Gaap vs. Ifrs

GAAP and IFRS are two systems of reporting accounting amounts. Their goal is to harmonize accounting standards.

GAAP is the acronym of Generally Accepted Accounting Principles. According to these principles, revenue represents actual or expected cash inflows that have occurred or will result from the entity's ongoing operations.

GAAP standards allow to recognize revenue from sales of good when delivery has occurred or ownership has been transferred. In other words, revenues are recognized when there is a clear evidence of a fix and determinable fee arrangement and collectability is reasonably assured.

GAAP determines the way of reporting the amount of control one entity has in another.According to this standard, control is focused on who control financial interests of the company by analyzing voting rights.

IFRS is the acronym of International Financial Reporting Standards. Under IFRS revenue is defined as "the gross inflows of economic benefits during the period arising in the course of the ordinary activities of an entity when those inflows result in an increase in equity other than increases relating to contributions from equity participants."

IFRS standards allow to recognize revenues when the significant risks and rewards of ownership have been transferred to the buyer which means that the seller does not retain managerial involvement or control over goods sold. According this standard, the amount of revenue and related costs can be reliably measured.

IFRS defines the control of one entity over the other unit, by focusing on the ability for a company to govern the financial and operating policies of another entity to obtain benefits.

So, in summary:

Both GAAP and IFRS require revenue to be realizable and earned before it is recognized, but they differ as to when these criteria are met. Both standards differ also in their definition of control.