Differences Between IFRS and U.S. GAAP

• Consolidation IFRS favors a control model whereas U.S. GAAP prefers a risks-and-rewards model. Some entities consolidated in accordance with FIN 46(R) may have to be shown separately under IFRS.
• Statement of Income Under IFRS, extraordinary items are not segregated in the income statement, while, under US GAAP, they are shown below the net income.
• Inventory Under IFRS, LIFO (a historical method of recording the value of inventory, a firm records the last units purchased as the first units sold) cannot be used while under U.S. GAAP, companies have the choice between LIFO and FIFO (is a common method for recording the value of inventory).
• Earning-per-Share Under IFRS, the earning-per-share calculation does not average the individual interim period calculations, whereas under U.S. GAAP the computation averages the individual interim period incremental shares.
• Development costs These costs can be capitalized under IFRS if certain criteria are met, while it is considered as "expenses" under U.S. GAAP.

Required:

1. Pick one of the above differences Between IFRS and U.S. GAAP and thoroughly explain it
2. Talk about how the difference affects financial reporting
3. Talk about which one between IFRS and U.S. GAAP is more suitable for financial accountingand give your reasons.