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Introduction

IFRS is an acronym which stands for International Financial Reporting Standards. It is defined as the set of accounting standards, developed by the International Accounting Standards Board (IASB). They are being applied on a globally consistent basis and thus the global standard for the preparation of public company financial statements.

GAAP on the other hand stands for, Generally Accepted Accounting Principles. They are a common set of accounting principles, standards, and procedures that companies must follow when they compile their financial statements. It helps in improving the clarity of the communication of financial information and also in ensuring a minimum level of consistency in a company's financial statements, which makes it easier for investors to analyze and extract useful information.

What are some steps taken by both the FASB and IASB to move to fair value measurement for financial instruments? In what ways have some of the approaches differed?

The steps taken by both the FASB and IASB to move to fair value measurement for financial instruments are:

Companies are required to report assets at either book value or fair value, depending on the situation.
Categorizing to ensure that all assets in the same class.
Making sure that assets in the same class receive the same valuation treatment. This was to provide the users of the financial statements with a true value of the company assets.
In what ways have some of the approaches differed?

IRFS uses a two-tiered method in valuation in of receivables, which at first analyzes individual receivables and then looks at receivables as a whole to determine if there is any impairment.

What is component depreciation, and when must it be used?

Component depreciation is the process of dividing real estate improvements into various components like plumbing, and building shells, and then depreciating each component separately for tax purposes.

Component depreciation must be used when the parts of the assets offer varying patterns of benefit. This is because it usually occurs when the assets have different parts that should be depreciated with different treatment.

What is revaluation of plant assets? When should revaluation be applied?

Revaluation of plant assets is referred to as the process of changing the values of assets from the book value to the fair values. It is used to get the most accurate value of a company's assets such as land, buildings, machinery when the assets declines in value because of the age that is tied to it. Another reason for a revaluation of a company would be in order to obtain a loan by mortgaging its assets because performing a revaluation of the asset would improve the company's chances of getting a of loan of a greater amount.

Revaluation should be applied in a situation where there are economic changes in the market. For example, if a company purchased a land a decade ago and it had appreciated in value, it could be reevaluated to its fair value.

Some product development expenditures are recorded as development expenses and others as development costs. Explain the difference between these accounts and how a company decides which classification is appropriate.

The difference between development cost and development expenses is that development costs is a cost used when a payment is made for goods used to develop assets for example a land purchased will remain an asset to the company as long as they own it. An expense on the other hand, refers to the cost incurred for assets the company acquires or purchases that will depreciate overtime such as a vehicle for the company that will continue to depreciate during its lifespan.

With the fixed asset e.g. the land, the company will continue to utilize it and therefore there will be no fees charged in regard to its use but for the vehicle it has purchased, the company will be required to be maintained and will lose its value over time. For this reason, classifying the expenditure as development cost will be appropriate.

Explain how IFRS defines a contingent liability and provide an example

A contingent liability, according to IFRS, is an obligation that has a probability of occurring in the future. These obligations should be disclosed within the notes but will not show up on any financial statements. An example may be when an oil company was involved in an accidental oil spill in Mediterranean Sea, the contingent liability would be the potential fines imposed by the European Union for environmental violations.

Briefly describe some similarities and differences between GAAP and IFRS with respect to the accounting for liabilities.

The basic principles for Accounting for liabilities between GAAP and IFRS are similar in that they both allow the use of effective rate method when valuing interest expense as a liability.

The difference on the other hand is that, on the balance sheet, GAAP requires liabilities be reported in order of liquidity while IFRS requires reverse order of liquidity.

Conclusion

For many years ago, the FASB and the IASB established separate accounting standards for financial reporting. In the year 2011, the FASB and the IASB initiated their goal of issuing common guidance on fair value measurements.

Understanding the particular accounting standards that define fair value will provide professional guidance for corporate taxpayers, and valuation analysts when applying the fair value standard of value.