The Accounting Policies Of The United States - 1284 Words

2. Significant Accounting Policies A) Basis of accounting Both the U.S. GAAP and IFRS both have similar requirements when it comes to the basis of accounting. This means that they both place a heavy emphasis on fair values, essentially implying that Chris does not need to address the basis of his company’s policies. In addition, both standards require companies to inform the public regarding any uncertainties in the accounting records. However, Chris was already given sufficient information for the conversion in the Basis of Accounting section, as the accounting policies were applied by each consolidated company consistently to all relevant periods. Therefore, Chris is able to transition the company’s basis of accounting with no other†¦show more content†¦Other than bank overdrafts, however; Chris should have enough information to convert cash and cash equivalents to IFRS. C) Accounts Receivable and Other Receivables Chris’ first objective in analyzing his firm’s receivables is to understand how they are recorded. The International Standards require receivables to be measured at fair value with an amortization cost. However, Chris was not given this information in his financial records. Still, what he was given is that Ruckman analyzes accounts receivable based on transaction history and creditworthiness of the customer, suggesting that the firm’s receivables are done per case, and thus cannot be lumped together. With that, Chris can move forward knowing that accounts receivable are in accordance with IFRS. D) Inventories Inventory is known as the single most important item on a balance sheet. Every business contains inventory, and Ruckman, Inc. is no exception. With the concept of inventory come the different types of cost methods, including: last in first out (LIFO), first in first out (FIFO), and the weighted average cost. With such an important item, it is understandable that both standards allow and prohibit different types of costing methods due to certain reasons. The major difference between the two is the allowance of the LIFO method, which is only allowed by GAAP. This method allows companies to highlight