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GAAP vs. IFRS: Adjusting Entries definitions

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  • GAAP
    U.S. accounting framework established by FASB, emphasizing consistency and comparability in financial reporting.
  • IFRS
    International accounting standards set by IASB, focusing on global comparability and often allowing asset revaluation.
  • FASB
    U.S. organization responsible for developing and updating generally accepted accounting principles.
  • IASB
    International body that creates and maintains standards for financial reporting used outside the U.S.
  • Accrual Accounting
    Method requiring revenues and expenses to be recorded when earned or incurred, not when cash is exchanged.
  • Periodicity Assumption
    Concept of dividing a business's ongoing activities into artificial time periods for reporting purposes.
  • Adjusting Entries
    End-of-period journal entries ensuring revenues and expenses are recorded in the correct accounting period.
  • Revenue Recognition
    Guideline dictating when and how income is formally recorded in the financial statements.
  • Fair Value Principle
    IFRS guideline allowing assets to be reported at current market value, impacting asset valuation and depreciation.
  • Depreciation
    Systematic allocation of the cost of a long-term asset over its useful life.
  • Revaluation
    IFRS-permitted process of adjusting the book value of long-term assets to reflect current fair market value.
  • Expense
    Outflow or using up of assets in the normal course of business operations.
  • Loss
    Financial decrease from events outside normal business activities, such as selling investments below cost.
  • Long-term Asset
    Resource expected to provide economic benefit to a business for more than one year, subject to depreciation.
  • Balance Sheet
    Financial statement presenting a company's assets, liabilities, and equity at a specific point in time.