Wouldn’t it be great if there was one set of reporting standards that encompassed the entire world? Mostly it would be great because, in theory, it would be less you would have to learn for the CPA exam. And who isn’t on board with that?
But we live in a world where there are two major sets of reporting standards: International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP).
I know many of you have also heard of International Accounting Standards (IAS), and you’ll notice that I didn’t mention them above. So where do the IAS’s lie in this spectrum of accounting standards? And how does IAS relate to GAAP?
From IAS to IFRS
Let’s have a little accounting history lesson (Yay!).
During the mid-1960’s, there was a movement to standardize accounting across the globe. Out of this movement was born the International Accounting Standards Committee (IASC) in 1973, which was mandated with releasing new accounting standards to be accepted worldwide.
Between 1973 and 2000, the IASC released 41 different reporting standards, known as International Accounting Standards (IAS). In 2001, the IASC was restructured to become the International Financial Standards Board (IASB), subject to the same task of creating accounting standards. Except the new standards went (and are still going) by a different name: IFRS.
IAS’s 1 through 41 were adopted into the new framework, and any standards created after were IFRS. So the two standards are under the umbrella of the same framework and are essentially the same. One thing to note is, if an IFRS comes out that contradicts a previous IAS, the IFRS will supersede the IAS.
To sum up:
1973-2000 = IASC = IAS
2001-Present = IASB = IFRS
IFRS > IAS
(Sorry, but we accountants can only handle so much history before we need a little math.)
IAS vs GAAP
As we talked about in this article comparing IFRS to GAAP, you could take an entire class on the differences between GAAP and IFRS. Luckily, we’re aware of a few major differences that you should keep in mind as you study for the exam:
Again, if you want a more in-depth look at the difference between IFRS and GAAP, check out this article.
Also, the IASB has a fantastic website devoted to IFRS. When I took my class devoted to IFRS and the differences between them and GAAP, we used this website extensively. I highly suggest you get on here and peruse the different standards the IASB has to offer, and compare them to what you already know about GAAP.
The Future Of IFRS
As we move closer to converging GAAP and IFRS, it’s going to become increasingly important to gain a better understanding of each. As you prepare for the CPA exam, keep in mind that learning about the differences between the two standards will not only help you on the exam, but make you an invaluable asset to any firm looking to do work overseas.