Despite major efforts by the Financial Accounting Standards Board, or FASB, and the International Accounting Standards Board, or IASB, significant differences remain between accounting practices in the United States and the rest of the world. For example, companies in the United States are allowed to use last in, first out, or LIFO, as an inventory-costing method, which is a practice banned in most other countries.

International practices are compiled in the International Financial Reporting Standards, or IFRS, as set forth by the IASB. In the United States, the FASB releases statements of financial accounting that, when combined, form the generally accepted accounting principles, or GAAP.

According to the IFRS website, the greatest difference between the IFRS and GAAP is "that IFRS provides much less overall detail." Other significant differences include how comparative financial information is presented, how the balance sheet and income statements are laid out and how debts are treated.

Inventory Accounting Differences

GAAP allows LIFO carrying cost of inventory accounting, while the IFRS explicitly prohibits any company from using LIFO. Instead, international standards dictate that the same cost formula must be applied to all inventories of similar nature.

Under GAAP, inventory is carried at the lower of cost or market, with the market being defined as current replacement cost, with some exceptions. Inventory under IFRS is carried at the lower of cost or net realizable value, which is the estimated selling price minus costs of completion and other costs necessary to make a sale.

Other inventory differences include how markdowns are allowed under the retail inventory method or RIM, and how inventory write-downs are reversed.

Long-Lived Assets

GAAP does not allow for assets to be revalued; IFRS allows for some revaluation based on fair value, as long as it is completed regularly. The depreciation of long-lived assets is very uncommon, though technically allowable, under GAAP; it is required under IFRS if the asset's components have "differing patterns of benefit."

Long-lived investment assets are separately defined by the IASB and are normally accounted for on a historical cost basis. In the United States, the FASB does not have a separate definition for property used as an investment only. Property is only held for use or held for sale.

Impairment losses for long-lived assets under GAAP are calculated as the amount of the asset exceeding fair value. Under IFRS, such assets are calculated as the amount an asset exceeds "recoverable amount," or the higher figure between fair value less costs to sell or value in use.

Required Documents for Financial Accounts

Companies that report under IFRS are required to compile and publish a balance sheet, income statement, changes in equity document, cash flow statement and all associated footnotes. The FASB requires all of these as well and adds in statements about comprehensive income.

Rules vs. Principles

GAAP is considered to be rules-based, meaning rules are made for specific cases and do not necessarily represent a larger principle. IFRS is principles-based and, in that way, more consistent. This is one reason the published version of the IFRS is less than 20% the size of the published volumes of GAAP.