ABSTRACTFor the business world, especially those in the accounting field, a major issue has risen in recent years relating to the differences between the United States Generally Accepted Accounting Principles (US GAAP) and the International Financial Reporting Standards (IFRS). Currently, the majority of countries in the world (more than 100 countries) follow IFRS guidelines; however, the United States still uses GAAP. This topic has become a main topic of discussion as there is a plan for convergence between the two frameworks in the near future.The United States accounting system will undergo drastic changes when this occurs, but the end result is intended to simplify the accounting procedures around the world.“Through these projects, some covering major components of the financial statements, the boards intend to improve financial reporting information for investors while also aligning the US and international accounting standards. These projects are a significant move toward achieving a common accounting framework, a necessary step in the globalization of business and investment” (“US GAAP vs.Keywords: US GAAP, IFRS, Convergence Project, FASB, IASCUS GAAP VS IFRSIn our current global economy, financial reporting requires operators to understand the accounting practices used by the company, the language of the country in which the company exists, the currency utilized by the company to prepare its financial statements and how to attract investors and creditors to invest in or lend money to their company.It is not surprising that many people who follow the development of worldwide accounting standards today might be confused and frustrated. Convergence is a high priority on the agendas of both the US Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB). Merriam-Webster defines convergence as “moving toward union or uniformity” (Gove, Webster’s third new international dictionary of the English language, unabridged, 1993). However, there is much discussion of the many differences that exist between US GAAP and International Financial Reporting Standards (IFRS). This suggests to many people, that the two accounting frameworks continue to speak languages that are worlds apart. This apparent contradiction has prompted some to ask just how different are the two sets of standards? Where do the differences exist, why do they exist, and when, if ever, will they be eliminated?In the guide, “US GAAP v. IFRS: The basics” a look is taken to attempt to answer these questions and provide an overview, by accounting area, of where the standards diverge. While the US and international standards do contain differences, the general principles, conceptual framework and accounting results between them are often the same or similar, even though the areas of difference seem to have overshadowed these similarities. Any discussion of this topic should not lose sight of the fact that the two sets of standards are generally more alike than different for most commonly encountered transactions, with IFRS being largely, but not entirely, grounded in the same basic principles as US GAAP.No report or publication that compares these two broad sets of accounting standards can include all the differences that could arise in accounting for the various business transactions that could potentially occur. The existence of any differences depends on a variety of specific factors including: the nature of the entity/business, the detailed transactions it enters into, its’ interpretation of the more general IFRS principles, its industry practices, and its accounting policy elections (“US GAAP vs. IFRS: The basics”, 2010). Let us focus on a select few of the most commonly found differences in present practice. In addition, we will discuss the disadvantages and advantages of the pending convergence of these two accounting frameworks.BACKGROUNDUS GAAPSince 1973, the Financial Accounting Standards Board (FASB) has been designated as the establishment of financial accounting that regulates the preparation of financial reports by non-governmental entities. These standards are identified as authoritative by the Securities and Exchange Commission (SEC) who has the authority to institute financial accounting and reporting standards for publicly held companies under the Securities Exchange Act of 1934 (“Facts About FASB”). The United States Generally Accepted Accounting Principles (US GAAP) is considered a more rules based system of accounting,IFRSThe International Accounting Standards Committee, formed in 1973, was the first international standards-setting body. It was reorganized in 2001 and became an independent international standard setter, now known as the International Accounting Standards Board (IASB). Since then, the use of international standards has progressed. “As of 2013, the European Union and more than 100 other countries either require or permit the use of international financial reporting standards (IFRSs) issued by the IASB or a local variant of them” (“International Convergence of Accounting Standards- A Brief History”). The IFRS is more principal-based which means there is room for interpretation. It can be said or argued that by being more principles based, the IFRS represents and captures the economics of a transaction better than U.S. GAAP.DIFFERENCESINCOME STATEMENTWhile each framework requires presentation of an income statement as a primary statement, there are some major differences in the way items are handled. The three main differences are the actual format of the income statement, the handling of exceptional items and also how extraordinary items are handled (Dharma Putra, “IFRS Vs GAAP: Balance Sheet and Income Statement”, 2008)._FORMAT OF THE INCOME STATEMENT_Under IFRS, there is no prescribed format for the income statement. The company should select a method of presenting its expenses by either function or nature; this can either be, on the face of the income statement, or in the notes. Additional disclosure of expenses by nature is required if functional presentation is used. IFRS requires a minimum presentation of the following items on the face of the income statement: revenue, finance costs, share of post-tax results of associates and joint ventures accounted for using the equity method, tax expense, post-tax gain or loss attributable to the results and to re-measurement of discontinued operations and profit or loss for the period (Dharma Putra, “IFRS Vs GAAP: Balance Sheet and Income Statement”, 2008).Under US GAAP; presentation is in one of two formats. Either, a single-step format where all expenses are classified by function and are deducted from total income to give income before tax; or a multiple-step format where cost of sales is deducted from sales to show gross profit, and other income and expense are then presented to give income before tax. SEC regulations require registrants to categorize expenses by their function. Amounts attributable to the minority interest are presented as a component of net income or loss (“US GAAP vs. IFRS: The basics”, 2010)._EXCEPTIONAL OR SIGNIFICANT ITEMS_Under IFRS; the separate disclosure is required of items of income and expense that are of such size, nature or incidence that their separate disclosure is necessary to explain the performance of the company for the period. Disclosure may be on the face of the income statement or in the notes. IFRS; does not use nor does it define the term exceptional items. Under US GAAP; the term exceptional items is not used, but significant items are disclosed separately on the face of the income statement when arriving at income from operations, as well as being described in the notes (“US GAAP vs. IFRS: The basics”, 2010)._EXTRAORDINARY ITEMS_