Question

Mary Tokar is comparing a GAAP-based company to a company that uses IFRS. Both companies report equity investments. The IFRS company reports unrealized losses on these investments under the heading “Reserves” in its equity section. However, Mary can find no similar heading in the GAAP-based company financial statements. Can Mary conclude that the GAAP-based company has no unrealized gains or losses on its non-trading equity investments? Explain.

Short answer

No, Marry should not make that conclusion.

Step-by-step solution

Meaning of GAAP

Generally accepted accounting principles, or GAAP, are measures that cover the points of interest, complexities, and validity of the business and corporate bookkeeping. The Financial Accounting Standards Board (FASB) uses GAAP as the setting for a comprehensive set of ratified bookkeeping practices and practices.

Explaining the comparison made by Marry Tokar between GAAP and IFRS Company.

The Marry is drawing an off-base conclusion. While IFRS allows unrealized losses on non-traded equity investments to be expanded under "reserve," the U.S. GAAP requires that these misfortunes extend to other comprehensive income. Specifically, unrealized losses are detailed within the accumulated. US Other Comprehensive Income (Loss) Accounts Under GAAP.