Piecemeal Opinion

and finance Allah shmoop What is Fr s versus Gap

The United Nations versus well the U S Congress Interpol

versus the FBI Paris France versus while Paris Las Vegas

Or how about the International House of Pancakes versus the

Waffle House We're talking international versus domestic things that happen

in exotic foreign local's versus things that happen well you

know close to home Which brings us to my F

rst versus Gap Well FR s stands for international financial

reporting standard and it provides an international standard for accountants

to use when they're preparing their company's books It was

developed by the London based International Accounting Standards Board and

has been adopted by about 120 countries No one's told

it yet that it's been adopted though So you know

Mum's the word Our other acronym for the day Yes

Gap which you probably already know stands for generally accepted

accounting principles It represents a set of detailed accounting guidelines

The rules for Gap are laid out by the Financial

Accounting Standards Board a private nonprofit organization headquartered in the

U S Well even though gaffe was developed in the

US a lot of international companies use the guidelines in

their accounting prep If a company wants to do business

in the US well it needs its financial figures to

fit into gap standards And if it wants to draw

investors from the US well there's a big benefit to

complying with Gap Iaff RS and Gap are generally compatible

aside from the occasional tiff and the groups responsible for

the separate guidelines are constantly making tweaks to bring the

two into closer alignment Will as a result of comedy

doesn't really have to choose between the two However there

are some key differences It's a classic Venn diagram situation

A company can make decision so that it fits both

the two standards making everyone happy ish But there are

certain accounting choices that only fit into one or the

other For example I have far s allows fewer types

of inventory accounting Under Gap accounting a company can choose

between three methods of inventory accounting They can use weighted

average method right It represents the most vanilla Wei Tau

figure out the value of the finished product of the

company you know that it has sitting around its warehouse

or the company can use that fife over life Oh

business Fife Oh First in first out Well under this

system a company assumes that the oldest items it holds

in inventory are the 1st 1 sent out to clients

Then there's life O which is last in first out

and hear the most recently produced inventory gets shipped out

first Presumably the older stuff just sits around there gathering

dust and you'd use life Oh if you were heavily

involved in things that had volatile pricing like oil is

one of the key ingredients because the last gallon of

oil that went into the product whatever it is that

you're shipping presumably best reflects the most recent market value

or market pricing of that product Well under Gap accounting

a company looking to value its inventory can go with

weighted average life or Fife Oh however fr s on

ly allows two of these life foe is prohibited under

its guidelines So if company wants to be both Gap

and FR s compliant it would have to drop its

swing in life over lifestyle and switch to Fife Oh

so yeah that's just one example of differences between two

standards There are many little points of contention like that

a company can fit It's accounting practices into both But

doing so means sticking to a relatively narrow set of

rules like Well you can order the same stuff at

IHOP and Waffle House but you have to limit yourself

to a pretty limited diet of waffles and hash browns 00:03:26.245 --> [endTime] Mmm yummy