GAAP Versus IFRS: The Differences and the Similarities

One major topic in the world of accounting is the differences and the similarities between GAAP, which is Generally Accepted Accounting Principles, and IFRS, which is the International Financial Reporting Standards. GAAP is the method that is used in the United States and there are talks about adopting IFRS for use in the United States, which will put our standards on par with the rest of the world. While GAAP and IFRS may be very similar there are a few major differences that are holding GAAP back from using the same standards as the rest of the world.
The two standards are very similar and there are a number of similarities that could in time make both GAAP and IFRS interchangeable and just be made into standards that are adopted all around the world. One of the most important similarities is that both of the standards use income statements, balance sheets, and statements of cash flows, to name a few, that are used to show companies and businesses financial information. Another major similarity is that both GAAP and IFRS require that the accrual basis of accounting be used to account for the financials of the businesses. Another similarity is the way that leases are classified and in both GAAP and IFRS leases are classified as either capital or operating leases. All around the two are very close and the differences really only arrive when it comes to specific problems that arise. There are many more similarities than differences and that is why, in the future, the world can be on even standards and not have to worry about the small, but sometimes very important, differences that are holding the standards back from being the same.