This material may consist of step-by-step explanations on how to solve a problem or examples of proper writing, including the use of citations, references, bibliographies, and formatting. This material is made available for the sole purpose of studying and learning - misuse is strictly forbidden.IFRS/GAAP: Treatment of Fixed Assets
The treatment of fixed assets is one of the key areas where the Generally Accepted Accounting Principles (GAAP) and the International Financial Reporting Standards (IFRS) differ. Under the GAAP, an entity’s fixed assets are valued using the cost model while under the GAAP valuation of fixed assets can be done using either the cost model or the revaluation model. Since the GAAP strictly follows the cost model, there is no comparability for an entity that opts to follow the revaluation model provided for under the IFRS. One of the main underlying assumptions under the revaluation model is the ability to reliably measure the fair value of a fixed asset. Under the cost model of fixed assets valuation, an entity’s fixed assets are recorded using the historical value. Accumulated depreciation is deducted from the fixed asset’s historical value to arrive at the current value. In comparison, under the revaluation model, the value of an entity’s fixed assets is based on fair value on the date of evaluation. The subsequent accumulated depreciation and impairment losses are deducted from the fair value to arrive at the current value (IFRS, 2013)....