Question

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

investments.

Short answer

Similarities are the classification of investments, fair value and amortised cost.

Step-by-step solution

Definition of GAAP

It stands for Generally Accepted Accounting Principles; it contains all the principles and rules of financial reporting.

Similarities between GAAP and IFRS

• Both of them has the same classification for investments.
• Both use the exact definition of fair value and amortised cost.
• Both use fair value and amortised cost based on the classification of investment.

Difference between GAAP and IFRS

• GAAP classify debt investment as trading, held-for-collection and available-for-sale. IFRS classify debt investment as held-for-collection and trading.
• IFRS permits the reversal of loss impairments, but GAAP does not allow the reversal of impairment of loss.
• GAAP permits fair value options for equity investments, but IFRS does not permit.