The next step is to quantify the impact on the

review the most common areas that might result in any significant changes. The next step is to
quantify the impact on the financial statements. Sometimes these changes can be somewhat easy
and other times they can be long and timely. The third step is to identify “other” effects of the
conversion to IFRS. Then Target will need to develop a timeline and strategy to convert to IFRS.
Target will need to determine the timing of the changes, who is involved in the changes, and

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what resources are needed to make the changes happen. Next Target will need to develop a new
system to collect information or modify a system that they already have. Once they have
completed the previous 5 steps, Target can perform the conversion under IFRS 1. IFRS 1 is the
“First-time Adoption of International Financial Reporting Standards” (Palmar, 2019). According
to Palmer, IFRS 1 requires a company that is adopting IFRS for the first time to prepare a
complete set of financial statements covering its first IFRS reporting period and the previous
year (2019). The last step is for Target to make sure they are compliant with all of the
requirements of IFRS.
Financial Statements: GAAP vs. IFRS
The main financial statements required by both the IFRS and GAAP are pretty similar.
However, the ways in which the numbers are calculated are sometimes different. GAAP is
considered a rules-based approach to accounting, but IFRS is considered a principals based
approach to accounting. IFRS guidelines provide much less overall detail than GAAP. This
leaves more room for interpretation which may frequently require long disclosures on financial
statements.
One of the biggest differences between GAAP and IFRS involves their method of
inventory. Both GAAP and IFRS allow for the first-in, first-out method (FIFO). GAAP also
allows the use of the last-in-first-out (LIFO) method of inventory. IFRS does not allow the use of
the LIFO inventory method. In addition to having different methods for tracking inventory, IFRS
and GAAP also differ when it comes to inventory reversals. IFRS allows for inventory reversals
under certain conditions, while GAAP does not allow them at all. Another big difference,
according to Ross, is that treatment of comprehensive income (2019). GAAP requires financial
statements to include a statement of comprehensive income. However, IFRS does not consider

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comprehensive income to be a major component of performance and therefore does not require it
(Ross, 2019). The income statement is another key financial statement in which the
requirements for IFRS and GAAP are similar. However, there is one key difference on the
income statement. Under IFRS, extraordinary or unusual items are included (and not separated)
in the income statement. Under GAAP, however, they are separated and shown below the net
income portion of the income statement. The balance sheets for GAAP and IFRS has some
differences in reporting style as well. GAAP has a specific format which requires assets,
liabilities, and equity to be presented in decreasing order of liquidity. IFRS, on the other hand,
doesn’t require any specific format; except for distinguishing current and noncurrent assets. It is