Best start with IFRS and US GAAP

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Best start with IFRS and US GAAP – Many of the world’s capital markets now require IFRS, or some form thereof, for financial statements of public-interest entities.

The remaining major capital markets without an IFRS mandate are: Best start with IFRS and US GAAP

  • The US, with no current plans to change Best start with IFRS and US GAAP
  • Japan, where voluntary adoption is allowed, but no mandatory transition date has been established
  • India, where regulatory authorities have made public statements about the intention to adopt from 2016-2017
  • China, which intends to fully converge at some undefined future date

Continued global adoption affects multinational businesses, as additional countries permit or require IFRS for statutory reporting purposes and public filings. IFRS requirements elsewhere in the world also impact multinational companies through cross-border, merger and acquisition (M&A) activity, IFRS’ influence on US GAAP, and the IFRS reporting demands of non-US stakeholders. Accordingly, it is clear from a preparer perspective that being financially bilingual in the international market is increasingly important.

From an investor perspective, the need to understand IFRS is arguably even greater. US investors keep looking overseas for investment opportunities. Recent estimates suggest that over $7 trillion of US capital is invested in foreign securities. The US markets also remain open to non-US companies that prepare their financial statements using IFRS. There are currently over 450 non-US filers with market capitalization in the multiple of trillions of US dollars who use IFRS without reconciliation to US GAAP.

To assist investors and preparers in obtaining this bilingual skill, this publication provides a broad understanding of the major differences between IFRS and US GAAP as they exist today, as well as an appreciation for the level of change on the horizon. While this publication does not cover every difference between IFRS and US GAAP, it focuses on those differences we generally consider to be the most significant or most common. Best start with IFRS and US GAAP

IFRS Standard setting

The International Accounting Standards Board (the Board) is responsible for the preparation and issuance of IFRS Standards. Upon its inception in 2001, the Board adopted the body of International Accounting Standards (IAS®) issued by its predecessor, the International Accounting Standards Committee (IASC).

The IFRS Interpretations Committee assists the Board in establishing and improving standards of financial accounting and reporting for the benefit of users, preparers, and auditors of financial statements. The IFRS Interpretations Committee was established in 2002 when it replaced its predecessor, the Standing Interpretations Committee (SIC®).

Under IFRS Standards, when a standard or an interpretation specifically applies to a transaction, other event, or condition, an entity would apply that guidance as well as any relevant implementation guidance issued by the Board.

IFRS Standards is the common noun to embrace the whole set of standards of directive standard settings on common Financial Reporting in Financial Statements and Interim Reporting, consisting off:

Standard naming/shortcut

Responsible body

International Financial Reporting Standard/IFRS

International Accounting Standards Board

International Accounting Standards/IAS

International Accounting Standards Board

IFRIC Interpretation/IFRIC

International Financial Reporting Interpretations Committee

SIC Interpretation/SIC

Standing Interpretations Committee

Financial reporting in the USA

The Financial Accounting Standards Board (FASB) is the designated private-sector body responsible for establishing and improving standards of financial accounting and reporting in the United States for nongovernmental public and private enterprises, including small businesses and not-for-profit organizations.

Those standards, collectively referred to as U.S. GAAP, govern the preparation of financial reports and are provided for the guidance and education of the public, including issuers, auditors, and users of financial information. The FASB Accounting Standards Codification is the sole source of authoritative nongovernmental GAAP, except SEC guidance.

SEC registrants must also comply with the Commission’s financial reporting requirements, including those promulgated in SEC Regulations S-X and S-K, Financial Reporting Releases (FRR), and Staff Accounting Bulletins (SAB). The SABs represent practices followed by the staff in administering SEC disclosure requirements.

Best start with IFRS and US GAAP

The items in this menu Best start with IFRS and US GAAP provides highlights of some significant U.S. GAAP and IFRS Standards requirements, as well as the major similarities and differences between the two sets of standards. While not an exhaustive listing, this document highlights some of the more significant differences between U.S. GAAP and IFRS Standards that we believe are most commonly encountered in practice. For example read: IFRS vs US GAAP Financial Statement presentation

The Best start with IFRS and US GAAP may be helpful to persons that are new to IFRS Standards who are trying to gain an appreciation of the more significant requirements of IFRS Standards and how these requirements differ from those in the United States. Disclosure requirements are not addressed, except in some exceptional cases where those requirements constitute major differences between U.S. GAAP and IFRS Standards.

Companies reporting under requirements established for the European Union must comply with IFRS Standards as adopted by the European Commission (EC). Those standards may differ from IFRS Standards as issued by the Board because of the timing or scope of endorsement by the EC.

Other jurisdictions may have similar endorsement-related differences. Such differences are not addressed on this website.

This Best start with IFRS and US GAAP does not address industry-specific requirements for banks, other financial institutions, insurance companies, not-for-profit organizations, retirement benefit plans, extractive industries, rate regulated activities, or agriculture.

This Best start with IFRS and US GAAP is only a guide; it is not all-encompassing. For the complete details of IFRS Standards and U.S. GAAP requirements, as well as SEC rules, regulations, and practices, readers should refer to the complete text of the standards, rules, regulations, and practices themselves.

See also: IFRS Community

Best start with IFRS and US GAAP

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