Us Gaap and Ifrs Difference in Income Statement

Income Statement Income statements present an ordered list, assort by broad categories of revenues and expenses. The income statement begins with revenues followed by a list of expenses. U. S. ecumenically accepted accounting principles and IFRS occupyments for the creation of income statements are confusable, with some important differences. * oppositewise than separating revenues from expenses, U. S. generally accepted accounting principles tenders little counsellor rough which items the unswerving must recrudescely endanger or their order. IFRS requires, at a minimum, the sort out display of revenues, financing costs (for example, please expense), income tax expense, profit or damage for the period, and certain other items. *Both U. S. GAAP and IFRS require the separate display of items whose size, spirit, or frequency of occurrence make much(prenominal) separate display necessary for accurately portraying performance. *Both U. S. GAAP and IFRS require separate di splay of items related to quit operations, a field of study discussed in Chapter 14. *IFRS requires separate display of the mess of profit or loss attributable to the minor- ity (noncontrolling) interest and the service of process attributable to the parent entity, a topic dis- cussed in more power compass point in Chapter 13. U. S. GAAP contains a similar requirement starting in 2009 for well-nigh firms. IFRS permits firms to present expenses by either nature or function although U. S. GAAP is close on this issue, guidance from the Securities and Exchange way requires registrants to classify expenses by function. 4 revenue RECOGNITION Revenue information refers to the tone and measurement of revenues. Management applies the revenue intelligence criteria of authoritative guidance to decide whether a given transac- tion meets the criteria and so contributes in written text revenues (and the related expenses). Reve- nue credit entry is among the most convoluted issue s in financial reporting.As of the writing of this textbook, U. S. GAAP contains over 200 pieces of authoritative guidance for recognizing revenues. The quantity and complexity of this guidance number from several factors. First, mis- reporting of revenues (either reporting revenues beforehand the firm earns them or reporting non- alive revenues) is the most common form of discover accounting fraud. 9 Second, firms often lot products and service and sell them in multiple-element arrangements, and each(prenominal) element of the arrangement has the potential to result in revenue recognition.An example of a multiple-element arrangement is the sale of a railway car with an extended cinque-year war- ranty, installation services, training for employees to mark off how to operate the machine, and software upgrades as they acquire available. This bundled arrangement squeeze out contain five or more elements, delivered at divers(prenominal) times, but with a single sales price. The selling firm faces difficult recognition and measurement issues in deciding (1 ) whether a given element of the arrangement has severable revenues, and (2) when, and in what amounts, to discover rev- enues for the separate elements of the arrangement.CRITERIA FOR taxation RECOGNITION As a general principle, under the accrual basis of accounting, the firm recognizes revenue when the transaction meets both of the pursuance conditions 1 . Completion of the earnings process. The trafficker has done all (or nearly all) that it has prom- ised to do for the customer. That is, the marketer has delivered all (or nearly all) of the goods and services it has agreed to provide. 2. Receipt of assets from the customer. The vender has acquire hard currency or some other asset that it can convert to cash, for example, by collecting an account receivable.The first measuring rod focuses on the sellers performance. Firms recognize revenues from many sales of goods and services at the ti me of sale (delivery) because that is often the point of completion of the earnings process, in the ace that the seller has transferred the promised goods to the customer or has performed the promised services. counterbalance if some items remain unperformed (for example, promises to provide warranty services and promises to accept cus- tomer returns), the seller can recognize revenues as languish as the unperformed items are non too great a portion of the total arrangement with the customer, and the seller can easonably measure the cost of the unperformed items. 11 The second criterion for revenue recognition focuses on measuring the amount of cash the seller will ultimately receive. The substitution price between the customer (buyer) and seller represents the assets exchanged by the customer for goods and services, and provides the ini- tial measure of revenue.