Comparison of Revenue Recognition in IFRS vs GAAP

Hard Financial Reporting Standards Comparison Of Ifrs And Gaap

As a financial analyst, you are tasked with recommending a reporting framework for a multinational corporation. The company has operations in various countries and primarily needs to consolidate its financial statements. It has to choose between International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP). You recall that one area of significant difference between the two frameworks is in the treatment of certain revenue transactions.

Which of the following statements correctly identifies a key difference between IFRS and GAAP regarding revenue recognition?

Under IFRS, revenue recognition is based on the completion of the earnings process, while GAAP uses a risk-and-reward approach.

GAAP allows for the recognition of revenue at the point of sale, whereas IFRS permits recognition based on the transfer of control.

Both IFRS and GAAP require that revenue be recognized only when cash is received.

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