Financial Reporting Standards and Principles

            The International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP) are rules and guidelines established to attempt to standardize accounting and recording practices across the United States and Internationally. While United States has traditionally used GAAP, the ever changing world market makes it necessary for the US to begin to use IFRS in conjunction with or sometimes in place of GAAP. In an effort to standardize fair value measurements for financial instruments, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) implemented a multistep approach to the standards. The International Financial Reporting Standards (IFRS) is working to provide standards on a practice that was once unregulated. The IASB and FASB believe if all companies reported financial instruments at fair value, the statements would be more easily understood and transparent. Disclosure of fair value information in financial notes is one way FASB and IASB are trying to move to fair value measurements. Also, allowing companies to record some financial instruments at fair value in financial statements; this is called a split model. This step is allowed but not required. Loans and receivables could be reported at amortized cost if specific criteria are met. Another important step is to develop a common measurement and reporting structure for the fair value reporting. The goal of developing the common measurement is to curb the misuse of financial instruments and reconcile the differences between the International and American Generally Accepted Accounting Principles (GAAP) fair value accounting. The IFRS is considered to be a principle-based accounting standard while American GAAP is regulatory in nature.
             Component depreciation, for tax purposes, is a method in which parts or sections of property are individually depreciated at different times or rates.