Question

In a professional career, one may be called upon to conduct research and deliver findings in professional settings. As discussed in the text, the SEC is considering moving from GAAP to international accounting standards.

Provide detailed scenarios (these can be case studies, articles, or any published accounting scenario within the last 5 years) in which GAAP and IFRS

would handle the situation differently.

Answer 1

Under GAAP, a company may go for LIFO method while under IFRS it is not allowed. As LIFO does not show the correct flow of inventory in many cases it results in reports of unusually low income levels.

In addition to having different methods for tracking inventory, IFRS and GAAP accounting also differ when it comes to inventory write-down reversals. Under GAAP if the market value of the asset increases, the amount of the write-down cannot be reversed, however in IFRS the amount of the write-down can be reversed.