Full Answer Section

• Balance Sheet Presentation (Statement of Financial Position):
  • US GAAP (Pfizer): Often presents assets and liabilities in order of liquidity, with current assets listed first, followed by non-current assets. Liabilities follow the same pattern (current then non-current). This emphasizes the short-term financial health.
  • IFRS (AstraZeneca): Typically presents assets and liabilities in order of non-liquidity, meaning non-current assets are often listed first, followed by current assets. Similarly, non-current liabilities usually precede current liabilities. This approach emphasizes the long-term capital structure and operational aspects.
  • Contrast: The primary difference lies in the ordering principle—liquidity for US GAAP versus non-liquidity for IFRS. This means a quick glance at the top of an IFRS balance sheet might show property, plant, and equipment, while a US GAAP balance sheet would start with cash and receivables.
• Income Statement Presentation (Statement of Comprehensive Income):
  • US GAAP (Pfizer): Allows for more flexibility in the income statement format. Companies can choose to present expenses by function (e.g., cost of goods sold, selling expenses, administrative expenses), which is common for manufacturing firms, or by nature (e.g., salaries, depreciation, raw materials).
  • IFRS (AstraZeneca): While also offering flexibility, IFRS tends to encourage presentation of expenses by nature more explicitly or requires disclosure of expenses by nature if presented by function. The statement of comprehensive income under IFRS often explicitly presents components of “Other Comprehensive Income” (OCI) as part of the primary statement, which might be presented separately or after net income under US GAAP.
  • Contrast: The key difference is the common approach to expense classification and the integrated nature of OCI in the primary IFRS statement, providing a more immediate view of all gains and losses affecting equity beyond net income.
• Inventory Valuation:
  • US GAAP (Pfizer): Permits the use of the Last-In, First-Out (LIFO) method for inventory valuation, which assumes that the last goods purchased are the first ones sold. This can result in a lower reported profit and tax liability during periods of rising costs.