The biggest difference between US GAAP (Generally Accepted Accounting Principles) and IFRS (International Financial Reporting Standards) is its approach to accounting. US GAAP standards are based on rules. Conversely, IFRS is principle-based (Forgeas, 2008).Principle-based standards are a guideline for transaction. These guidelines can be interpreted differently depending a multitude of circumstances. The International Accounting Standards Board (IASB) can provide clarification on standards and limit the amount of exceptions (Forgeas, 2008). Rule-based accounting can be viewed as a list of rules that have to be adhered to while preparing financial statements.

The differences in the founding concepts for GAAP and IFRS creates the variances in how accounting items are recognized. These differences are reflected in financial statements. Comparing balance sheets from a company using IFRS and one using GAAP, we can begin to see the differences. The most recognizable difference is IFRS lists its assets from least to most liquid (Hoyle, 2016). The opposite is true for GAAP assets. Another difference lies in how deferred taxes are treated. Under GAAP the portion of the deferred tax to be paid within 12 months is recognized as a current liability (Benge, n.d.). The rest is held in noncurrent. IFRS dictates all deferred taxes are classified as noncurrent. The Note section of the financial statement contains more details on what is currently due.

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Do you agree or disagree on how the differences impact financial reporting and why