What is the Difference Between GAAP and IASB?

The main differences between GAAP (Generally Accepted Accounting Principles) and IASB (International Accounting Standards Board) lie in their scope, structure, and methodology. GAAP is a set of accounting principles used primarily in the United States, while IASB is an international organization that develops global accounting standards. Here are the key differences:

1. Scope: GAAP is a locally based system used primarily in the United States, while IASB develops internationally recognized accounting standards that are used in many countries around the world.
2. Structure: GAAP is more rules-based, providing specific guidance targeted towards specific industries and allowing for exceptions. In contrast, IASB (part of the broader IFRS, International Financial Reporting Standards) is principles-based, establishing general principles without making exceptions for industries or specific situations.
3. Methodology: GAAP tends to be more prescriptive and detailed, while IASB/IFRS provides more room for interpretation and flexibility. This difference in methodology can lead to variations in financial reporting between companies using GAAP and those using IASB/IFRS.

Some specific differences between GAAP and IASB/IFRS include:

• Inventory: GAAP allows the use of the Last in, First out (LIFO) inventory cost method, while LIFO is banned under IFRS.
• Development costs: Under GAAP, these costs are considered expenses, while under IFRS, they are capitalized.
• Investment property: IFRS has a separate category for investment property, which is defined as property held for rental income or capital appreciation and can be subsequently revalued to market value. GAAP has no such separate category.
• Lease accounting: IFRS has a de minimus exception, allowing lessees to exclude leases for low-valued assets, while GAAP has no such exception.

Despite these differences, the IASB and FASB (Financial Accounting Standards Board, which establishes and updates GAAP) have been working towards converging the two sets of accounting standards.

Comparative Table: GAAP vs IASB

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GAAP (Generally Accepted Accounting Principles) and IASB (International Accounting Standards Board) are both sets of accounting rules and guidelines used by businesses and organizations to prepare and present their financial statements. Here are some key differences between the two:

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