Full Answer Section

• Balance Sheet Presentation:
  • US GAAP: Typically presents assets and liabilities in order of liquidity, meaning current assets (e.g., cash, accounts receivable) are listed before non-current assets (e.g., property, plant, and equipment). Similarly, current liabilities precede non-current liabilities.
  • IFRS: Often presents assets and liabilities in order of non-liquidity, placing non-current assets and liabilities before current ones. This emphasizes the long-term capital structure. However, it also allows a liquidity-based presentation if it provides more relevant information.
  • Contrast: The primary ordering convention on the balance sheet differs, impacting the initial visual assessment of a company’s financial position.
• Inventory Valuation Methods:
  • US GAAP: Permits the use of Last-In, First-Out (LIFO), First-In, First-Out (FIFO), and Weighted-Average methods for inventory costing. LIFO assumes the last goods purchased are the first ones sold, which can significantly affect reported cost of goods sold and net income, particularly during periods of inflation or deflation.
  • IFRS: Prohibits the use of the LIFO method. Only FIFO and Weighted-Average methods are allowed. This is a significant difference that can lead to materially different reported inventory values and profitability compared to a company using LIFO under US GAAP.