets in the case of Apple include vendor…