US GAAP vs IFRS: Key Differences for US Companies

Both frameworks cover the same ground and agree on most outcomes. The table lists the places where a US company's numbers move when the framework changes. Each row points to the page that goes deeper.

People say so, and it's half true. The SEC staff's July 2003 study under Section 108(d) of the Sarbanes-Oxley Act looked at the question for the US system. It concluded that objectives-oriented standard setting is desirable, and observed that rules-based standards can provide a roadmap to avoidance of the accounting objectives inherent in the standards.

Neither framework has stayed pure. IFRS has detailed rules, such as the six development cost criteria in IAS 38. US GAAP asks for judgment in areas such as the reporting unit definition for goodwill. The better question for a controller is where the two produce different numbers, which the table above answers.

The big convergence attempt is mostly behind us. FASB and the IASB wrote the revenue standards as a joint project, and Topic 606 and IFRS 15 share a core. Leases, credit losses and financial instruments were converged less, and the framework gap there remains. Presentation is now drifting apart again, since IFRS 18 adds subtotals that US GAAP does not require.

Close. IFRS 15 applies five steps: identify the contract, identify the performance obligations, determine the price, allocate it, and recognize revenue as control transfers. ASC 606 applies the same five. For most contracts the answer is the same under both.

FASB's own ASU 2016-12 lists where differences remain. Two matter for a US subsidiary:

• Collectibility. Both ask whether it is probable that the entity will collect the consideration, but ASC 606 defines probable as "likely to occur" and IFRS as "more likely than not". The same customer can pass the IFRS test and fail the US one.
• Sales taxes. ASC 606 allows a policy election to exclude all sales taxes from the transaction price. IFRS 15 has no such election.

The same appendix lists three more:

• Noncash consideration. US GAAP measures it at contract inception; IFRS 15 does not prescribe the measurement date.
• Contract cost impairments. Topic 340 doesn't allow an impairment of capitalized costs to obtain or fulfill a contract to be reversed, while IFRS 15 requires reversal. Sales commissions under ASC 340-40 are the usual example.
• Nonpublic entities. Topic 606 gives nonpublic entities relief on disclosure, transition and effective date, and IFRS 15 has none.

The recurring work, including deferred revenue schedules, is on the revenue recognition page and the SaaS revenue guide.

IFRS 16 introduces a single lessee accounting model and requires a lessee to recognize assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. The lessee recognizes a right-of-use asset and a lease liability, then depreciation on the asset and interest on the liability. Expense is higher early in the lease and lower later.

ASC 842 also puts nearly all leases on the balance sheet, but keeps two classes for the lessee. A finance lease follows the IFRS 16 pattern. An operating lease records a single straight-line lease cost in the income statement. The balance sheet looks similar; the income statement and EBITDA do not. A company that converts from GAAP to IFRS typically sees EBITDA rise because operating lease cost moves out of operating expense and into depreciation and interest.

Lessor accounting differs far less between the two. The mechanics, discount rates and disclosure schedules are on the lease accounting page, and the monthly bridge for a subsidiary is in the IFRS reporting pack.

No. IAS 2 assigns cost by specific identification for items that are not interchangeable, and by the first-in, first-out or weighted average formula for items that are. The IASB's basis for conclusions on IAS 2 explains the exclusion of the LIFO cost formula in paragraphs BC9 to BC21. US GAAP permits LIFO, and ASU 2015-11 left its subsequent measurement unchanged for LIFO and the retail method while aligning other inventory with IAS 2's lower of cost and net realizable value.

A second difference: IAS 2 requires a write-down below cost to be reversed, up to the original write-down, when net realizable value recovers (paragraph 33), so a price recovery can lift IFRS profit. Test the US treatment of your own policy before you assume the two match.

LIFO has a tax angle that makes the difference more than a bookkeeping one. A company adopts LIFO for tax by filing Form 970 with its return for the first year it uses the method, and section 472(c) of the Internal Revenue Code conditions the election on how inventory is valued in reports to owners and creditors. A business moving to IFRS reporting has to look at that interaction with its tax adviser before it changes its financial statement method. The inventory accounting page covers day-to-day cost flow.

IAS 36 is a one-step test. If the carrying amount exceeds the recoverable amount, which is the higher of fair value less costs of disposal and value in use, the asset is impaired. US GAAP for held-and-used long-lived assets is two-step: first test recoverability against undiscounted cash flows, and only if that fails, measure the loss against fair value (FASB Statement 144, now ASC 360-10).

Reversal splits the frameworks. IAS 36 reverses an impairment loss on assets other than goodwill when the circumstances improve, up to the carrying amount the asset would have had without the loss. FASB Statement 144 retained the prohibition on restoring a previously recognized impairment loss, on the reasoning that the impaired asset has a new cost basis. Neither framework reverses a goodwill loss.

Goodwill itself is tested at the reporting unit in GAAP and the cash-generating unit in IFRS, where the unit cannot be larger than an operating segment. A private US company can also elect to amortize goodwill over 10 years or less under ASC 350-20-35-63, an option IFRS does not have. The mechanics, with a triggering event checklist, are on the impairment testing page.

IAS 38 expenses research and capitalizes development expenditure only if the entity can demonstrate all six items in paragraph 57: technical feasibility, intention to complete, ability to use or sell, probable future economic benefits, adequate resources and reliable measurement. Internally generated brands, customer lists and similar items are never recognized.

US GAAP's starting point is the opposite. FASB Statement 2, now ASC 730, requires research and development costs to be charged to expense when incurred. The exceptions are software: costs of internal-use software follow ASC 350-40, which ASU 2025-06 modernizes for annual periods beginning after December 15, 2027, and costs of software to be sold follow ASC 985-20. A SaaS company can therefore capitalize engineering cost under both frameworks, but starting on different dates for the same project.

A US subsidiary reporting to an IFRS parent can end up with a larger intangible asset under IFRS. Business combinations add a second difference: IFRS 3 recognizes customer relationships separately, while a private US company can elect under ASU 2014-18 to subsume some into goodwill. The capitalized software page and the purchase accounting page work through both.

CECL, the current expected credit loss model in ASC 326, has an entity present financial assets at amortized cost at the net amount expected to be collected, with the allowance based on past events, current conditions and reasonable and supportable forecasts. A day-one allowance covers losses over the life of the asset.

IFRS 9 uses a staged model. If credit risk hasn't increased significantly since initial recognition, the loss allowance equals 12-month expected credit losses (paragraph 5.5.5); when it has, the allowance moves to lifetime losses (paragraph 5.5.3). For trade receivables and contract assets without a significant financing component, IFRS 9 requires a lifetime allowance from the start (paragraph 5.5.15); with one, the simplified approach is a policy choice. IFRS 9 also classifies financial assets by business model and cash flow characteristics, a framework US GAAP does not share.

For trade receivables, ASU 2025-05 gives all entities a practical expedient on forecasting from annual periods beginning after December 15, 2025. The full comparison is in the CECL vs IFRS 9 guide, and the receivables application is on the CECL trade receivables page.

Business combinations are close, with specific differences. IFRS 3 lets the acquirer measure a noncontrolling interest at fair value or at the proportionate share of the acquiree's identifiable net assets, deal by deal. US GAAP requires fair value, so full goodwill is always recognized. Provisional amounts are adjusted retrospectively under IFRS 3, paragraph 45, while US GAAP, since ASU 2015-16, records the adjustment in the period it is determined. Private US companies also have the ASU 2014-18 and goodwill amortization alternatives.

Share-based payment is also close. ASU 2016-09 lets a US GAAP entity account for forfeitures as they occur or estimate them; IFRS 2 requires an estimate of the instruments expected to vest, revised as information arrives. IFRS 2 has explicit rules for awards among group entities (paragraphs 43A to 43D) that determine whether a subsidiary treats a parent's award as equity- or cash-settled.

These are the two areas where subsidiaries most often hold a recurring bridge line. See purchase accounting and stock compensation for the detail.

IFRS 18 replaces IAS 1 for annual periods beginning on or after 1 January 2027, with earlier application permitted. It classifies income and expenses into operating, investing, financing, income taxes and discontinued operations, and requires two subtotals, operating profit and profit before financing and income taxes. US GAAP requires neither. For a private company ASC 220 prescribes no operating subtotal, while SEC registrants follow the Regulation S-X Rule 5-03 captions, and ASU 2024-03 on expense disaggregation applies to public business entities only.

The cash flow statement moves too: the indirect method starts from operating profit under IFRS 18, and interest and dividend classification choices narrow. US GAAP classifies interest paid, interest received and dividends received as operating cash flows (FASB Statement 95, codified in ASC 230).

Because comparatives are restated, a calendar-year IFRS reporter needs its 2026 income statement in the new format. A US subsidiary on a parent's pack will feel it through the pack template. See the IFRS 18 adoption page for the project plan.

It depends on what the company is.

SEC domestic registrants. Regulation S-X, 17 CFR 210.4-01(a)(1), presumes financial statements not prepared under US GAAP to be misleading unless the Commission provides otherwise. In July 2012 the SEC staff's final report on its IFRS work plan reported that designating the standards of the IASB as authoritative was not supported by the vast majority of participants in the US capital markets, and the staff turned to other methods, such as an endorsement mechanism or continued convergence.

Foreign private issuers. Under Rule 210.4-01(a)(2) and the SEC's December 2007 Release 33-8879, a foreign private issuer may file IFRS as issued by the IASB without reconciliation to US GAAP.

Private US companies. No SEC rule applies. The choice follows lenders, investors, the parent and the auditor. The IFRS Foundation says companies in more than 140 jurisdictions are required to use IFRS Accounting Standards, so a US subsidiary of a foreign parent often reports under IFRS in the parent's pack while keeping US GAAP books.

Keep one set of books and bridge. The ledger stays on US GAAP, because that is what the bank, state filings and local audit need. A monthly or quarterly bridge then moves each balance to its IFRS figure, one adjustment per line, with the workings behind it. The IFRS reporting packs page describes the routine.

A one-off change of framework is a different job. The IFRS conversion service restates the books once and builds an opening balance sheet, and the US GAAP conversion service goes the other way. The GAAP vs IFRS checklist is a quick screen for which areas to test first.

Start with the rows that produce recurring differences: leases, development costs, inventory method, impairment and goodwill. Test each against your real contracts and balances before assuming a difference exists. A line with no adjustment is documented as tested and unchanged, so the next reviewer doesn't have to rediscover it.