U.S. GAAP and IFRS

There two general approaches to accounting in the world: Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS). In the United States, GAAP is the standard approach, and the standard American system is referred to as U.S. GAAP. However, the Security and Exchange Commission is looking to switch to IFRS by 2015, the system used in the European Union and many other countries (Loque, 2013). In fact, the United States has been moving towards IFRS for a number of years. This long period of convergence has provided an opportunity for reconciliation of the main differences between the two systems. However, there remains at least one significant difference: "U.S. GAAP is rule-based, whereas IFRS is principle-based. The inherent characteristic of a principles-based framework is the potential of different interpretations for similar transactions. This situation implies second-guessing and creates uncertainty and requires extensive disclosures in the...
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