ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

IFRS Statement of Financial Position vs GAAP Balance Sheet: Is Converging Even a Feasible Idea?

Updated on April 11, 2018

For a while now International Accounting Standards Board has been trying to convince the United States to leave behind their old ways of accounting (GAAP) and use IFRS. This seems like a pretty good idea on the surface; everyone using the same accounting rules to make financial statements. However, it rarely seems to work this way. Looking at the financial statement methods alone, it is easy to see the very real problems that could come with convergence of IFRS and GAAP.

Diving into the differences laid out in the content of the third financial statement specifically, there are already major differences. GAAP refers to this financial statement as the Balance Sheet whereas IFRS prefers the title “Statement of Financial Position.” This can prove to be confusing if there were ever to be a convergence because the most basic title of a financial statement is drastically different and virtually unrecognizable to outsiders. The difference in terminology does not stop there. IFRS refers to equity as “share capital—ordinary.” Equity, alongside assets and liabilities, is one of the largest account titles needed to be known on a balance sheet/statement of financial position to even understand what the rest of the information being presented means. Without the ability to agree on simple terminology financial information can be, not only blindly lost on a page, but misinterpreted and ultimately misused in the future.

IFRS and GAAP have diverging ideas of how information should be presented on the third financial statement as well. In relation to current assets, GAAP presents the company/organizations current assets in order of liquidity. This helps to bring more attention and engagement to the more liquid assets rather than other assets that are less liquid, therefor less useful when a company needs to turn an asset into cash on demand. For example, the list begins with cash and ends with prepaid expenses. IFRS does this in reverse. The more liquid assets, being the more useful ones, are found at bottom of the current asset lists. Regardless of which way is believed to be more useful and/or the “better” way to present the current assets, the difference in presentation alone is cause for confusion to society outside of the accounting world.

The final major difference between GAAP and IFRS in relation to the balance sheet/statement of financial position is a simple word, reserve. The term “reserve” is highly discouraged from being used under GAAP. It was previously used when referencing accumulated depreciation, current liabilities, and future plant expansion. When using IFRS, the word “reserve” is perfectly acceptable. This difference may seem odd but it is relevant because these differences set GAAP and IFRS far back on their road to convergence.

With the current accounting methods that are in place with both GAAP and IFRS, convergence is not yet feasible. With the amount of disagreements and differences between IFRS and GAAP when only paying attention to the balance sheet/statement of financial position both methods need to make significant progress in order to entertain the idea of the United States switching over. However, looking forward, when the timing is right and ideas begin to match, IFRS and GAAP could one day see eye to eye.


    0 of 8192 characters used
    Post Comment

    No comments yet.


    This website uses cookies

    As a user in the EEA, your approval is needed on a few things. To provide a better website experience, uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

    For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at:

    Show Details
    HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
    LoginThis is necessary to sign in to the HubPages Service.
    Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
    AkismetThis is used to detect comment spam. (Privacy Policy)
    HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
    HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
    Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
    CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
    Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the or domains, for performance and efficiency reasons. (Privacy Policy)
    Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
    Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
    Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
    Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
    Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
    VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
    PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
    Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
    MavenThis supports the Maven widget and search functionality. (Privacy Policy)
    Google AdSenseThis is an ad network. (Privacy Policy)
    Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
    Index ExchangeThis is an ad network. (Privacy Policy)
    SovrnThis is an ad network. (Privacy Policy)
    Facebook AdsThis is an ad network. (Privacy Policy)
    Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
    AppNexusThis is an ad network. (Privacy Policy)
    OpenxThis is an ad network. (Privacy Policy)
    Rubicon ProjectThis is an ad network. (Privacy Policy)
    TripleLiftThis is an ad network. (Privacy Policy)
    Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
    Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
    Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
    Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
    ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
    Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)