International Accounting Standards versus GAAP

2007-03-08 10:33:40

( Computers )



International accounting standards, also known as IAS, are a set of guidelines that are followed by a number of countries in drafting the financial statements of a company. It is the International Accounting Standards Board (IASB) that is in charge of setting up these rules, which must be followed internationally. International accounting standards were first issued in 1973, and were only produced until 2001.

Another set of accounting standards were issued after 2001 called the International Financial Reporting Standards, and took the place of international accounting standards. It is still the IASB that issues these international accounting standards. They are not authorized to require companies to comply with these accounting standards; however, there are certain countries that require publicly-traded companies to produce the company’s financial statements according to these standards.

Today, international financial standards are used in many countries including Hong Kong, Singapore, Australia, the European Union, Russia and South Africa to name a few. A complete list of countries that follow the international financial reporting standards can be found on the Internet.

In contrast, generally accepted accounting principles, also known as GAAP are a set of financial principles, procedures and guidelines that companies follow when drafting and filing their financial statements in the countries where they are based. The generally accepted accounting principles differ in each country, and the International Accounting Standards Board has no direct influence or control over being able to change the generally accepted principles issued in any country. Instead, the country’s financial accounting standards board is the one who has the responsibility in making any changes to a country’s general accepted accounting principles.

International accounting standards also provide guidelines on how contract costs, lease costs, income tax, employee benefits, revenue, cost of property equipment, investment property, cost of assets and other costs should be reported.

It is the goal of the International Accounting Standards Board that the entire world will eventually produce a consistent format for financial statements based on the international financial reporting standards. At the moment, each company’s financial reports are based on each country’s generally accepted accounting principles.


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