IFRS® compared to US GAAP

The current portion of long‑term obligations is crucial - missing it inflates working capital by understating short‑term obligations. Many companies display PPE gross, then a contra line for accumulated depreciation, to show net book value clearly. The more accurate your stock counts and costing, the more reliable your gross margin and current ratio will be. Lenders and external stakeholders typically expect a classified format, where current items (expected to turn into cash or require cash within 12 months) are separated from non‑current items.

The result of measurement differences, particularly in fair value accounting and lease recognition, is what affects financial statements and ratios. IFRS provides grouping all liabilities and more choices available in relation to the presentation of financial statements that sometimes reduce the detailed level but allow for a smoother presentation fitted to different business models. These differences are fundamental and have major implications for how businesses prepare, interpret, and compare their financial statements. These two frameworks—one being rules-based while the other principles-based—define how companies display their financial status to the world. GAAP is a rule-based system that all domestic publicly traded companies must follow when filing financial statements.

Despite efforts made in the UK to merge the two standards, some differences between UK GAAP and IFRS persist. However, while this might lead one to ask what is the difference between GAAP and IFRS, the biggest difference between US GAAP vs IFRS is IFRS standards are principle-based while GAAP is a rule-based framework. As IFRS is commonly used around the globe, it’s vital that businesses understand the steps necessary for successful integrated IFRS reporting.

About 160 jurisdictions have made a public commitment to IFRS reporting standards, and 147 require publicly listed entities to follow IFRS accounting standards.
Knowing how to analyze financial statements can improve your ability to communicate results and boost collaboration with colleagues in more numbers-focused positions.
It also gives investors a more accurate understanding of your business.
So it is relevant for these companies and investors to understand the differences in presentation and hence interpret financial information for the best decision-making.
Nevertheless, this can also mean that similar transactions are reported differently across companies if accountants make different assumptions.

Research and Development (R&D) Costs

IFRS enables the ability to see exactly what has been happening with a company and allows businesses and individual investors to make educated financial decisions. IFRS was established in order to have a common accounting language, so businesses and accounts can be understood ifrs vs us gaap from company to company and country to country. GAAP regulations require that non-GAAP measures are identified in financial statements and other public disclosures, such as press releases. Also, some companies may use both GAAP- and non-GAAP-compliant measures when reporting financial results.

The International Accounting Standards Board (IASB) is the accounting standards body for the IFRS Foundation. In this article, we explore key differences between IFRS and GAAP, including how they treat inventory, development costs, write-downs, and fixed assets. GAAP and IFRS® Standards is designed to help financial statement preparers grasp some of the major similarities and differences between IFRS and U.S.

Start with current assets, typically arranged by liquidity - cash first, then near‑cash items. Some organizations use an unclassified balance sheet (no current vs non‑current split). Profits from the income statement roll into retained earnings (equity), which is why the balance sheet https://mountainkidsschool.com/accumulated-depletion-definition-financial/ connects all the statements together.

Business Insights

Under IFRS, companies can capitalize on development costs for intangible assets if certain criteria are met, such as technical feasibility and the intention to complete the asset. Workiva helps multinational companies simplify statutory reporting around the world and legal entity reporting. This might create significant differences in the carrying value of assets between GAAP and IFRS. IFRS allows companies to revalue their intangible assets to fair value if fair value can be measured reliability in an active market. As GAAP allows the LIFO inventory method, companies using GAAP might value their inventory differently than if they were using IFRS.

When following IFRS standards, companies have a choice of how they categorize dividends. GAAP prescribes that interest paid and interest received should be classified as operating activities, while international standards are a bit more flexible. A company’s cash flow statement is also prepared differently under GAAP and IFRS. The two standards also dictate different approaches to ordering categories on the balance sheet. Under GAAP, current assets are listed first, while a sheet prepared under IFRS begins with non-current assets. A classified balance sheet separates current and non‑current items, which enables readers to assess liquidity and near‑term obligations.

The IFRS Foundation works with more than a dozen consultative bodies, representing the many different stakeholder groups that are impacted by financial reporting.
IFRS allows companies to revalue their intangible assets to fair value if fair value can be measured reliability in an active market.
Below is a practical list of ten tools and aids that help produce and support a reliable balance sheet format.
Under these criteria, internally developed intangible assets are capitalized under IFRS and expensed as incurred under GAAP.
The differences between US GAAP and IFRS are paramount for any multinational corporation.
The separation of current and noncurrent assets and liabilities is required, and deferred taxes must be shown as a separate line item on the balance sheet.

Leases (ASC 842 and IFRS

The move to a single method of inventory costing could lead to enhanced comparability between countries and remove the need for analysts to adjust LIFO inventories in their comparative analysis. Under GAAP, either LIFO or first-in, first-out (FIFO) inventory estimates can be used. Like GAAP, however, discontinued operations under IFRS are represented by their own section on an income statement.

What strong governance really requires

This document is a point‑in‑time snapshot - think midnight on the last day of a reporting period. It’s the precise snapshot of what a business owns, owes, and the residual value belonging to owners. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. © 2026 KPMG IFRG Limited, a UK company, limited by guarantee. This guide does not discuss every possible difference; rather, it is a summary of those encountered frequently when the principles differ or when there is a difference in emphasis, specific application guidance or practice.

IFRS is used widely https://stablesolutionsjo.com/adp-navigation-guide-for-wage-garnishments-2/ around the world, while GAAP applies specifically to U.S. companies, making this distinction critical for accurate comparisons and analysis. Grant Thornton Advisors LLC may use resources from its subsidiaries and domestic and/or international affiliates during the course of providing professional services to its clients. It is not, and should not be construed as, accounting, legal, tax, or professional advice provided by Grant Thornton LLP. This Grant Thornton LLP content provides information and comments on current issues and developments. It covers only those differences in guidance that we believe practitioners generally encounter in practice. This update of the comparison guide includes standards issued as of December 31, 2023 that are effective as of that date.

Filter accounts that naturally reside on the balance sheet (asset, liability, equity). Manufacturers have deeper PPE, inventory stages, and potentially more complex provisions. If your business is multinational, consider presenting in a functional currency with a translation note, or present a dual‑currency view when required. Key presentation choices include currency (state clearly), rounding (e.g., dollars in thousands), comparative columns (current year vs prior year), and materiality. For example, IFRS uses “Statement of Financial Position,” but the content mirrors the balance sheet concept. IFRS tends to emphasize principles; GAAP may be more prescriptive on certain line items and disclosures.

Key principles and frameworks of GAAP and IFRS

A conservative approach prevents overstating financial health by reversing initially recognised losses. These methods usually raise inventory values and decrease the cost of goods sold when prices are increasing, leading to higher reported profits compared to LIFO. Instead, the First in, First Out (FIFO) method or weighted average cost method should be used by companies. Its https://www.alphamarinegroup.net/accounting-for-inventory-cogs-a-complete-guide/ popularity in America comes from its tax advantages, as it can reduce taxable income by reporting higher costs. Nevertheless, this can also mean that similar transactions are reported differently across companies if accountants make different assumptions. However, this rigidity can lead to overly complex regulations and a ‘’check-the-box’’ mentality, where the focus may shift from the economic substance of transactions to mere compliance with the rules.

International Financial Reporting Standards (IFRS) are the accounting standards set by the International Accounting Standards Board (IASB). Compare US and global accounting standards in 2026. Explore our online finance and accounting courses, which can teach you the key financial concepts you need to understand business performance and potential. Deciding which set of standards to use depends on whether your company operates in the US or internationally.

However, IFRS also has guidance requiring companies to capitalize development expenditures when certain criteria are met. Although the GAAP and IFRS standards converge on the need to recognize a right-of-use asset and a lease obligation, under the IFRS standard, all lessee leases are considered finance leases. Under GAAP, intangible assets are carried at historical cost, and revaluation is not permitted. While it’s important to have a general understanding of the difference between US GAAP and IFRS, there are certain specific differences that are important to understand when it comes to US GAAP vs. IFRS.

He specializes in driving scalable business growth through AI adoption, operational excellence, and enterprise solutions such as OneStream EPM. From there, a focused blueprint can define the target reporting model, primary and secondary GAAPs, and how OneStream will embed data quality, workflow and governance into daytoday consolidation and reporting. Rolebased security and segregation of duties help align OneStream with internal control and SOX expectations.

These differences include flexibility, industry-specific practices, differences in terminology, treatment of certain transactions, and disclosure requirements between the two frameworks. Since GAAP is primarily only used within the United States, the IFRS standards have a much wider scope. US GAAP, on the other hand, has specific rules for different industries and transactions, such as the percentage-of-completion method for long-term construction contracts. IFRS provides general principles for revenue recognition, focusing on when control of goods or services transfers to the customer. US GAAP, on the other hand, allows companies to use FIFO, weighted average cost, or the last-in, first-out (LIFO) method.

The process of determining the value of your inventory is known as inventory valuation. By May 2024, jurisdictions covering more than half of global GDP—including Australia, Brazil, Canada, China, Japan, Mexico, and the UK—had announced plans to adopt or align with these rules. Learn about the key differences between GAAP and IFRS and where they overlap, and discover the latest updates in this guide.

The treatment of acquired intangible assets helps illustrate why the International Financial Reporting Standards (IFRS) are considered more principles-based. In 2002, the FASB and the International Accounting Standards Board (IASB®) set up a formal collaboration program that aimed to achieve convergence on major financial reporting topics. Although US GAAP and IFRS® Accounting standards are built on largely similar concepts and often lead to similar accounting outcomes, there are many differences in the specific accounting requirements. This roadmap provides a comparison of IFRS and US GAAP—two of the most widely used accounting standards in the world—and the most significant ways they diverge. Sharing our expertise to inform your decision-making in an evolving global financial reporting environment. Under GAAP, companies are required to disclose information about their accounting choices and their expenses in footnotes.