Difference Between GAAP And IFRS

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Difference between GAAP and IFRS The GAAP and the IFRS are the two accounting standards that are used by businesses. The IFRS is used in over 120 countries, especially countries in the European Union while the GAAP is used primarily in the United States. Although the two standards serve the same purpose, there are some differences in the way they operate. The most outstanding difference between the two is that while the GAAP is based on rules, the IFRS is based on principles. Unlike a rule based system, the principle based system allows for different interpretations of similar transactions. 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
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