IFRS AND U.S. GAAP: DIFFERENCES AND CONVERGENCE

Abstract

This paper describes selected major differences between International Financial Reporting Standards (IFRS) and U.S. generally accepted accounting principles (GAAP), and completed convergence projects of the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) as of March, 2010. These selected differences pertain to the following accounting issues: fundamental framework, inventories, property, plant and equipment, intangibles with finite useful life, impairment of assets, leases, cash flows statement, contingent liabilities and assets, financial instruments, income taxes, derecognition of financial assets, consolidated financial statements, revenue recognition, and employee benefits. A short discussion question and an answer to enhance a class discussion are also provided for most of these issues. For the completed convergence projects, they are categorized into IFRS converged with U.S. GAAP (five projects), U.S. GAAP converged with IFRS (six projects), and convergence as a result of joint projects between FASB and IASB (two projects and a completed first phase of two major projects). Two convergence projects expected to become final standards later in 2010 are also discussed. Accounting educators should definitely try to incorporate these differences and the convergence outcomes into their classes.