Question

We have discussed many differences between U.S. GAAP and IFRS related to the recognition and measurement of assets. Within these differences, indicate two that you consider are the most difficult to reconcile and why. Be specific is your answer and provide examples.

Answer 1

The two most difficult differences are:

1. In US GAAP assets are recorded at fair value whereas in IFRSs state that an entity cannot recognize inception gains or losses for a financial instrument unless the instrument’s fair value is demonstrated by a quoted price in an active market for an identical asset or liability or based on a valuation technique in which an entity uses only observable market data.

To identify the fair value of the assets is one of the most difficult things further if the asset is customized and tailor-made than it will become more difficult.

2. In U.S. GAAP, there is a practical expedient that permits an entity with an investment in an investment company to use, as a measure of fair value in specific circumstances, the reported NAV without adjustment whereas in IFRSs do not provide an NAV practical expedient for investments in investment companies.

If the company is not publically traded it will be difficult to identify the NAV of the company