CONVERGENCE OF IFRS 3
Differences in Income Statement and Balance Sheet
There are significant differences between the U.S. GAAP and IFRS in terms of the
income statements and the balance sheets. The list below presents the major differences between
the two standards.
I. The U.S. GAAP recommends the use of a specific format for the income statement, with
the options available being the single-step and the multi-step formats. IFRS, on the other
hand, does not provide a specific format for the income statement. However, IFRS
postulates that the items that must be included in the income statement are the revenue,
finance cost, post-tax results, tax expenses, post-tax gains or losses, and the profits or
losses for the financial period (IAS Plus, 2017).
II. IFRS requires no specific format for the balance sheet whereas GAAP requires the
inclusion of assets, liabilities, and equity in a descending order of liquidity (Epstein,
2018). However, IFRS requires the compliant firms to classify the current and non-
current assets and liabilities separately on the balance sheet. The GAAP balance sheet
format, however, seems to be globally acceptable (Epstein, 2018).
III. The IFRS prohibits the inclusion of extraordinary items in the income statement while the
GAAP allows its inclusion.
IV. IFRS requires the disclosure of expenses and incomes that are considered to be
exceptional by nature, size, and incidence. The GAAP, on the other hand, does not use
the term “exceptional items.”
V. Finally, under U.S. GAAP, when making contributions, the entity should place the
related tax under the net benefit cost. Under IFRS, on the other hand, the taxes are
included as part of the return-on-asset.