Question

IFRS5-2 Briefly describe some of the similarities and differences between GAAP and IFRS with respect to statement of financial position (balance sheet) reporting.

Short answer

Both of them require reporting accounting policies and estimates made in accounting. Both of them report their assets in a different sequence.

Step-by-step solution

Definition of Accounting Estimates

Accounting estimates can be defined as the approximation made by the business entity for a business transaction that does not have any means of measurement.

Similarities between reporting of GAAP and IFRS

1. Both of them require minimum notes disclosure. They require the business entity to disclose information about accounting policies adopted, judgments made by the business entity, and assumptions made by the business entity.

2. Previous period’s financial statement must be reported for comparison.

3. Assets and liabilities must be classified as current and non-current.

Difference between reporting GAAP and IFRS

Under IFRS, long-term assets such as property, plant, and equipment are reported first. While under GAAP, assets are reported as per their liquidity.