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The world of international accounting standards is dominated by two financial reporting frameworks: the US Generally Accepted Accounting Principles (US GAAP) and International Financial Reporting Standards (IFRS).

The frameworks have broadly the same objective – that is, to maintain a set of international standards that ensure organisations account for, and report on, economic transactions, assets, liabilities, and funding structures, in the financial statements, in a way that is consistent and useful to stakeholders.

Given the fact that US GAAP and IFRS share this common goal, you might ask why they haven't joined forces to form a single international accounting framework by now?

The answer is, in part, because this is nowhere near as easy as it sounds. Because, despite their similarities, there are several significant differences between US GAAP and IFRS.

Certain accountants and financial professionals need to be aware of these distinctions. For example, if you work for a large company that reports under IFRS but competes with an American company that reports under US GAAP, you might be asked why your numbers look less good in a certain area than theirs – and the answer may well lie in the reporting differences. Some of you may even work for multinationals that use both frameworks. And investment analysts certainly need to be clued up on how the two vary.

So for those of you who need to be in the know, or who are simply interested, here is a summary of some of the key differences between US GAAP and IFRS...


The US GAAP framework is overseen by the Financial Accounting Standards Board (FASB), with the assistance of the Emerging Issues Task Force and the Private Company Council. They develop what are collectively known as the Accounting Standards Codification (ASC).

IFRS Standards, on the other hand, are set and maintained by the International Accounting Standards Board (the IASB Board) and the IFRS Interpretations Committee.


US GAAP is designed for use by non-governmental entities, both profit-oriented and not-for-profit, in – you guessed it – the US. The framework is mandatory for US companies registered with the US Securities and Exchange Commission (SEC).

IFRS is adopted by profit-oriented entities, primarily public companies, and financial institutions, in all corners of the world – over 100 countries, at the latest count.

Core approaches

The frameworks are unpinned by two fundamentally different philosophies.

US GAAP is largely rules-based, whereas IFRS is driven by principles. Essentially, this means US GAAP standards are more prescriptive and specific than IFRS Standards, which act more like guidelines that leave room for interpretation.

Structure of standards

The ways the accounting standards are structured under each framework are very different.

US GAAP is well-organised, with nine blocks of standards, each linked to a specific area of accounting. To give you an idea, the first three blocks are:

  • Standard numbers starting with 1 (the 100 series): general principles
  • Standard numbers starting with 2 (the 200 series): presentation
  • Standard numbers starting with 3 (the 300 series): assets

This is helpful in that we immediately know that a standard in the "100 series" is related to accounting for general principles, and so on.

Each standard within these blocks starts with the acronym ASC and is followed by a three-digit number. For example, there's ASC 280, which covers segment reporting, while ASC 310 deals with receivables.

Over in IFRS, the standards are structured completely at random! Whatever happens, to be next on the list of unissued numbers is allocated to the next standard to be released. So, for example, IFRS 16 deals with leasing, while IFRS 17 covers insurance contracts – they're nothing to do with one another.

Industry-specific standards

The "900 series" of US GAAP standards (which contains more than 20 standards) focuses on the accounting and reporting needs of several specific industries, such as oil and gas.

The IFRS framework has comparatively few standards that provide accounting guidance to specific industries. In fact, only three – IFRS 14 on regulatory deferral accounts, IFRS 17 on insurance contracts, and IAS 40 on investment properties – come to mind as having a fairly narrow focus.

More on the standards

One more interesting difference to note on the standards is that there are more than twice as many US GAAP standards than there are IFRS Standards.

So, while in some cases there are direct like-for-like standards between the frameworks – for example, US GAAP's ASC 842 is broadly equivalent to IFRS 16 – a lot of US GAAP standards don't have IFRS counterparts.

Financial statements

Let's take a break from spotting differences for a moment.

The high-level statements required by both US GAAP and IFRS are actually pretty much the same:

  • A statement of financial position (commonly referred to as the "balance sheet" under US GAAP)
  • An income statement
  • A statement of cash flows

Both frameworks also require entities to submit a statement of changes in equity.

However (back to the differences), under US GAAP, the information in this statement may be shown either as a separate financial statement or within the notes that form part of the overall financial statements "package". In contrast, IFRS requires that the statement of changes in equity be included as a standalone financial statement.

Overcoming their differences?

While it's not possible for us to cover the whole range of detailed accounting and reporting differences between US GAAP and IFRS in the space of one blog, hopefully, we've given you a good idea of how the frameworks fundamentally vary on a broader level – and why the convergence of the two isn't as easy as it sounds.

That's not to say there haven't been efforts to align the two frameworks more closely – partly because of the increased globalisation of the world economy, and partly because there are now several major multinational businesses faced with the arduous task of reporting under both frameworks.

Most recently, for example, the FASB and the IASB teamed up to develop new, concurrent standards on revenue from contracts with customers, and leasing. Although the US GAAP and IFRS versions of these two standards are not identical in every respect, there are certainly significant correlations between them.

There is, however, still a long way to go before the two frameworks overcome their differences completely and become one – if that ever happens, which many would argue is unlikely.

  1. Mumtaz H
    Posted 02-Sep-2021 at
    Excellent article to gain an understanding of US by the inhabitants of Non-US world.
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