GAAP is generally accepted accounting principle. 1937, the American Accounting Procedure Committee (CAP) issued the first accounting research announcement, and initiated the activity of "General General Accounting" issued by government agencies or industry organizations. Below I have prepared the main differences between GAAP and IFRS in the United States for your reference!
The main difference between American GAAP and IFRS is 1 1. When measuring impairment losses,
The provisions of IFRS are based on the recoverable amount (the higher of the use value and fair value of assets minus the cost of sales). American GAAP is based on fair value.
2. Regarding the measurement of the residual value of assets,
International Financial Reporting Standards (IFRS) stipulate that assets should be measured at the current net selling price, assuming that they have been used up and meet the expected conditions at the end of their service life. GAAP in the United States is usually the discounted value of the expected income when disposing of assets in the future.
3. At the level of goodwill impairment test,
International Financial Reporting Standards (IFRS) define a cash-generating unit or a group of cash-generating units. It represents the lowest organizational level for monitoring goodwill for the purpose of enterprise internal management, and it cannot be larger than a business or regional branch. US GAAP defines the reporting unit-a lower level within a business unit or organization. When calculating the impairment of goodwill, international financial reporting standards stipulate a one-step comparison method between the recoverable amount (fair value minus the higher of sales cost and use value) and the book value of its cash-generating unit. American GAAP stipulates two steps: comparing the fair value of the reporting unit with its book value including goodwill; If the fair value is greater than the book value, there is no impairment (no second step is needed); Compare the implied fair value of goodwill with its book value. For the impairment of intangible assets with uncertain service life, international financial reporting standards stipulate that goodwill and other intangible assets with uncertain service life should be included in cash-generating units to test the impairment of cash-generating units. American GAAP stipulates that goodwill is included in the cash-generating unit, and other intangible assets with uncertain service life are tested separately.
4. Regarding the reversal of impairment losses,
According to international financial reporting standards, if it reaches a certain standard, the impairment loss should be reversed, but the impairment loss of goodwill cannot be reversed. American GAAP stipulates that impairment losses cannot be reversed.
5. Regarding the measurement of preparatory work,
IFRS provides the best estimate of debt settlement, usually using the expected value method, and requires the discount method. American GAAP stipulates the lower possible amount of debt settlement, and some reserves do not need to be discounted. With regard to the follow-up expenditures for purchasing R&D projects under development, International Financial Reporting Standards stipulate that those that meet the definition of development should be capitalized. American GAAP stipulates that it is expensive.
6. On the revaluation of intangible assets,
International Financial Reporting Standards stipulate that intangible assets can only be revalued when they are traded in an active market. Generally speaking, GAAP cannot be revalued.
7. In terms of investing in unlisted equity instruments,
International financial reporting standards stipulate that if it can be measured reliably, it should be measured at fair value, otherwise it should be measured at cost. American GAAP stipulates that it is measured at cost. International Financial Reporting Standards stipulate that financial instruments cannot be reclassified or classified as trading holdings. American GAAP stipulates that if the relevant assets are transferred to a portfolio for short-term profits, the financial instrument should be classified from the available-for-sale category into the category held for trading. However, financial assets held for trading cannot be classified as available-for-sale financial assets.
8. With regard to the offset of accounts payable and receivable from different parties,
International financial reporting standards stipulate that if there is a legal offset contract, it can be offset. American GAAP stipulates that it cannot be offset.
9. In the subsequent reversal of impairment losses,
International Financial Reporting Standards stipulate that if certain conditions are met, the impairment losses of loans and receivables, held-to-maturity financial instruments (HTM) and available-for-sale debt instruments (available-for-sale) need to be reversed. According to American GAAP, HTM and AFS are prohibited from reversing impairment losses;
10. According to the measurement of investment real estate,
International financial reporting standards stipulate that the cost-depreciation-impairment model or fair value model can be adopted, and changes in fair value are included in profits and losses. GAAP regulations in the United States usually require the use of historical cost method, and depreciation and impairment are extracted at the same time.
1 1. According to the measurement of agricultural products, livestock, fruits and forest products,
IFRS requires the adoption of fair value, and changes in fair value are included in profit and loss; American GAAP usually adopts historical cost, however, the harvested and sold agricultural products and livestock will be accounted for at fair value minus the cost of sales.
12. embedded derivatives in insurance contracts,
According to international financial reporting standards, when the characteristics and risks of embedded derivatives are not closely related to the main contract, and the value is related to the value of the insurance contract, it does not need to be listed separately and accounted for as derivatives. American GAAP stipulates that such derivatives must be accounted for separately. In the measurement of assets initially classified as held for sale, international financial reporting standards stipulate that accumulated exchange differences are retained in equity. American GAAP stipulates that the accumulated exchange difference is redistributed from equity to the value of assets for sale.
13. Regarding the definition of termination of business,
IFRS defines a business or regional reporting department or its major components. US GAAP defines a reporting department, an operation department, a reporting unit, a subsidiary or a group of assets (less restrictive than the definition in B). When the presentation is terminated, the international financial reporting standards stipulate that the after-tax profit and loss of the termination should be presented in the income statement. According to American GAAP, the pre-tax and after-tax profits and losses of terminated operations should be reported in the income statement.
The main difference between American GAAP and IFRS is 2 1. In the calculation method of inventory cost, IFRS stipulates that the LIFO method is prohibited. USGAAP stipulates that LIFO method can be used.
2. Regarding the reversal of inventory impairment, international financial reporting standards stipulate that it needs to be reversed when certain conditions are met. USGAAP stipulates that there is no turning back.
3. In the classification of interest receipts and payments in the cash flow statement, international financial reporting standards can include cash flows from operating activities, investment activities or financing activities. USGAAP stipulates that it must be classified as a business activity.
4. In the construction contract where the proportion of the project cannot be determined, the International Financial Reporting Standards stipulate the cost recovery method. USGAAP specifies the contract completion method.
5. On the basis of reporting segments, International Financial Reporting Standards provide for division according to business and region. USGAAP is divided according to the composition of information reported to the company's senior management, which may or may not be based on business and region.
6. Based on the measurement of square, plant and equipment, IFRS stipulates that revaluation or historical cost can be used. If it is measured by revaluation, it shall be listed at the fair value on the revaluation date minus accumulated depreciation and impairment losses. USGAAP regulations usually require the use of historical costs.
7. In terms of termination benefits, International Financial Reporting Standards stipulate that there is no distinction between "special" and other termination benefits, and termination benefits are recognized when employers express their commitment to pay. USGAAP stipulates that "special" (one-time) termination benefits are recognized when employees accept the conditions provided by employers and the amount can be reasonably estimated; When the employee is likely to be entitled to this benefit, and the amount can be reasonably estimated, the contract termination benefit will be confirmed.
When recognizing the cost of past services related to defined benefits, IFRS requires immediate recognition. USGAAP stipulates amortization over the remaining useful life or life.
9. In defined benefit plans, there is no minimum requirement for the minimum amount of liabilities to be recognized in IFRS. According to American GAAP, the minimum amount of liabilities to be recognized is the accumulated welfare debt without reserve.
10. In terms of restrictions on the recognition of pension assets, international financial reporting standards stipulate that the recognized pension assets cannot exceed the total net present value of unrecognized past service costs, actuarial losses and economic benefits obtained by returning funds from the plan or reducing contributions to the plan in the future. USGAAP stipulates that there is no such limit on the amount of confirmation.
1 1. In terms of confirming the time of profit reduction, the International Financial Reporting Standards stipulate that the reduction of profit and loss will be confirmed when the relevant enterprises clearly indicate that they will reduce their welfare plans and have announced them. USGAAP stipulates that the reduced profits will be recognized until the relevant employees are fired or the plan is terminated or revised, which may be after it is clearly stated and announced.
12. When measuring the profit and loss caused by the reduction of welfare plans, the international financial reporting standards stipulate that the reduction of profit and loss includes the change of the present value of the defined benefit obligation; Any change in the fair value of the planned assets; Any relevant actuarial gains and losses not previously recognized, the amount not recognized due to the application of transitional provisions, and the share of past service fees. USGAAP stipulates that although unconfirmed actuarial gains or losses should be written off in proportion to unconfirmed transitional assets and liabilities, unconfirmed actuarial gains or losses after the transitional period are not affected by planned reduction.
13. According to the International Financial Reporting Standards, capitalization is an optional accounting policy for asset borrowing costs that take a long time to complete. USGAAP stipulates that capitalization policy must be adopted. In terms of the types of borrowing costs that can be capitalized, international financial reporting standards stipulate that interest, some auxiliary expenses and conversion differences should be included as interest adjustments. USGAAP regulations usually only include interest.
14. IFRS stipulates that capitalized borrowing costs can be deducted from the temporary investment income of special loans for the purchase and construction of fixed assets. USGAAP rules usually do not offset capitalized borrowing costs.
15. According to the International Financial Reporting Standards, the accounting policies of investors and affiliated enterprises must be unified. There is no requirement for uniform accounting policies in the USGAAP regulations.
16. In the adjustment of financial statements of business entities in the hyperinflation economy, international financial reporting standards stipulate that the general price level index should be used for adjustment before conversion. USGAAP stipulates that entities operating in hyperinflation economy must use the functional currency of the parent company (not the currency in hyperinflation economy) to prepare their financial statements.
17. In the investment in joint ventures, IFRS stipulates that the equity method or the proportional merger method is allowed. USGAAP usually adopts the equity method (except for the construction and oil and gas industries).
18. In terms of the issuer's classification of convertible bond instruments, international financial reporting standards stipulate that convertible bond instruments should be presented as a liability part and an equity part at the time of issuance. USGAAP stipulates that the whole bill should be regarded as a liability.
19. in the interim report-recognition of income and expenses, the international financial reporting standards stipulate that the interim period is an arbitrary reporting period (with some exceptions). USGAAP stipulates that the mid-term is a part of the whole year (with some exceptions).
20. In terms of signs of impairment, international financial reporting standards stipulate that when assets show signs of impairment, detailed impairment calculation must be carried out. If the book value of an asset exceeds the use value of the asset (the discounted value of the expected future cash flow of the asset) and the fair value MINUS the cost of sales is high, impairment will occur. USGAAP stipulates that if the book value of an asset exceeds its total estimated future cash flow (no discount is needed), it indicates that the asset has signs of impairment and must be calculated in detail.
2 1. In the measurement of impairment losses, international financial reporting standards stipulate that the recoverable amount is the basis (the higher of the use value and fair value of assets minus the cost of sales). The USGAAP rule is based on fair value.
22. When measuring the residual value of assets, international financial reporting standards stipulate that the current net sales price of assets should be used under the assumption that the assets have been used up and reached the expected conditions at the end of their service life. USGAAP is usually the discounted value of the expected income when disposing of assets in the future.
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