There are still many differences in accounting treatment between International financial reporting standards (IFRS) and the U.S Generally Accepted Accounting Principles (GAAP). While IFRS are widely used by many countries around the world, FASB of the U.S still working on the intention of either adopt the IFRS or converge towards it. Until the convergence actually happens, there are still many critics about the accounting treatment at the same subject under U.S GAAP and IFRS. Example of this is the argument about whether U.S GAAP should allow upward revaluation of non-financial asset of IFRS which was described in details on the article “Upward Revaluation of Non-financial” in the CPA journal November 2012 by David Sardone and Tom Tyson.
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The revalued amount is equal to the fair value at the date of revaluation, minus any subsequent accumulated depreciation and subsequent impairment losses”(Sardone and Tyson, 27). The revaluation model allows companies bring the non-financing assets close to their fair value which is also the standard measurement for available for sale investment under U.S GAAP. Furthermore, if the revaluation reveals that “if an asset’s carrying value is increased as a result of revaluation, the increase is recorded as a component of other comprehensive income, and is carried in equity as an item of other comprehensive income under the heading ‘Revaluation surplus.’ If an asset’s carrying amount is decreased as a result of revaluation, the decrease is to be recognized in profit or loss” (Friedrich, 4). In addition, very similar to the U.S GAAP treatment for available for sale investments, IFRS allows companies to reverse the recognized impairment losses from prior periods for nonfinancial assets.
Regarding the treatment for property, plant, and equipment, in contrast with the IFRS upward revaluation of these nonfinancial assets, the U.S GAAP does not allow companies to revalue their non-financing assets and prohibit the reversal of any impairment amounts that are previously estimated. So, under GAAP standard, companies “may not