Question

Briefly describe some of the similarities and differences between GAAP and IFRS with respect to the accounting for leases.

Short answer

Answer

Both U.S. GAAP and IFRS share the same objective of recording leases by lessees and lessors.

Step-by-step solution

Step-by-Step Solution

Step 1: Meaning of GAAP

GAAP is a collection of rules and standards that firms must follow when it comes to financial reporting. The FASB and the GASB worked to develop the US GAAP, a comprehensive set of accounting processes that applies to both government and non-profit accounting.

Explaining some of the similarities and differences between GAAP and IFRS with respect to the accounting for leases

The goal of both US GAAP and IFRS is to record leases by lessees and lessors according to their economic substance—that is, according to asset and liability definitions.

The US GAAP for leases is far more "rule-based," with precise bright-line criteria for determining whether a lease agreement transmits the risks and rewards of ownership, whereas the IFRS rules are more generic.