[Anonymous]

I’m trying to make a comprehensive list of GAAP / IFRS differences as a quick reference for CPA studying. I know that I’m missing a ton. Can anyone help me out and post some basic differences that I can add.

Statement of Cash Flows:

1. GAAP you can use either the indirect or direct method, IFRS you can only use the direct method
2. For GAAP Interest X, Interest Rev and Dividend Revenues are always reported as operating. Dividends paid are reported as financing. Under IFRS Interest X and Dividends Paid can be reported as either operating OR financing. Interest Revenue and Dividend Revenues can be reported as operating OR investing

Construction contracts:

1. GAAP uses either percentage of completion OR completed contracts method, whereas completed contracts is prohibited by IFRS

Income Statement:

1. GAAP has a separate classification for “extraordinary items” that must be reported net of tax beneath net income. In IFRS no such classification exists.

Inventory:

1. GAAP can choose between LIFO and FIFO, in IFRS there is no LIFO option
2. Under GAAP inventory is carried at lower of cost or replacement cost, for IFRS it is lower of cost or NRV
3. Under GAAP inventory write-downs cannot be reversed. For IFRS if the reasons for the impairments no longer exist, the inventory can be written up back to the original basis

Current vs. Non-Current:

1. GAAP can report current liabilities as long term if a refinancing agreement exists prior to the issuance of the balance sheet. For IFRS a refinancing agreement must exist prior to the balance sheet date to qualify as non-current

Asset Valuation:

1. For GAAP the revaluation of assets is prohibited. For IFRS, it is an acceptable accounting policy to periodically apply to an entire class of assets. IFRS can revalue intangibles to FMV if there is a market for them to easily determine FMV
2. In GAAP you rarely see component depreciation. For IFRS component depreciation is mandatory for assets where different components depreciate in different ways
3. IFRS has a separate classification for “biological assets” (living animals and plants), that are reported at fair value less estimated cost to sell. In GAAP no such classification exists, and biological assets are reported at historical cost less accumulated depreciation.

Gains and Losses:

1. Under GAAP a loss contingency is accrued only if the loss is PROBABLE and the amount is reasonably estimable. For IFRS the loss only needs to be more likely than not to be accrued
2. When a contingent loss is judged to be probable within a range of amounts and no number within that range is viewed as more likely, GAAP requires the recognition of the lowest number in that range. In that same circumstance, IFRS requires the recognition of the midpoint in the range

Costs:

1. R&D costs are expensed under GAAP, unless there is a separate standard to guide it. Under IFRS development costs are capitalized at technological feasibility assuming future economic benefits are probable
2. Under GAAP costs incurred defending an intangible asset are capitalized as part of the intangible. Under IFRS they are expensed as incurred

Bonds:

1. Under IFRS any extra amount that is received for a bond because of its convertibility is recorded as equity rather than as a liability. According to GAAP, the entire amount received is reported as a liability until such time

   as the bond is actually converted

2. Under GAAP debt issue costs are put into an asset account and amortized over the life of the bond. Under IFRS, the bond liability is reported net of debt issue costs.

Leases:

1. To be a capital lease under GAAP one of the (TT, BPO, 75, 90) test must be met. To be a capital lease under IFRS the lease term must only consist of a “significant portion” of the assets useful life. This is a lower standard than GAAP
2. For capital leases under IFRS both the lessor and the lessee must use the interest rate implicit in the agreement. Under GAAP the lessee can use the incremental borrowing rate as his interest rate. This means that under GAAP the lessor and the lessee can book different interest rates for the same transaction.
3. Under GAAP if the fair value of the land component of a lease is greater than 25% of the total lease, the land and building must be reported separately. For IFRS the land and building are always recorded separately

[jeff]

Ninja notes have a whole section on this, but they're broken down into more succinct fact nuggets

Jeff Elliott, CPA (KS) | Another71 | NINJA CPA | NINJA CMA | NINJA CPE

[Justinnnn]

https://www.pwc.com/us/en/issues/ifrs-reporting/publications/ifrs-and-us-gaap-similarities-and-differences.jhtml

This PDF is quite lengthy but the charts in each section (ie revenue recognition, page 28) are very good summaries for general knowledge.

REG 80 2/7/11
FAR 91 10/8/11
AUD 97 11/22/11
BEC 96 2/4/12

CPA 3/15/13

[katiekanton]

By the way, although I love the list and think it's a good idea, it's insufficient for what you need to know about IFRS now. You need to know how to do actual calculations. A HUGE portion of my exam had at least something to do with IFRS, and I'm hoping most if it was pretest, but you never know. For instance, it's beyond getting a question on inventory and you just saying “oh, well I know LIFO's prohibited and I know how to calculate FIFO, so bada bing bada boom”. (That's not a question from my actual exam and probably doesn't even make sense, but I just use it for illustrative purposes.)

I suspect in a few months all of the review materials will have caught up, but for now, review materials do not cover this area sufficient for you to handle the breadth and depth of information you'll see on the exam.

AUD - 88
FAR - 90
REG - 85
BEC - 88

[jenuno01]

@katie did you take FAR already?! How did it go??

Class of 2012

[Anonymous]

Ok….so basically all of us taking the exam in the next few months are fried…I just hope I get more answers right than the others and make it to the top 10%….People taking FAR please go do your taxes..

[Author]

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