IFRS vs GAAP (Balance Sheet, Cash Flows and Income Statement)

Oct. 14, 2012 - PRLog -- Statement of Financial Position
Statement of Financial Position (Balance Sheet) prepared under IFRS often classifies accounts in reverse order of liquidity (lack of nearness to cash), which is the opposite of what the US companies do. E.g. intangible assets are typically listed first and cash is listed last among assets. Also, equity is often listed before liabilities, where as liabilities are again listed in order of decreasing liquidity. These choices reflect convention and not IFRS requirements.


Income Statement
- The most visible difference is that GAAP requires three years’ data on the income statement whereas IFRS requires only two.
- GAAP income statements classify expenses by function and must separately report expenses applicable to revenues (cost of goods sold), whereas IFRS permits expense classification by function (cost of sales, selling and administrative, etc.) or by type (raw materials, labor, depreciation, etc.). This means, for example, that under IFRS, there is no requirement to report a cost of sales figure.

Statement of Cash Flows
- GAAP-based statement of cash flows classifies interest expense, interest revenue, and dividend revenue as operating cash flows, and dividends paid as financing cash flows.
- IFRS allows firms to choose from between the following two options:
         : Classify interest expense, dividends paid, interest revenue, and dividend revenue as operating cash flows, or
        : Classify interest expense and dividends paid as financing cash flows, and interest revenue and dividend revenue as investing cash flows.

Source: Investment Banking - The Dream Begins (3rd Edition)


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