Generally accepted accounting principles (GAAP) are standards that include the details, complexities, and procedures that must be followed by companies and their accountants when compiling financial statements (Ross, 2022). International Financial Reporting Standards (IFRS) lays out the financial reporting practices in the United States and is organized within the framework of the GAAP. The main difference between GAAP and IFRS is that GAAP is rules-based and IFRS is principles based. The most distinguished specific difference is their treatment of inventory. IFRS rules prohibits the use of last-in, first-out (LIFO) inventory accounting processes while GAAP rules accepts LIFO as a method. Under GAAP inventory reversals are not allowed, while IFRS allows them under certain conditions.

The software industry is an industry sector with a large expense that goes toward its Research and Development (R&D). R&D expenses are recorded as they occur under GAAP which is the same under IFRS but requires certain R&D expenditures to be capitalized (Ross, 2022). Under IFRS, the real estate sector, in terms of investment property, has the ability to revalue assets to fair value might create a significant difference in the carrying value of assets as compared with GAAP (Annual Reporting, 2021). Under IFRS, the hospitality industry in regards to the reporting of fixed assets, uses a fair value option while under GAAP historical data is used to report fixed assets (Cayuga Hospitality Consultants, 2021). For valuing its inventory, LIFO is not allowed but permitted under GAAP. The gain on sale and leaseback (operating lease) which occurs when an owner sells a hotel to obtain cash but still controls it is reported immediately under IFRS but it is deferred over the lease term under GAAP (Cayuga Hospitality Consultants, 2021). Interest cost on a hotel loan must be capitalized under GAAP but can be expensed under IFRS.