Question

Question: Briefly describe some of the similarities and differences between GAAP and IFRS with respect to the accounting for dilutive securities, stock-based compensation, and earnings per share.

Short answer

Answer

IFRS and U.S. GAAP follow similar model, dilutive securities, and earnings per share IFRS and U.S. GAAP are considerably something similar in the terms of accounting.

Under U.S. GAAP the proceeds of convertible debt are accounted as long-term debt. Whereas under IFRS, convertible bonds are divided into equity and debt component.

Step-by-step solution

Introduction to GAAP-

Generally accepted accounting principles (GAAP) are accounting standards and rules for financial reporting. It is made to give a worldwide structure for how firms set up their financial statements.

Some of the similarities and differences between GAAP and IFRS-

All the proceeds of convertible debt are recorded as long-term debt under U.S. GAAP. Under IFRS, convertible bonds are divided into parts or separated into equity component the value of the conversion option of the bond issue and the debt component.

The FASB permits businesses to challenge the presumption that contracts that can be fulfilled in either cash or shares will be settled in shares, which is a little variance in EPS reporting. In this circumstance, share settlement is required under IFRS.

Other EPS difference associated to the treasury stock method and how the revenue from cessation of a liability should be recorded for and how to calculate from the weighted average of contingently issueable shares.