Accounting might be a universal language, but that doesn’t mean we’re all on the same page. If you’ve ever looked at a set of US GAAP-compliant financial statements and wondered what on Earth is going on, you’re not alone.
This week on The Briefcase, we’re diving into the key differences between US GAAP and IFRS, and what they tell us about our different cultures. So, buckle in for some American weirdness, including casino-specific standards.
🌍 Why do the differences matter?
IFRS and US GAAP are the two major frameworks used around the world and, while they aim to achieve similar goals, they don’t always take the same route.
Even if your company doesn’t report under US GAAP, you probably own products by some companies that do. Apple, for instance, reports under US GAAP. And, since Apple has as much money as a small nation’s GDP, it’s worth us being able to read their financial statements.
In other cases, like BP, companies must report under both IFRS and US GAAP, and reconcile the differences. So, if you want a job at the noble institution of British Petroleum, you’re going to have to become bilingual.
👑 Who’s in charge?
Both systems aim to provide consistent, useful information for stakeholders. But:
- IFRS is developed and maintained by the IASB.
- US GAAP is developed by the FASB, and all standards are codified under something called the ASC (Accounting Standards Codification).
To add a twist – and we love a twist – any company listed on US stock markets must also follow rules issued by the SEC, which has its own authoritative guidance and bulletins layered on top of GAAP.
📑 How’s it structured?
The IASB’s approach to IFRS’s structure is very "we’ll work it out as we go along”. IFRS 16 covers leases, IFRS 17 covers insurance – there’s neither rhyme nor reason.
US GAAP, on the other hand, is a neat filing cabinet:
- ASC 300–399 concern assets
- ASC 600–699 are about revenue
- ASC 900–999 are industry-specific standards (including casinos and oil rigs)
It’s like a beautiful library!
🧾 A real statement
At first glance, the two systems seem aligned – both require balance sheets ("statements of financial position” if you’re fancy), income statements, and cashflow statements.
But there are differences:
- Statement of changes in equity – IFRS requires it as a standalone document. US GAAP is fine with it as a note in the accounts.
- Presentation – IFRS is more flexible in how items are grouped. US GAAP often prescribes formats and subtotals more tightly.
🏗️ Approaching assets
Assets is one of the areas where US GAAP and IFRS most obviously diverge, and those differences can absolutely scramble a balance sheet.
Revaluation
- Under IFRS, companies can revalue PPE (like property) to reflect market value.
- >US GAAP does not allow this! Assets must stay at historical cost (unless impaired).
So, if your building doubles in value, IFRS can show it. US GAAP will keep it at what you paid.
Depreciation
Methods allowed – straight-line, reducing balance, and so on – are broadly the same in both frameworks.
However, since US GAAP doesn’t allow revaluations, you avoid the complexity of recalculating depreciation on a revalued asset.
Impairments
Both frameworks require impairment reviews, but only IFRS allows reversals if asset values recover. As we mentioned earlier, under US GAAP, once you write an asset down, it stays down – even if things improve.
Intangible assets
Now, let’s don our marigolds and get down to the nitty gritty:
- IFRS allows capitalisation of development costs, if they meet certain criteria.
- US GAAP does not – all R&D must be expensed.
Also:
- Revaluing intangibles is allowed under IFRS. Not under GAAP.
- US GAAP does require capitalisation of some specific intangible costs, like internal-use software but, in general, it's more conservative.
🏭 Casinos, films, and more
US GAAP’s ASC 900 series is devoted to industry-specific rules – over 20 of them, covering everything from:
- Casinos (ASC 924)
- Oil and gas
- Real estate
- Insurance and mortgages
- Entertainment (films, music)
IFRS hasn’t got that glitz and glamour to it. It tends to keep things broader and more principles-based.
🔄 Convergence
There have been serious efforts to align IFRS and US GAAP – especially in the 2000s. A couple of notable successes include:
- ASC 606 (Revenue) and IFRS 15
- ASC 842 (Leases) and IFRS 16
But convergence has stalled. Different rulebooks reflect different philosophies, and widely different political systems. The SEC has influence in the US that’s not really got an equivalent elsewhere.
So, while similarities are growing, we’re still far from one global framework.
🧠 Final thoughts
If you’re frustrated by the differences between US GAAP and IFRS, good! That means you’re paying attention.
Understanding both systems isn’t just for multinationals or accounting nerds, it’s for anyone looking for a role in global finance today. That said, it’s very annoying that American exceptionalism is even present in the way they write their financial statements.
But hopefully this newsletter’s explained something that – maybe you weren’t dying to know about – but could come in useful when you’re next asked why our American cousins done write all so funny.
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