Which statement accurately contrasts GAAP and IFRS?

Which statement accurately contrasts GAAP and IFRS?

• A. GAAP is more flexible and used globally; IFRS is stricter but used in a few countries.
• B. GAAP is international; IFRS is U.S.-only.
• C. Both are identical in approach and jurisdiction.
• D. GAAP is rules-based and primarily used in the U.S., while IFRS is principles-based and used in over 140 countries.

Answer: (D)

The key idea being tested is the difference between rules-based and principles-based frameworks and where each is used. GAAP is highly prescriptive and rules-based, and it is primarily used in the United States. IFRS is more principles-based, focusing on broad concepts and professional judgment, and it has been adopted by more than 140 countries around the world. This contrast explains why the statement describing GAAP as rules-based and U.S.-focused while IFRS is principles-based and widely adopted internationally is the best fit. The other options misstate either the approach (rules-based vs. principles-based) or the geographic scope (U.S.-only vs. global).

The key idea being tested is the difference between rules-based and principles-based frameworks and where each is used. GAAP is highly prescriptive and rules-based, and it is primarily used in the United States. IFRS is more principles-based, focusing on broad concepts and professional judgment, and it has been adopted by more than 140 countries around the world. This contrast explains why the statement describing GAAP as rules-based and U.S.-focused while IFRS is principles-based and widely adopted internationally is the best fit. The other options misstate either the approach (rules-based vs. principles-based) or the geographic scope (U.S.-only vs. global).