Você está na página 1de 4

1

Financial Statement Analysis


ACC 291
November 9, 2015

2
Introduction
The IFRS (International Financial Reporting Standards) is the accounting standard that is
used in more than 110 countries and has some featured differences from the GAAP (U.S.
Generally Accepted Accounting Principles). IFRS is more of a principle cased standard compared
to GAAP, which is more rule based in accounting. This paper will describe some of those
differences.
Financial Statement Analysis
IFRS 8-1: Fair value measurements supply users of financial statements with a reliable
picture of the value of a companys assets. Both IFRS and GAAP feel necessity for firms to
include information concerning fair value measurement practices in the notes of financial
statements. Under both systems, companies will be required to report assets at either book value
or fair value, depending on the situation. As a general rule of thumb, all assets in the same class
must receive the same valuation treatment. In regards to the value of receivables, IRFS uses a
two-tiered method that first analyzes individual receivables, and then looks at receivables as a
whole to determine if there is any impairment.
IFRS 9-1: Component depreciation happens when an asset has essentially different parts
that should be depreciated with different treatment. Under IFRS, firms are mandated to use
component depreciation if the parts of the asset offer changeable patterns of benefit. The
reasoning behind this is it provides an opening picture of the assets book value. This method is
also allowed under GAAP, but U.S companies barely use it in practice.
Take for example a large piece of manufacturing machinery that consists of a main housing
and a computerized control unit. Each of these units is part of the same asset, but they have
different useful lives and salvage values. The main housing may have a useful life of 25 years and a
salvage value of $50,000, but the control unit will be obsolete in 5 years and have a salvage value

3
of $200. Because these two components have contrasting patterns of benefit, IFRS requires that
they be depreciated separately.
IFRS 9-2: The evaluation of plant assets can be defined as the procedure of change values
from book value to fair value. This procedure is mandatory in the event that there have been
substantial economic changes in the market have occurred. For example, if a company purchased
a building 10 years ago and it has appreciated due to a real estate boom, it can be reevaluated to
fair value. If an asset is to be reevaluated under IFRS, it is required that all assets in its class must
be treated with the same valuation method. This ensures that companies maintain consistency in
valuations for the same types of assets.
IFRS 9-3: Companies that utilize GAAP standards are required to expense all research and
development costs by reporting them on the income statement. In contrast, IFRS only places this
requirement on research costs. Once technological viability has been reached, it is optional for a
company to start reporting development costs as capital expenditures. This allows the costs to be
depreciated over the useful life that the technology provides.
IFRS 10-2: In the utmost basis function, a contingent liability is a duty that has a
probability of appearing in the future. These items will not be involved in financial statements, but
should be acknowledged within the notes. The company will also be enforced to measure the
nature of the contingent liability in consecutive accounting periods.
An example of an IFRS Contingent Liability would be to envision an oil company that was
tangled in an accidental oil spill in the Mediterranean Sea. An example of a contingent liability
would be possible fines charged by the European Union for environmental violations. The
company may not be aware of the extent of the fines yet, but they should be acknowledged as a
contingent liability in the notes. Because the fines can be fairly predicted, it is crucial to release
this information to users of financial statements.

4
IFRS10-3: The basic principles of accounting for liabilities between GAAP and IFRS
practically the same, but there are several minor differences. On the balance sheet, GAAP requires
liabilities be reported in order of liquidity, while IFRS requires reverse order of liquidity. When it
comes to reporting interest expenses, GAAP permits both the effective interest rate method and
the straight-line method; however, IFRS will only allow the effective interest rate method.
Furthermore, IFRS has special rules for contingent liabilities, which is not a requirement under
GAAP.
In the grand scheme, the differences between IFRS and GAAP are fairly small. Each has
specific requirements related to the reporting of assets and liabilities, which can result in slightly
different financial results. Both FASB and IASB are working actively to modernize their
accounting rules with changes in the evolving business climate. In summary, both systems are
important for maintaining high quality accounting standards in the global economy.
Conclusion
In other countries, especially in Europe, experience shows that IFRS is more complex and
lengthier than anticipated. But European countries were the first ones to make the change and
they were unable to grasp the lessons learned. Hopefully, U.S companies can learn from the
mistakes of European forerunners.

Você também pode gostar