The US GAAP vs IFRS differences that come up most in senior accounting interviews sit in inventory, long-lived assets, impairment, leases, contingencies, cash flow classification, and consolidation. Accountants trained under IFRS already share most of the conceptual framework with US GAAP, so interviewers skip definitions and ask where the two frameworks produce different numbers. This guide explains each difference the way you'd explain it in a technical screening, with the accounting impact attached.
US GAAP permits last-in, first-out inventory costing, and IFRS prohibits it. During rising prices, a company using LIFO under GAAP reports lower income and lower inventory balances than a FIFO equivalent, and it must disclose the LIFO reserve. US tax rules also require companies that use LIFO for tax purposes to use it for financial reporting, which is why the method persists.
The second difference is subsequent recovery. IFRS permits reversing an inventory write-down, up to the original amount, when net realizable value recovers. US GAAP treats the written-down amount as the new cost basis, with no reversal.
IFRS allows the revaluation model for classes of property, plant, and equipment, which lets carrying amounts move to fair value. US GAAP requires the cost model. IFRS also requires component depreciation when parts of an asset have different useful lives, and US GAAP permits it without requiring it.
Development costs create the difference most relevant to technology companies. IFRS capitalizes development costs once criteria such as technical feasibility, intent, and ability to complete, and probable future economic benefits are met. US GAAP expenses research and development as incurred, with specific exceptions for certain software costs: internal-use software under ASC 350-40 and software to be sold under ASC 985-20. A SaaS company can therefore show different capitalized asset balances under the two frameworks for similar development work.
US GAAP tests long-lived assets for impairment in two steps: a recoverability test using undiscounted cash flows, followed by measurement at fair value when the test fails. IFRS uses a single step that compares the carrying amount to the recoverable amount, defined as the higher of fair value less costs of disposal and value in use. IFRS permits reversal of impairment losses on assets other than goodwill, and US GAAP prohibits reversals for assets held and used.
Goodwill testing happens at the reporting unit level under US GAAP and at the cash-generating unit level under IFRS. US private companies also have an option that interviewers like to raise: they can elect to amortize goodwill over up to ten years and test for impairment only when a triggering event occurs. That alternative matters for growth-stage and private equity-backed companies.
Both standards put most leases on the balance sheet, and the lessee models differ. ASC 842 keeps two classifications. Finance leases produce amortization of the right-of-use asset plus interest on the liability, which front-loads expense, while operating leases produce a single straight-line lease cost within operating expenses. IFRS 16 uses one model for lessees, so every lease is treated like a finance lease with depreciation and interest, apart from short-term and low-value exemptions.
The practical consequence appears in earnings measures. Under IFRS 16, lease expense moves out of operating costs into depreciation and interest, which raises EBITDA. Under ASC 842, operating lease cost stays in operating expenses, so EBITDA for the same lease portfolio comes out lower. Interviewers like candidates who can explain that comparability point when a company benchmarks against international peers.
Contingencies reveal a threshold difference. US GAAP requires recognizing a loss when it's probable, a bar commonly read as roughly seventy to eighty percent, while IFRS uses 'probable' to mean more likely than not. When a range of outcomes exists with no best estimate, US GAAP records the low end of the range and IFRS records the midpoint.
Cash flow classification differs for interest and dividends. US GAAP classifies interest paid and received as operating activities and dividends paid as financing. IFRS lets companies choose operating or financing for interest and dividends paid, and operating or investing for interest and dividends received, as long as the choice is applied consistently.
Consolidation under US GAAP uses two models, the voting interest model and the variable interest entity model, while IFRS 10 applies a single control model. Special purpose structures and venture arrangements are where the answers diverge most often.
The best explanations follow a short pattern: state the difference, state the effect on the financial statements, and attach a business example. Reciting a list of differences sounds like exam preparation. Saying that a software company capitalizes development costs under IFRS but expenses most of them under US GAAP, so its asset base and early-year earnings differ, sounds like experience.
Preparation can stay efficient. Choose the five differences most relevant to the industries you're targeting, work through one example for each, and know where the FASB Codification addresses them. Accountants who can move between the two frameworks without hesitation signal that they'll adapt quickly to a US close, which is the quality hiring managers want to confirm.
Joint FASB and IASB projects produced similar standards for revenue and leases, and broader convergence stalled. The SEC accepts IFRS from foreign private issuers but requires US domestic companies to report under US GAAP.
Securities law doesn't require private companies to use US GAAP, though lenders, investors, and auditors typically expect it. The Private Company Council alternatives, such as goodwill amortization, give them some flexibility within GAAP.
Development cost capitalization, revenue recognition judgments, lease classification, and stock-based compensation details come up most often. The first one produces the largest balance sheet differences.
Map your existing work to the equivalent ASC topics, study the differences above with one example each, and practice explaining them aloud. Applied examples from past work carry more weight than memorized lists.
Map your existing work to the equivalent ASC topics, study the differences above with one example each, and practice explaining them aloud. Applied examples from past work carry more weight than memorized lists.