Accounting-IFRS Essay Example | Topics and Well Written Essays - 1000 words

Accounting-IFRS - Essay Example This difference between the IFRS and the GAAP is the core of other differences between the two standards. A major difference between the two standards is the way revenue is recognized. The GAAP has more extensive guidelines on revenue recognition compared to the IFRS. The IFRS has two standards of dealing with revenue recognition while the GAAP provides several concepts as well as detailed rules to deal with revenue recognition in different industries. The IFRS requires revenue to be recognized when it is likely that the benefits associated with a transaction can be traced to the entity and quantified reliably. In contrasts, the GAAP provides criterion for determinable or fixed pricing in revenue recognition. In this case revenue cannot be recognized until the amount of the revenue is ascertained. This implies that under the IFRS revenue that is not of a set amount is recognized earlier as compared to the GAAP (Erchinger, and Winfried 124). Another point of difference between the two standards is in relation to financial assets. The IFRS only provides two standards to deal with financial assets while the GAAP has extensive guidelines that apply in various industries. While the IFRS classifies assets into various categories, the GAAP classifies financial assets into pronouncements. The GAAP looks into the legal form of the entity while classifying financial assets while the IFRS considers the nature of the instrument. Financial asset classification is important as this affects income statements and the entities equity. Different classification of financial assets by the two standards can significantly affect the amount in the entity‘s financial statements. There is also a major difference in the manner the two standards treat intangible assets. While the GAAP does not allow for capitalization of internally incurred costs related to development, the IFRS allows for this capitalization when certain criteria are met. In relation to asset impairment, the IFRS