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A. Both IFRS and U.S. GAAP require an annual review of residual value and useful life.
B. Unlike IFRS, U.S. GAAP requires an annual review of residual value and useful life.
C. Unlike U.S. GAAP, under IFRS each component of an asset must bedepreciated separately..
The International Financial Reporting Standards (IFRS) - the accounting standard used in more than countries - has some key differences from the U.S. Genrally Accepted Accounting Principles (GAAP). At the conceptually level, IFRS is considered more of a "principles based" accounting standard in contrast to U.S. GAAP which is considered more "rules based." By being more "principles based", IFRS, arguably, represents and captures the economics of a transaction better than U.S. GAAP. Some of differences between the two accounting frameworks are highlighted below:
Intangibles The treatment of acquired intangible Assets helps illustrate why IFRS is considered more "principles based." Acquired intangible assets under U.S. GAAP are recognized at fair value, while under IFRS, it is only recognized if the asset will have a future economic benefit and has measured reliability. Intangible assets. are things like R&D and advertising costs.
Inventory Costs
Under IFRS, the last in, first out (LIFO) method for accounting for inventory costs is not allowed. Under U.S. GAAP, either LIFO or first-in, first-out (FIFO) inventory estimates can be used. The move to a single method of inventory costing could lead to enhanced comparability between countries, and remove the need for analysts to adjust LIFO inventories in their comparison analysis.
Write Downs
Under IFRS, if inventory is written down, the write down can be reversed in future periods if specific criteria are met. Under U.S. GAAP, once inventory has been written down, any reversal is prohibited.
C. Unlike U.S. GAAP, under IFRS each component of an asset must bedepreciated separately.
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Which of the following statements is most likely correct regarding the depreciation of property, plant and equipment under IFRS and U.S. GAAP?
BELOW IS THE CORRECT ANSWER:
C. Unlike U.S. GAAP, under IFRS each component of an asset must be
depreciated separately..
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