International Reporting Financial System(IRFS) vs GAAP Essay

International Reporting Financial System(IRFS) vs GAAP - Essay Example Although there are similarities between the two, their differences are major and will affect greatly the entities affected by the conversion. In terms of the general, underlying principles and accounting for commonly – occurring transactions, the two principles are actually more similar than different. Despite these similarities, however, the approaches taken by the two principles are different (i.e., IFRS is principle-based while the U. S. GAAP is rule-based). In addition, major differences are also found in their accounting treatments for significant accounts and complex transactions. This article aims to compare and to contrast the U. S. GAAP and the IFRS. It takes into account the similarities and differences between these two accounting principles. It utilizes materials from various accounting firms and accounting standards board in its comparison. As this topic is so diverse (some publications comparing the two principles have over one hundred pages), only a basic comparison will be done in this article. The 2006 Memorandum of Understanding or MOU (as updated in 2008) issued by the FASB and the IASB have set the path towards the convergence of U. S. GAAP and the IFRS. The MOU affirmed the two Board’s commitment to â€Å"developing common, high quality standards† (FASB, 2009). The ongoing efforts to converge the U. S. GAAP with IFRS have raised a lot of concerns and a lot of questions as to how different or similar the two sets of accounting principles are. The following briefly compares the two principles and outlines their similarities and differences. Despite their differences, the â€Å"general principles, conceptual framework and accounting results† (Ernst & Young, 2009) between these two principles are basically the same or similar. In fact, according to Ernst & Young (2009), the accounting treatment for transactions that commonly occur in companies is the same under both principles. The basic difference of these two principles is their general