What is the International Organization of Securities Commissions (IOSCO)

Although the IFRS and GAAP frameworks are different, they usually agree in the overall structure and principle and are working toward convergence. The two differ in the following ways:

• IFRS requires users to consider the general principles in the absence of specific standards.
• US GAAP distinguishes between objectives for business and non-business entities.
• The IASB framework gives more emphasis to the importance of the accrual and going concern assumptions than FASB
• GAAP framework establish a hierarchy of qualitative financial statement characteristics;
• Some differences in how each defines, recognizes, and measures individual elements of financial statements
• Companies reporting under standards other than GAAP that trade in USA must reconcile their statements with GAAP
.

The International Accounting Standard Board (IASB)
The IASB structure's main features are:

- the IASC Foundation - which is an independent organization whose two main bodies are the Trustees and the IASB
- a Standards Advisory Council
- the International Financial Reporting Interpretations Committee

The IASC Foundation Trustees appoint the IASB members, exercise oversight and raise the funds needed, but the IASB has sole responsibility for setting accounting standards. This organization was created to set international accounting standards in an effort to bridge the gap between the accounting standards of different nations.

U.S. GAAP versus IAS GAAP

Under U.S. GAAP, SFAS 95:
- Dividends paid by a company to its shareholders are classified on the cash flow statement under cash flow from financing.
- The dividends received by a company from its investments are classified as cash flow from operations.
- All interests received and paid by or to a company are classified as cash flow from operations.

Under IAS GAAP:
- Dividends paid by a company to its shareholders, dividends received by a company from its investments and all interests received and paid by or to a company can be classified as either cash flow from financing or cash flow from operations.

These rules are summarized in the following chart:

  U.S. GAAP IAS GAAP
Dividends paid by a company to shareholders Cash Flow from Financing Cash Flow from Financing or Operations
Dividends received by a company from investments Cash Flow from Operations Cash Flow from Financing or Operations
All interest received and paid by or to a company Cash Flow from Operations Cash Flow from Financing or Operations


Look Out!

It is highly likely you will need to calculate a figure on a cash flow statement according to one of the two rules.



Introduction

Related Articles
  1. Investing

    How To Evaluate The Quality Of EPS

    Companies can manipulate their numbers, so you need to learn how to determine the accuracy of EPS.
  2. Investing

    Cash Flow Statement: Analyzing Cash Flow From Financing Activities

    The financing activity in the cash flow statement measures the flow of cash between a firm and its owners and creditors.
  3. Investing

    International Financial Reporting Standards

    Learn about the purpose of the IFRS, as well as its benefits, goals and fundamental difference from the U.S. GAAP.
  4. Investing

    Some Key Differences Between IFRS and GAAP

    The International Financial Reporting Standards and the U.S. Generally Accepted Accounting Principles have some key differences.
  5. Investing

    What are Accounting Principles?

    The term accounting principles refers to rules and guidelines companies use to help them record their business and financial transactions.
  6. Investing

    Cash Flow From Financing Activities (CFF)

    Cash flow from financing activities is typically the third and final section of the statement of cash flows. It shows changes to cash resulting from activities such as issuing stocks and bonds ...
  7. Investing

    Analyze Cash Flow The Easy Way

    Cash flow statements reveal how a company spends its money and where that money comes from.
  8. Investing

    Fundamental Case Study: Is Amazon's Cash Flow Actually Solid? (AMZN)

    Review Amazon's cash flow situation, including its free cash flow yield, operating cash flow from organic growth and cash flow from debt financing.
  9. Investing

    Cash Flow From Operating Activities

    Cash flow from operating activities is a section of the Statement of Cash Flows that is included in a company’s financial statements after the balance sheet and income statements.
Frequently Asked Questions
  1. Depreciation Can Shield Taxes, Bolster Cash Flow

    Depreciation can be used as a tax-deductible expense to reduce tax costs, bolstering cash flow
  2. What schools did Warren Buffett attend on his way to getting his science and economics degrees?

    Learn how Warren Buffett became so successful through his attendance at multiple prestigious schools and his real-world experiences.
  3. How many attempts at each CFA exam is a candidate permitted?

    The CFA Institute allows an individual an unlimited amount of attempts at each examination.Although you can attempt the examination ...
  4. What's the average salary of a market research analyst?

    Learn about average stock market analyst salaries in the U.S. and different factors that affect salaries and overall levels ...
Trading Center