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Difference Between GAAP and AASB


In the new era of technology, the world has become a global village. Even the organizations and businesses have expanded their operations in different countries of the world. It is a fact that technology has brought diversification and innovation in the industrial and business sector, but business processes have also become complex.

As we all know that accounting and finance is the backbone of every business, and financial and accounts management is very important for its success. Therefore, one issue that businesses and multinational organizations used to face was to prepare the financial statements of different regions that are comparable, transparent, relevant, and reliable so that complex accounting operations are managed effectively. In order to overcome this obstacle, accounting bodies were set up in different countries to effectively manage the accounting operations and financial statements.

Mostly, different countries have their own accounting bodies, where accounting standards are designed according to the specific requirements and laws of that country. In the United States, also known as GAAP, are used for this purpose. GAAP is a set of accounting standards that provide guidelines and define procedures set by the accounting professional organizations, and are used to prepare the financial statements of a company. Whereas, in Australia, there is the Australian Government company, known as the Australian Accounting Standards Board (AASB) that is responsible to develop, issue and maintain accounting standards according to the Australian law. Although, the purpose of GAAP and AASB is to bring effectiveness in the accounting operations so that reliable and relevant financial statements are made available to the stakeholders, yet, there are certain differences between them. Some differences are discussed below.

Comparative information


Comparative financial statements are prepared in GAAP, but there are certain circumstances where only a single period financial statement is prepared. It is obligatory for public companies to follow the rules defined by the SEC, according to which balance sheet of two most recent years should be prepared and all other financial statements should be based on the 3 year period that ends on the balance sheet date.


According to AASB 101, an entity should present comparative information for all the amounts that are reported in the current year financial statements except when the standards permit otherwise.

Layout of financial reports


There are no specific requirements in the GAAP to follow a defined layout of financial statements, but public companies are required to follow the requirements of Regulation S-X.


Although, AASB doesn’t follow a specific layout, it has defined a list of minimum line items that should be included in the financial statements and they are less dictatorial as compared to Regulation S-X.

Disclosure of Financial Performance Measure


Under the GAAP, companies are not required to address the presentation and disclosure of financial performance measures. However, there are certain regulations of the SEC, which require the presentation of some headings. Public companies, on the other hand, disallow the presentation of non-GAAP measures in financial reports.


AASB allows the presentation of financial performance measure under the statement of comprehensive income when that information is related to the understanding of financial performance of the company.

Consolidation model


The US GAAP focuses on the controlling financial interest where all entities as VIEs. If an entity is not VIE, its controlling power is assessed via voting rights.


On the other hand, AASB focuses on the power to control. Control is believed to exist if the investor has power over the investee and when he has the ability to use its power over investee so that it can affect the investors’ return.

Costing Method


Under the Generally Accepted Accounting Principles, LIFO (last in first out) method is acceptable. However, there is no clear requirement to use a consistent formula for the inventories that are similar in nature.


LIFO is not an acceptable costing method in AASB. Cost of inventories is determined by using the retail method for the retail industry, or standard cost method.

Investment Property


The GAAP account for the Investment property as held for sale or held for use as it is not separately addressed.


Investment property is separately accounted for according to AASB 140 and is recognized as an asset if there is a probability that future economic benefits will flow to the entity and cost of the property can be reliably measured.



No revaluation is allowed under the Generally Accepted Accounting Principles.


According to AASB 1041, revaluation of intangible assets is allowed. However, the standard does not apply to Goodwill.

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