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GAAP vs. IFRS: Introduction definitions Flashcards

GAAP vs. IFRS: Introduction definitions
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  • GAAP
    A set of accounting rules established by the FASB, primarily used in the USA, known for its detailed, rules-based approach.
  • IFRS
    International accounting standards set by the IASB, emphasizing a principles-based approach and used in many countries outside the USA.
  • Financial Accounting Standards Board
    The US organization responsible for developing and issuing GAAP, shaping accounting practices domestically.
  • International Accounting Standards Board
    The global body that creates and maintains IFRS, aiming for consistency in international financial reporting.
  • Principles-based Approach
    A flexible method in accounting standards allowing professional judgment and interpretation in applying rules.
  • Rules-based Approach
    A method in accounting standards characterized by detailed, specific requirements and minimal room for interpretation.
  • Bright Line Standards
    Clear, quantifiable thresholds in accounting rules that dictate specific treatments based on set criteria.
  • Sarbanes-Oxley Act
    US legislation enacted to enhance corporate governance and impose stricter requirements on public company reporting.
  • Multinational Corporation
    A business entity operating in multiple countries, often facing challenges from differing accounting standards.
  • Mergers and Acquisitions
    Business activities involving the combination of companies, often complicated by varying national accounting rules.
  • Journal Entry System
    The foundational accounting technique for recording financial transactions in both GAAP and IFRS frameworks.
  • External Users
    Individuals or groups, such as investors, who rely on financial statements for decision-making but are not part of the organization.
  • Financial Markets
    Global platforms for trading stocks, bonds, and currencies, increasingly interconnected and influencing accounting standard convergence.
  • Convergence
    The ongoing process of harmonizing GAAP and IFRS to create a unified set of global accounting standards.
  • Public Company
    An organization whose shares are traded on stock exchanges and is subject to stricter reporting and auditing requirements.