1. Overview
IFRS (International Financial Reporting Standards): Developed by the International Accounting Standards Board (IASB), IFRS is a globally accepted framework for financial reporting. It aims to standardize accounting across international boundaries.

GAAP (Generally Accepted Accounting Principles): Primarily used in the United States, GAAP is a set of accounting standards, principles, and procedures issued by the Financial Accounting Standards Board (FASB).

2. Key Differences Between IFRS and GAAP
Feature IFRS GAAP
Origin International (IASB) United States (FASB)
Inventory Valuation FIFO and weighted average allowed; LIFO prohibited FIFO, weighted average, and LIFO allowed
Development Approach Principles-based Rules-based
Reversal of Inventory Write-downs Permitted if value recovers Not permitted
Treatment of R&D Costs Some development costs can be capitalized R&D costs are expensed as incurred
Extraordinary Items Not separately classified Reported separately
Fixed Assets Revaluation Allowed Not allowed
Impairment Losses Can be reversed Cannot be reversed
3. IFRS Highlights
Objective: Provide transparent and comparable financial statements globally.

Structure: Includes standards like IFRS 9 (Financial Instruments), IFRS 15 (Revenue), IFRS 16 (Leases).

Adoption: Used in over 140 countries including the EU, Canada, and Australia.

4. GAAP Highlights
Objective: Ensure consistency and reliability in U.S. financial reporting.

Structure: Includes standards like ASC 606 (Revenue), ASC 842 (Leases).

Regulation: Overseen by the SEC for publicly traded companies.

5. Convergence Efforts
The IASB and FASB have worked together to align IFRS and GAAP, especially in areas like revenue recognition and leasing.

Despite progress, full convergence has not been achieved due to differing legal, economic, and cultural environments.

📊 IFRS vs. GAAP – Quiz (20 Questions)
Instructions: Choose the correct answer for each question. Circle or highlight your choice.

1. Which organization issues IFRS? A. Financial Accounting Standards Board (FASB) B. American Institute of CPAs (AICPA) C. International Accounting Standards Board (IASB) D. Securities and Exchange Commission (SEC)

Answer: C

2. Which inventory valuation method is prohibited under IFRS? A. FIFO B. Weighted Average C. Specific Identification D. LIFO

Answer: D

3. GAAP is primarily used in which country? A. Canada B. United States C. Australia D. United Kingdom

Answer: B

4. Which framework is considered principles-based? A. GAAP B. IFRS C. Both D. Neither

Answer: B

5. Under GAAP, how are research and development costs treated? A. Capitalized B. Deferred C. Expensed as incurred D. Amortized

Answer: C

6. Which framework allows reversal of inventory write-downs? A. GAAP B. IFRS C. Both D. Neither

Answer: B

7. Which framework permits revaluation of fixed assets? A. GAAP B. IFRS C. Both D. Neither

Answer: B

8. Which of the following is a key standard under IFRS? A. ASC 606 B. ASC 842 C. IFRS 15 D. FASB 101

Answer: C

9. What is the main objective of IFRS? A. Tax compliance B. Global comparability and transparency C. Audit enforcement D. U.S. market regulation

Answer: B

10. Which body oversees GAAP compliance for public companies? A. IASB B. SEC C. IMF D. IFAC

Answer: B

11. Which framework uses ASC (Accounting Standards Codification)? A. IFRS B. GAAP C. Both D. Neither

Answer: B

12. Which framework does not separately classify extraordinary items? A. GAAP B. IFRS C. Both D. Neither

Answer: B

13. Which framework is more detailed and prescriptive? A. IFRS B. GAAP C. Both D. Neither

Answer: B

14. Which framework is used by companies listed on the London Stock Exchange? A. GAAP B. IFRS C. Both D. Neither

Answer: B

15. Which framework allows capitalization of certain development costs? A. GAAP B. IFRS C. Both D. Neither

Answer: B

16. Which framework is more flexible in applying professional judgment? A. GAAP B. IFRS C. Both D. Neither

Answer: B

17. Which framework is more likely to include industry-specific guidance? A. IFRS B. GAAP C. Both D. Neither

Answer: B

18. Which framework is more widely adopted globally? A. GAAP B. IFRS C. Both D. Neither

Answer: B

19. Under which framework is lease accounting governed by IFRS 16? A. GAAP B. IFRS C. Both D. Neither

Answer: B

20. Which framework is governed by the Financial Accounting Standards Board (FASB)? A. IFRS B. GAAP C. Both D. Neither

Answer