Ifrs Vs Gaap Essay

889 words - 4 pages

Tyana Campbell
November 12, 2014
Habib Ousmane Diallo

The International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP) are rules and guidelines established to attempt to standardize accounting and recording practices across the United States and Internationally. International Financial Reporting Standards (IFRS) is a set of international accounting standards stating how particular types of transactions and other events should be reported in financial statements. IFRS uses fair-value accounting of assets and liabilities. GAAP also known as Generally Accepted Accounting Principles which is a common set of ...view middle of the document...

According to FASB times, as part of an ongoing and versatile collective effort, there is currently a joint project between the FASB and the IASB to create a common measurement and reporting structure for fair value accounting. Fair value accounting, also recognized as mark to market accounting, has been around for many years and has been applied to many types of asset and liability accounts. The FASB and IASB are working together to ensure that the concept of fair value will have the same meaning in U.S. GAAP and in IFRS and that their respective fair value measurement and disclosure requirements will be the same, except for minor differences in wording and style.
IFRS requires that each part of an item of property, plant, and equipment that is significant to the total cost of the asset must be depreciated separately. Companies therefore have to exercise judgment to determine the proper allocations to the components. Component depreciation involves dividing real estate improvements into various components like plumbing, electrical systems, and building shells, and depreciating each component separately for tax purposes. Component depreciation specifies that any significant parts of depreciable assets that that different estimated useful lives should be separately depreciated. Component depreciation is allowed under GAAP but seldom used.
The reevaluation of plant assets can be defined as the process of change values from book value to fair value. This process is required in the event that there have been substantial economic changes in the market have occurred. If an asset is to be reevaluated under IFRS, it is required that all assets in its class must be treated with the same valuation method. Re-evaluation of plant assets should be used to show the factual speed of return on capital employed, to show the fair market value of assets which have significantly appreciated since their purchase such as land and buildings or to negotiate fair price for the...

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