INTRODUCTION

All over the world different companies follow different accounting rules and standards on the basis of their country and its rules and standards. This variation creates difficulty in the investor’s decision making which causes major effects on the company. The IASB is a private entity, operating independently and governing the IFRS (International Financial Reporting Standards), which proposes a collection of rules and standards of financial reporting. The GAAP (Generally Accepted Accounting Principles) is the prepared amalgamation of standards and principles for the purpose of financial reporting ((IASB), 2016).

The IFRS is an international accountancy structure in which rules are crafted for proper reporting of financial information. It is being accepted in more than 120 countries. FBR requires the reporting from companies under its stated rules, majorly confirming to uniformity in removing fraudulent transactions and manipulations (Bragg, 2018). It provides general guidance for preparations of financial statements.

The GAAP is a broad combination of the principles of accounting, procedures and standards, an amalgamation of authoritative and influencing standards for generally recognized methods that the companies are advised to shadow in practice when they are in process of compiling of their financial statements.

Comparison Analysis Of Us Gaap & Ifrs Harvard Case Solution & Analysis

COMPARISION ANALYSIS OF THE STANDARDS

DIFFERENCES

The differences between US GAAP and IFRS as per certain standards are;

·         Intangibles

Under ASC 340-20 the US GAAP recognizes its intangibles assets at fair value. While the IFRS under IAS 38 recognizes at if assets have future economic benefit and measured reliability. US GAAP allocates the cost on individual assets whereas in IFRS initial measurement is at cost.

Examples: Under US GAAP Jet Blue Airlines uses the amortization method from straight-line source for the intangible assets over the anticipated useful lives. As for Latam Airlines under IFRS the intangible costs are to be amortized on its estimated useful lives.

·         Assets Valuation

ASC 320 declares that US GAAP does not allow writing-up of assets, they can only be written down. IFRS permits rule of writing assets both up and down as per re-evaluation if market exists of the abstract under IFRS 13 rule (Nderitu, 2018).

Example: Jet Blue Airways under US GAAP record their cost of assets and depreciate them through straight-line method over the probable useful lives to their estimated residual values, writing-down the assets. Latam Airlines adds value to the assets as per the maintenance and repair make probable the future economic benefits.

·         Revenue

US GAAP recognizes revenue when and if the delivery of goods has been mage or the services has been rendered, under ASC 606. While the IFRS 15 suggest that the revenue can be recognized when rewards and risk ownership has been transferred.

Example: Under US GAAP the Jet Blue Airlines’ revenue received from the tickets sold to customers but not recognized yet as revenue to the company or the unexpired credits are incorporated in air traffic liability. Under IFRS Latam Airlines records revenues at fair value of earnings received or yet to be attained from rendering the services..............

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