Hierarchy Of GAAP vs. IFRS The Case Of Bankruptcy Accounting

Abstract

With increased movement toward convergence of major accounting principles between U.S. GAAP and IFRS, the issue of which authoritative source should be referenced becomes increasingly important. An important question is: what is the hierarchy of authority for pronouncements and documents under U.S. GAAP and IFRS? FASB Accounting Standards Codification is the single official source ofauthoritative U.S. GAAP. The hierarchy under international standards is less clear. The IASB promulgated a hierarchy in IAS 8, but interpretation concerning many issues is required. There are several issues not addressed at all by IFRS and one of these is bankruptcy accounting. ASC 852 is the guidance for bankruptcy accounting under U.S. GAAP. This study will investigate whether companies in countries which use IFRS are influenced by the guidance of ASC 852 when confronted with bankruptcy. A review of the financial statements of bankrupt companies in countries using or converting to IFRS was conducted into the reporting of reorganization-type bankruptcies.