Lesson 6 of 6 · 14 min
Reporting systems, changing standards and other information sources
IFRS and US GAAP still differ in ways that affect comparisons, standards keep changing, and the best analysts combine company filings with issuer, third-party and their own primary research.
In short
- US GAAP (FASB) is more rules-based; IFRS (IASB) is more principles-based. New standards are now mostly converged, but differences remain.
- Examples: interest paid is operating under US GAAP but operating or financing under IFRS; LIFO only under US GAAP; development costs expensed under US GAAP but capitalised under IFRS if conditions are met; inventory write-down reversals prohibited under US GAAP, allowed under IFRS.
- No reconciliation between the two is required, and often the data for full adjustment is missing, so analysts must interpret cross-standard comparisons with caution.
- Monitor developments from a user's perspective: new products and transactions, actions of standard setters and user groups such as CFA Institute, and companies' critical accounting policies and estimates.
- Other sources: issuer (earnings calls, investor days, press releases, management contacts, websites and visits), public third-party, proprietary third-party and proprietary primary research.
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