How close are the two frameworks?
Closer than they were twenty years ago. In 2002 the IASB and the FASB agreed in the Norwalk Agreement to work towards compatible standards. The results include almost identical revenue standards (IFRS 15 and ASC 606, issued in 2014) and very similar fair value standards (IFRS 13 and ASC 820). Other joint projects, such as leases and credit losses, ended with each board taking its own view, which is why some of the largest differences today are in those areas.
Which differences matter most?
The differences in detail
| Area | IFRS | US GAAP |
|---|---|---|
| Inventory cost formula | FIFO or weighted average; LIFO prohibited | FIFO, weighted average or LIFO |
| Inventory write-downs | Reversed if value recovers | Never reversed |
| Property, plant and equipment | Cost or revaluation model | Cost model only |
| Components of an asset | Significant parts depreciated separately | Allowed but not required |
| Impairment of assets other than goodwill | One-step test; losses reversed if value recovers | Two-step recoverability test for assets held and used; no reversal |
| Development costs | Capitalised when specified criteria are met | Expensed, except some software costs |
| Leases, lessee | One model: all leases are financed purchases | Operating and finance leases, with different expense patterns |
| Credit losses | 12-month or lifetime expected losses, depending on credit risk | Lifetime expected losses from day one (CECL) |
| Provisions | Recognised when an outflow is more likely than not | Recognised when a loss is probable, a higher threshold |
| Range of possible outcomes | Midpoint when all points are equally likely | Low end of the range when no amount is a better estimate |
| Interest paid, cash flow statement | Financing, for most companies under IFRS 18 | Operating |
| Consolidation | A single control model | Voting interest model and variable interest entity model |
For how IFRS classifies financial assets, see IFRS 9 classification and measurement; for credit losses, IFRS 9 explained.
What does a difference do to the numbers? An example
A retailer buys a range of winter coats for CU 100,000. At the end of 2026 the coats can only be sold for CU 70,000, so it writes them down by CU 30,000 under both frameworks. In 2027 a cold winter pushes the expected selling price back up to CU 95,000 while the coats are still in stock.
| CU | IFRS (IAS 2) | US GAAP (ASC 330) |
|---|---|---|
| Carrying amount after the 2026 write-down | 70,000 | 70,000 |
| Reversal recognised in 2027 | 25,000 | 0 |
| Carrying amount at the end of 2027 | 95,000 | 70,000 |
| Effect on 2027 profit before tax | +25,000 | None until the coats are sold |
Under IFRS the reversal is capped at the original write-down, so the coats can never be carried above their CU 100,000 cost. Under US GAAP the reduced amount becomes the new cost, and the higher value shows up only as a larger margin when the coats are sold.
Why do the differences exist?
Partly history and partly philosophy. US GAAP grew up alongside US tax and securities law: LIFO survives partly because US tax rules let a company use LIFO for tax only if it also uses it in its financial statements. IFRS was written for many countries at once, so it leans on principles and on measuring assets at current values where that is reliable. Neither framework is simply "stricter"; each is stricter in different places.
Are the financial statements presented differently?
Yes, and the gap is changing. IFRS 18 requires defined subtotals such as operating profit from 2027 (see IFRS 18 vs US GAAP). US GAAP has no equivalent requirement, but public companies will soon disaggregate certain expenses in the notes under ASU 2024-03. IFRS 18 also moves interest paid to financing cash flows for most companies, while US GAAP keeps it in operating; see the IFRS 18 cash flow changes and IFRS 18 explained.
Where to go next
For background on each framework, read what is IFRS and what is US GAAP. To see which framework applies where, read who uses IFRS and who uses US GAAP. Detailed comparisons for each topic are being added to the IFRS vs US GAAP section.
Need help applying the standards?
Our Chartered Accountants help finance teams and students apply IFRS and US GAAP to real transactions.
Questions people ask
What is the main difference between IFRS and US GAAP?
IFRS is more principles-based and used in over 140 jurisdictions; US GAAP is more detailed and used by US companies. In the numbers, the biggest differences are in inventory, property, impairment, development costs, leases and credit losses.
Is LIFO allowed under IFRS?
No. IAS 2 permits FIFO and weighted average cost only. US GAAP permits LIFO.
Can impairment losses be reversed under US GAAP?
Not for assets held and used, and never for goodwill. IFRS allows reversal for assets other than goodwill when value recovers.
Are IFRS 15 and ASC 606 the same?
They are substantially converged, with a small number of differences in areas such as licences and some practical expedients.
Sources
Every fee, date and rule on this page was taken from these official and primary sources.
- IFRS Foundation: Who uses IFRS Accounting Standards?
- Financial Accounting Standards Board: Accounting Standards Codification
Rules and fees change. If you are reading this long after October 4, 2026, confirm the figures with the source before you rely on them.
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This guide is general information. It is not tax or legal advice for your situation.