The International Financial Reporting Standards (IFRS) and the US Generally Accepted Accounting Standards (GAAP) are the main accounting standards applied in the United States. The two approaches to accounting are different in their application of accounting standards. Fr instance, IFRS is viewed as a standard based on principles while the GAAP is viewed as a standard that is based on rules (Shamrock 34). In that regard, IFRS encompasses and addresses the economics of transactions in a better manner than US GAAP. Two main differences between the two accounting frameworks include intangibles and inventory costs. Under US GAAP, intangible assets such as research and development and advertising costs are awarded fair values (Shamrock 36). In contrast, IFRS only recognizes them if they are reliable and if they can benefit an organization economically in future. IFRS framework does not allow the inclusion of inventory costs in accounting while US GAAP allows the use of inventory estimates in accounting (Shamrock 38).
An expense is a cost that was used to conduct a business transaction in order to generate revenue and benefit the business in other ways (Stice and Stice 54). In contrast, an asset is a tangible or intangible resource that has positive economic value and that can be used to produce value (Benedicto 12). Current and long-term assets are types of assets that businesses usually have. Current assets refer to assets that a business uses within a one year period or within a balance sheet’s operating cycle and that can be easily converted to cash (Stice and Stice 56). Examples include cash in checking, savings, on hand, accounts receivables, inventory, short-term investments, and prepaid insurance. In contrast, long-term assets refer to assets that businesses use over extended long periods of time such as land, buildings, vehicles, furniture, and equipment (Stice and Stice 57).
Current and long-term liabilities are types of liabilities that are included on a company’s balance sheet for accounting purposes (Benedicto 9). Current liabilities refer to money that a businesses is required to pay to creditors within a year of the balance sheet while long-term liabilities refer to money owed to creditors that is usually paid after the fixed period of the balance sheet expires (Edwards and Hermanson 405). Examples of current liabilities include accounts payable, accrued liabilities, and short term debt. Examples of long-term liabilities include long-term rent, debentures, notes and bonds payable, tax and pension obligations (Stice and Stice 59). Examples of Apple Inc’s current liabilities include accounts payable and commercial paper (“Apple Reports Record First Quarter Results” par. 5). Examples of long-term liabilities include long-term debt and deferred revenue. Current assets include short-term marketable securities and vendor non-trade receivables. Long-term assets include property and equipment.
Retained earnings refer to the amount of a company’s revenue that is not paid out as dividends, but retained within the firm for purposes of investment in core business areas such as R&D or to fulfill other obligations such as debt payment (Edwards and Hermanson 559). A company can retain a large percentage of its earnings if the amount of money paid out as dividends is small. High dividends payout implies that a company retains little money while payout of low dividends means that a company retains most of its revenues. This is possible if the company makes significant profits and avoids losses. In 2015, Apple’s retained earnings amounted to $92,284,000 while in 2014 they amounted to $87,152,000 (“Apple Reports Record First Quarter Results” par. 5). In the past two years, Apple has increased its retained earnings. Its retained earnings account has increased by $5,132,000 within a period of two years.
Apple and Samsung have different entries in their balance sheets that signify their varied operations and money allocation strategies. Three major differences in their balance sheets include the amount of debt, debts and liabilities. Apple’s total current assets amount to $76,219,000 while Samsung’s current assets amount to $126,587,169. Apple’s total assets amount to $293,284million. On the other hand, Samsung’s total assets amount to $241,239,789 million (“Audited Financial Statements” par. 7). In that regard, Apple has more assets than Samsung. Apple’s current liabilities amount to $76,092,000 while Samsung’s current liabilities amount to $49,049,500. Apple’s total liabilities amount to $165,017million. Samsung’s total liabilities amount to $62,913,603 (“Audited Financial Statements” par. 7).
In that regard, Samsung is bigger than Apple because of the small difference between its liabilities and assets. With regard to debt, Apple has a long-term debt of $53,204 million while Samsung has long-term debt of $67,543 million. Therefore, Samsung has a bigger debt than Apple. Finally, both companies have different entries in regard to liabilities. Samsung has more current and non-current liabilities than Apple. Apples liabilities include accounts payable, accrued expenses, deferred revenue, commercial paper and current portion of long-term debt. On the other hand, Samsung’s liabilities include trade payables, short-term borrowings, advances received, withholdings, accrued expenses, income tax payable, and provisions among others (“Audited Financial Statements” par. 7). Non-current liabilities include debentures, long-term borrowings, long-term payables, net defined liabilities, provisions, and deferred income tax liabilities.
Apple Reports Record First Quarter Results. 2016. Web.
Audited Financial Statements. 2016. Web.
Benedicto, Maite 2008, Introduction to Financial Accounting. PDF file. Web.
Edwards, James, and Rogers Hermanson 2008, Accounting Principles: A Business Perspective, Volume 1 Financial Accounting. PDF file. Web.
Shamrock, Steven. IFRS and US GAAP: A Comprehensive Comparison. New York: John Wiley & Sons, 2012. Print.
Stice, Earl, and James Stice. Intermediate Accounting. New York: Cengage Learning, 2013. Print.