U.S. GAAP vs. IFRS Research Paper Example | Topics and Well Written Essays - 500 words

U.S. GAAP vs. IFRS - Research Paper Example This allows matching of the accounting contract costs, as well as revenue with the accounting periods in which the construction work takes place (Bohusova, 2009). Another factor is that the accounting of fixed price construction contracts is done using percentage of the completion technique. According to Intermediate Accounting (2008), under such as case, the completed contract method is not permitted; there is no specific guidance on software revenue recognition and the guidance on sales of real estate is limited† (p.102). On the other hand, U.S. GAAP is based on rules; thus, it lacks an extensive guidance regarding revenue recognition specific to the type of contract or industry. Its revenue recognition is divided into two levels with the first part being the guidance in concepts statements. In the second level is the guidance for revenue recognition in particular industries, as well as transactions that are economically different. Revenue recognition in this case depends on two criteria that must be met as defined in the FASB Concepts Statement No.5, which notes that revenue must be realizable, as well as earned (Bohusova, 2009). Another point of difference is that in this case, the accounting for the construction contracts uses the percentage-of-completion method only on condition that certain criteria are met; if not the completed contract method is applied. Finally, GAAP unlike IFRS provides for a detailed on the recognition of software revenue, as well as on accounting for real estate sales (Int ermediate Accounting, 2008). In IFRS financial statement, the net income is exclusive of the interest expenses and interest revenues. IFRS reports on interest income with regard to financing activities only happens when the future economic benefits are put in place. On the other hand, GAAP performs report of its income under investing