The next step is to quantify the impact on the financial statements Sometimes

The next step is to quantify the impact on the

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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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TARGET ACCOUNTING PORTFOLIO 10 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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TARGET ACCOUNTING PORTFOLIO 11 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
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