Ifrs Essay

In: Business and Management

Submitted By angjoni
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There is a lot to be done before US GAAP is totally converged with IFRS, and there are still significant differences between the two reporting standards.
The consolidated financial statements of Nokia are prepared in accordance with IFRS, which are set by the IASB. The accounting for investment impairments is different from IFRS to GAAP. US GAAP does not permit the reversal of an impairment charge related to available-for-sale debt and equity investments, whereas IFRS allows reversals due to a subsequent recovery. Nokia reverses any increase in the fair value of investment in a subsequent period, and includes this reversal in the income statement.
Another difference between the two reporting standards is in accounting for inventories. Under IFRS you cannot account for inventories using LIFO, whereas under GAAP you are permitted to use LIFO. Under GAAP inventories are valued at their Lower of Cost or Market, where Market is the replacement cost, limited to a “ceiling” and “floor”, and under IFRS inventories are stated at the Lower of Cost or Net Realizable Value, it does not use a ceiling or floor to determine Market. Under GAAP when inventory is written down using lower of cost or market, the new basis is considered its cost, therefore, inventory may not be written back up to its original cost in a subsequent period. Under IFRS, the write down may be reversed in a subsequent period up to the amount of the previous write down.
Under IFRS a one-step approach is used to review for asset impairment. A fair value test is used to measure the impairment loss; it does not use the first-stage recoverability test used under GAAP – by comparing the asset’s carrying value to its undiscounted expected future cash flows. And IFRS permits asset revaluation, whereas under GAAP it is…...

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