¶ … IFRS and U.S. GAAP The U.S.' GAAP and the IFRS serve the same functions. IFRS and U.S. GAAP provide a system of principles of accounting, which is used to draft financial statements. IFRS is used among countries in the developed world while GAAP is used in the United States. While many organizations defining IFRS and U.S. GAAP intend to merge the two standards, they are notable differences. The U.S. Exchange and Securities Commission has established many differences in various areas of application between IFRS and U.S. GAAP. The prime differences stem from the way the two frameworks have been structured, the definition of liabilities and assets, the presentation of financial statements and revenue recognition.

a) What is IFRS? What is U.S. GAAP?

IFRS is defined as the principles-based interpretations, standards, and framework embraced by the International Accounting Standard Board (IASB). Most standards comprising sections of IFRS are historically known as International Accounting Standards (IAS). They were issued in the early 1970s and the new IFRS took over the responsibility of setting international standards of accounting. Since then, IFRS has continued to create more standards to govern the accounting field. The GAAP refers to the framework of guiding standards for financial accounting used in various jurisdictions known as accounting standards. GAAP entails the conventions, rules, and standards accountants adhere to in recognizing and summarizing transactions. They also use this framework to prepare any financial statement.

b) Which approach best serves the objectives of SFAC #8?

Statement of Financial Accounting Concepts (SFAC) has developed a conceptual framework, which serve as a ground for all IFRS pronouncements. While GAAP does not serve all the six SFAC, IFRS also does. These principles offer a ground for concepts of financial accounting for non-business and business enterprises. SFAC has also created a conceptual framework for IFRS. Significant differences between...

SFAC has established a difference in how GAAP and IFRS serve its objectives. The goal of SFAC No. 8 is to give financial information regarding the reporting entity, which is valuable to users of the financial report. This helps them make decisions concerning the provision of resources to the reporting entity. In U.S. GAAP, statements of comprehensive income are portrayed as an independent column in the owner's equity statement. Such a presented is prohibited by SFAC. SFAC demands that the separate presentation of accumulated comprehensive income be part of the owner's equity statement. IFRS has been at the forefront in advocating for this; hence serving the main objective of SFAC.
c) What are the primary differences between the IFRS and U.S. GAAP approaches?

There are key differences between IFRS and U.S. GAAP in terms of their basic premise. At the most basic level, U.S. GAAP appears to be much of a rule-oriented system while IFRS is much principle oriented. This difference is seen to be more challenging than it appears. Most finance and accounting professionals in the United States have been educated in the U.S. GAAP rules. The overall lesson from their years of work and school is that if they have an issue, they should look it up. Within U.S. GAAP, volumes of guidance attempts seek to address almost all conceivable accounting problems, which are likely to arise. On the contrary, IFRS is a shorter volume standard based on principles. Consequently, IFRS requires involves many decision-making processes, which U.S. accountants are not accustomed to doing.

Firms engaged in the development and exploration of natural gas and crude oil have an option of adopting one of the two accounting approached; IFRS and U.S. GAAP. These approaches differ in terms of how they treat operating expenses related to the exploration of natural gas and new oil reserves.

Other elements worth mentioning include extraordinary items and contingent assets. Contingent assets refer to assets…