GAAP and IFRS Difference

GAAP and IFRS Difference
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GAAP and IFRS Difference
Different countries have adopted distinct accounting rules and standards that dictate how their companies should prepare and report their financial statements. The main categories of standards are the General Accepted Accounting Principles (GAAP) and the International Financial Reporting Standards (IFRS), which most companies rely on in their reporting (Hlaciuc et al.,2014). In some countries, it is mandatory to follow either of these standards, while in some, they have no strict guidelines; hence companies can use the method they deem fit. Though different companies use the rules based on their preference, they contain numerous differences that can impact company reporting.
GAAP and IFRS differ significantly based on how they value the company’s inventory. The General Accepted Accounting Principle requires organizations to use either the First-In-First-Out (FIFO) or Last-In-First-Out (LIFO) to come up with inventory valuation at a given period (Lucchese & Carlo,2020). When using the LIFO method, companies consider the last goods or the most recent purchases in the company to be the ones to be sold first. The method can affect a company's performanc...