Sunday, November 23, 2008

Just a bit of back ground information:

The main difference between GAAP (Generally Accepted Accounting Principles) and IFRS (International Financial Reporting Standards) is that GAAP is rule-based accounting, while IFRS is principle-based accounting.

Rule-based accounting is where employs seek to identify the rule that tells you how to specifically handle different types of transactions and how they must be accounted for. This can lead to more work/time due to accountants having to follow specific steps with no question. On the other hand, principle-based accounting lets the prepares of finical statements exercise professional judgment and have them deciede how transactions should be handle. While there are set examples of how to handle transactions in principle-based, it puts more emphasis on the professional judgment and loyalty of the individual.

-Frank.

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