GAAP and IFRS – have you heard of them?

GAAP – Generally Accepted Accounting Principles

Public corporations must adhere to a set of guidelines known as GAAP when preparing their financial accounts. The presentation, disclosure, measurement, and recognition of your business transactions in financial reports are all governed by GAAP rules.

Revenue recognition, balance sheet, item classification, and measurements of outstanding shares are all covered by GAAP.

Different countries have their own set of guidelines and standards for financial reporting that are equivalent to GAAP.

Here are a few examples:

Canada: Canadian GAAP (CGAAP) are issued by the Canadian Accounting Standards Board (AcSB).

United Kingdom: Generally Accepted Accounting Practice (GAAP) in the UK are issued by the Financial Reporting Council (FRC).

Australia: Australian GAAP (AuGAAP) are issued by the Australian Accounting Standards Board (AASB).

In summary, each country has its own set of guidelines and standards for financial reporting that are used to ensure that financial statements are consistent, transparent, and reliable.

And then, there’s…

IFRS –  International Financial Reporting Standards

A set of global standards known as IFRS makes financial statements more uniform, transparent, and comparable all over the world. According to the rules, certain types of transactions and other events must be disclosed in financial statements in a specific way.

These criteria can assist investors in recognising opportunities and hazards in global markets, which enhances capital allocation.

International Financial Reporting Standards (IFRS) are issued by the International Accounting Standards Board (IASB) and are used by companies around the world.

What’s the difference between GAAP and IFRS?

The primary distinction between the two accounting methods is that GAAP is based on regulations, whereas IFRS is based on principles. The IFRS is less specific than GAAP and is recognised in all of Europe and Asia. Although there is greater space for interpretation with IFRS, they are often more rational and can more accurately depict the economics of commercial transactions.

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