IFRS vs. GAAP

(Ernst and Young n .d . Prepayment is not subject to deprecation , thus capitalization even after payment may still be an advantage under US GAAP in terms making cost to appear lower and income to appear higher

Macy 's (2008 ) financial statements revealed that its advertising and promotional costs amounted to 1 ,194 in 2007 and 1 ,171 for 2006 and 1 ,076 for 2005

In addition , its financial statements revealed that its department store non-direct response advertising and promotional costs are deferred and expensed over the period and the same are

expensed generally one to four months after the cost when sales are expected to arise . In other words , under US GAAP , there is the matching of actual sales and advertising costs but under the IFRS , there would be immediate recognition of the expenses whether sales would be made or not

Which standard would give more accurate financial statement ? The validity of assumptions should settle the issue . It is submitted that the IFRS computation would be more accurate than that US GAAP since the whether the sale would be made or not as result of advertising , the cost has been spent already . Unlike in the case of property and plant equipment which should be depreciated , the effect of said advertising and promotional costs could not be actually directly attributed to the time when sales increased because there are many causes of increased sales . If the reasoning of US GAAP would be followed , it would seem that expenses will not be incurred until there is increase in sale . This is dangerous because the cost that was spent may be indefinitely being deferred without basis on what period it had benefited

3 . Conclusion

It can be concluded that the difference lies in the possibility of capitalizing the advertising costs and promotional costs...