GAAP vs. IFRS: Recordkeeping

Brian Krogol
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Alright now let's see the difference between gap and differs when we're doing the record keeping in our books. Alright, let's see some of the main differences and similarities there. So remember when we talk about Gap that generally accepted accounting principles, These are the rules in the US. This is what we're focused on for the most part in this course. And they're set by the financial Accounting standards board. Faz be creates gap where internationally Gab gap. Okay. Faz be creates gap and under internationally we've got the International Accounting Standards Board and they're creating offers the international financial reporting standards. Okay, so mostly in this course we're focused on Gap but it's nice to talk about the differences as well. So let's check it out now. We're focused on the record keeping process like we saw in this chapter, right? So this one's not too crazy because for the most part they're the same. The basic techniques for recording are the same. We're gonna have our journal entry system with our debits and credits and that's gonna be pretty much the same for for how we handle our record keeping. And again, just like we we've seen when we see financial statements or we've done a trial balance, they only use the dollar sign or maybe the euro sign whatever it might be. Their only gonna show it um on the trial balance and the financial statements. They're not gonna do it when you do journal entries, you're doing your debits and credits. You don't usually use your dollar signs because you're gonna be using only one unit of measure, right? That's the unit of measure principle that we go through is that we're gonna have a unit such as the dollar or the euro that we use consistently throughout our books. Okay. And finally the trial balances follow the same format, right? When we created our trial trial balance, we list all our assets liabilities and equity and we show their balances to make sure that everything is listed properly. We do our adjustments just the same to get to our adjusted trial balance and create our financial statements. Okay. Now one of the main differences we've talked about this before is that it offers uses the fair value principle more often. Okay, They're much more lenient about using fair value principle. Remember fair value principle. It allows you to change the value of your assets based on their current market value, compare that to the to the historical cost principle. So the gap for the most part focuses on the historical cost principle and the historical cost principle basically says that whatever we purchased it, the cost that we paid well that's the value that we're going to keep on our balance sheet. We don't update it for changes in the market value changes in the value of the asset over time we leave it at that historical cost and that's because it values consistency. We want to keep that consistent. We don't want these random fluctuations from the change in value where refers is a little more lenient and lets you use the fair value principle and there's pros and cons for each of them where gap the historical cost principle, it has that consistency. Well, fair value principle. It has more up to date information because it has those market values as they are closer to the date of the report. Right? So Gap still uses the fair value principle, but generally it only uses it for short term investments. It'll update the value of those short term investments because well for the most part, those short term investments, there's easily available information about their value. You know, if you have some shares of stock, well, you can just look up what they cost on the internet and that's what you should report them at. It's pretty simple and there's pretty good information however, differs allows it for all assets, all long term assets. You can do it for your property, plant and equipment, such as your land, your fixed assets. You can update those using the fair value principle. You just have to be consistent in using it. If you're gonna use the fair value principle, you have to keep using it. You can just use it when it benefits you, but not when it hurts you. All right, you just have to be consistent. Right? That's one of the main differences between gap and offers is the use of this fair value principle. Cool. Alright, let's go ahead and move on to the next video