To: Phil Connor and Eric
From: Rawan Ibrahim
Re: Interim and Segment
are many differences and similarities between the U.S. GAAP and IFRS standards.
GAAP and IFRS help with the improvement of how a company prepares and discloses
its financial statements. GAAP is used
mainly in the U.S and research is focused on literature and is rule based. On
the other hand IFRS is used in over a hundred countries that are based on
reviewing fact patterns and is principle based.
are the similarities between GAAP and IFRS?
it comes to similarities between GAAP and IFRS it is hard to find a big number
of similarities. However, there are is similarities between the two accounting
standards like changes in accounting estimates are accounted for in the income
statement when identified. Equity methods are similar in which investor must
account for investment in an associate using the equity method. The investor presents its share of the
associate’s profits and losses in the income statement (PWC, 2018). GAAP and IFRS both prohibited uniting of
interests and interest expense is recognized on an accrual basis. Earnings per
share are calculated as profit available to common shareholders divided by the
weighted-average number of shares in issue during the period (PWC, 2018). Adjusting events that occur after the balance
sheet date are defined as events that provide additional evidence of conditions
that existed at the balance sheet date and that materially affect the amounts
included are the same for both (PWC, 2018). In IFRS revenue represents the
“gross inflows of economic benefits during the period arising in the course of
ordinary activates”. In GAAP revenue represent “actual or expected cash inflows
that have occurred or will occur from the entity’s major operation” (Gari, 2016).
Both definitions seem to be very similar in meaning, yet the requirements that
need to be met are different.
are the major differences between GAAP and IFRS?
similarities GAAP and IFRS have many differences then they do similarities.
There are many differences between the two different standards like GAAP is
used in the United States, and IFRS is used in over 110 countries. The big
difference between the two is that GAAP is more rule-based, while IFRS is recognized
as principle-based. IFRS provides principles that should be followed by the
best judgment of the entity. .Although I had stated that GAAP and IFRS have
similarities in revenue recognition they also have their differences in it. The
required documents in the financial statements for GAAP are the balance sheet,
income statement, and statement of comprehensive income, changes in equity,
cash flow statement, and footnotes. For IFRS it’s the balance sheet, income
statement, changes in equity, cash flow statement, and footnotes. The performance elements under GAAP are
revenue or expenses, assets or liabilities, gains, losses, and comprehensive
income and under IFRS is revenue or expenses, assets or liabilities.
are the requirements for interim reporting under both GAAP and IFRS? The requirements for interim reporting in GAAP
requires disclosure of the items: sales or gross revenue, income taxes,
extraordinary items, net income, comprehensive income, annual income and
expenses, significant changes in financial position, contingencies, changes in
accounting principles, changes in accounting estimates, and segment
information. In the IFRS they requires
condensed statement of financial position, condensed statement of comprehensive
income, condensed statement of changes in equity, condensed statement of cash
flows, and notes.
there any problems or issues associated with interim reporting?
There are basically two problems with interim reporting they
are accounting problem and conceptual problems. In accounting the problem is inventory
problem in interim reporting has three types of problems; determination of
inventory quantities, valuation of inventories, and adjustments of valuation. There
is also matching problems because business operations are not the same all
through the year. The extent of
disclosure problem that is deciding that quantity of disclosures is not
applicable to interim reporting. The
problem with conceptual is whether the interim period is part of a longer
period or is a period by itself (Kaur, n.d).
are the advantages and disadvantages of providing segmented reporting?
many differences and similarities between the U.S. GAAP and IFRS there are many
and disadvantages. The advantages of segment reporting are they highlight
performances of different parts of the company, lets the users of the financial
statements better predict the profitability in the future. The disadvantages of segment reporting are
that it will lead to some costs that are imposed on the company, the management
won’t take business risks, and other companies can access information on their
are the requirements for segment reporting under both GAAP and IFRS? Include
the definition of an operating segment.
Both GAAP and IFRS have different requirements
for segment reporting. In GAAP it requires that a public entity discloses all
segment information both in its year-end
and interim financial statements, in the footnotes of the annual financial
statements, in the footnotes of the annual statements information describing
how the entity’s reportable segments are identified, the profit and loss
measurement for each segment, assets, and reconciliations of profit and loss. While
in IFRS it requires the disclosure of
the general information on how the entity identified its operating segments,
products and services, judgments made by management, information on the profit
and loss of their segments, assets and liabilities, and reconciliations of
segment and profit and loss.
Operating segment is a
component of a public entity that has all of the following characteristics:
It engages in business activities from which
it may earn revenues and incur expenses (including revenues and expenses
relating to transactions with other components of the same public entity).
Its operating results are regularly reviewed
by the public entity’s chief operating decision maker to make decisions about
resources to the allocated to the segment and assess its performance.
Its discrete financial information is
available. (FASB and IFRS, n.d.).