IFRS Vs US GAAP – Difference, Course, Scope & Salaries

Welcome to the battle of the accounting standards. 

In the left corner, we have the contender — US GAAP. A traditional brand of regulations which originated in the USA and is used by many Indian companies. 

In the right corner, we have the challenger — the IFRS. A universal and more efficient system of accounting practices with big plans to take over the globe.

Two competent accounting standards are fighting for dominance. As an accounting student, you may wonder which standard will emerge victorious. Which one is more relevant to your budding career? Let’s find out. 

It’s IFRS versus US GAAP. 

Why are accounting standards such a big deal?

The financial statement is the most important document a company generates. 

It is a summary of the financial data of an organisation within a period of time. 

Statements and reports are read by accountants, company heads, board members, stockholders and the general public. 

They are also given to potential investors and buyers from around the world. 

An accounting standard is a format that dictates how a financial report is written. It ensures that there is transparency, credibility and uniformity in the statements. They specifically state how to record transactions, measure financial data and summarise the information concisely in a statement. 

However, a dichotomy arises when different standards use dissimilar practices. A report drafted in one country follows the official national standards but may not be legible in another country. Every set of standards follows a detailed list of rules and codes. This could cause a conflict of interest when you receive a statement that doesn’t follow the regulations you do. 

What is the US GAAP standard?

The Generally Accepted Accounting Principles (GAAP) were created after the 1929 stock market crash in America to regulate the practices of publicly listed companies and other market-related institutions. Since then, it is universally accepted by all corporations in the US, along with their various subsidiaries and offices in other countries. The department of Securities and Exchange Commission (SEC) has taken on the responsibility of implementing the regulations. 

GAAP follows a set pattern of rules and definitions to create clean and consistent financial records. Financial reporting is easily understood across the corporate world, irrespective of industry. 

The US GAAP board follows these 10 core principles

  • Compensation
  • Consistency
  • Continuity 
  • Good faith
  • Materiality
  • Periodicity
  • Permanent methods
  • Prudence
  • Regularity
  • Sincerity

What is the IFRS standard?

When accounting discrepancies arise from conflicting guidelines, it is difficult to carry out multi-national business transactions. The International Financial Reporting Standards (IFRS) was created to address this issue, by developing a universal system of principles and practices.

The IFRS is affiliated with two accounting organisations — the International Accounting Standards Board (IASB) and the International Sustainability Standards Board (ISSB).

The accounting rules are followed by public companies worldwide. The USA may also permit the IFRS system as one of the official accounting standards used. 

By following these standards, companies hope to achieve consistency, uniformity and corporate transparency. It’s easier to do business when you follow the universal accounting language. 

The IFRS board follows these 4 core principles 

  • Clarity
  • Comparability 
  • Relevance
  • Reliability

Want to know about the IFRS course, click here

US GAAP vs IFRS — a comparison

US GAAP IFRS
It is largely used by public corporations the United States of AmericaAn adapted international version is used in the foreign offices and branches of American companies   Over 120 countries allow IFRS as one of the accounting standards Another 90 countries have fully implemented the standardsSome countries who have adopted IFRS are Singapore, Australia, South Korea, the UK and the European Union
US GAAP is a rules-based system IFRS is a principles-based system
US GAAP regulations permit the use of last-in, first-out (LIFO) method as part of the inventory accounting standard. IFRS has decided to omit the use of the last-in, first-out (LIFO) method.
GAAP is focused on research IFRS is fixated on looking at the overall patterns
US GAAP does not permit the write-down to be reversed  IFRS allows the write-down to be reversed
Developmental costs are not capitalised in the US GAAP system IFRS has enabled developmental costs to be capitalised
Extraordinary items are listed below the net income in the statement  Extraordinary items are not separately listed but are included in the income statement 
US GAAP uses a cost model to arrive at a valuation for fixed assets IFRS prefers to use a revaluation model to valuate  fixed assets
The term ‘probable’ means greater than 75 per cent  The term ‘probable’ means greater than 50 per cent

Which system works better in India?

Companies in India used the Indian GAAP for preparing financial statements. The Ind AS system was developed which is similar to the IFRS standards. So professionals who know how to operate IFRS can also use Ind AS. Lately, there seems to be a shift towards international financial reporting standards as the norm for accounting in India. While IFRS hasn’t been officially adopted in India, it is only a matter of time before most organisations make the switch. Using an international standards system like IFRS will make it better for corporate India to operate and collaborate with multi-national partners and investors. It also makes it easier for Indian finance professionals to secure jobs in MNCs and other companies abroad.

 

Read how the IFRS course can help your accounting career

The Proschool IFRS course

Proschool has joined with the NSE Academy to offer the IFRS program to its students. The institute has recognised the need to update the next generation of accountants on International financial reporting standards. It is essential to stay on the level of our global peers and work in accordance with the latest developments in accounting. To achieve this, Proschool offers a concise course that teaches you the skills and methods of following IFRS. Here are some of the benefits you get when you sign up:

  • Faculty members are industry professionals equipped to effectively teach and train 
  • You get a joint certificate from three boards — Proschool, NSE and NSDC
  • Choose between a traditional classroom setup or online sessions
  • Exhaustive study resources that help you learn better
  • This course helps to prepare for the DipIFRS or CertIFRS

Career opportunities after the IFRS course

As India is slowly easing into the international accounting system, companies need professionally trained employees to help them make the transition. If you have an IFRS credential on your resume, you are sure to catch the eye of MNCs and global bank groups. As the IFRS standards are similar to the current Ind AS system, you are also qualified to work in standalone Indian companies. After gaining a few years of experience, you can even open your consulting firm and help clients make the change to the IFRS system. 

Salary expectations

  • The average salary is between Rs 8 to 9 lakhs a year for an IFRS specialist
  • Accounting and finance professionals with additional IFRS training can receive an average annual salary of Rs 25 lakhs 

Conclusion 

The corporate world has had enough of non-comparability in financial statements. A universal system such as the IFRS can help the business world operate in a more seamless and efficient manner.

The world is already embracing IFRS accounting, and India is following suit. This could be a golden opportunity for young hopefuls to make a significant mark in the finance industry. 

Check out Proschool’s highly acclaimed IFRS course here