Lexi Webster
The accounting standards in Australia and the United States differ in several ways. In the US, the generally accepted accounting principles (GAAP) are followed, while in Australia, the International Financial Reporting Standards (IFRS) are used. GAAP is a rule-based system created by the Financial Accounting Standards Board (FASB) and enforced by the Securities and Exchange Commission (SEC), whereas IFRS is a principles-based approach issued by the International Accounting Standards Board (IASB). GAAP is more detailed and prescriptive, requiring more disclosures, while IFRS is more flexible and high-level. These differences in accounting standards between the two countries impact how financial statements are prepared and filed, with GAAP requiring certain measures to be identified and IFRS providing a common global language for company accounting.
| Characteristics | Values |
|---|---|
| Accounting standards in Australia | IFRS |
| Accounting standards in the US | GAAP |
| IFRS stands for | International Financial Reporting Standards |
| GAAP stands for | Generally Accepted Accounting Principles |
| IFRS is used by | Most countries in the world |
| GAAP is used by | The US and Canada |
| Methodology | IFRS is principles-based; GAAP is rules-based |
| Disclosure requirements | IFRS requires fewer disclosures; GAAP requires more |
| Focus | IFRS allows flexibility in asset valuation; GAAP focuses on the historical cost of assets |
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What You'll Learn
Qualifications and certifications
In the United States, the first step in becoming an accountant is obtaining a 4-year college degree in accounting, covering subjects like advanced maths, economics, business, and basic and advanced accounting courses. After obtaining a degree, an accountant must pass the Uniform CPA (Certified Public Accountant) exams, one of the most difficult professional exams, with an average 50% passing rate. The CPA license is the most popular accounting certification in the US, granted by the American Institute of Certified Public Accountants (AICPA). It is highly valued throughout the accounting industry and is recognised globally.
In Australia, the accounting route begins in college, which may take at least 3 years of full-time study. The country is home to three global top-20 universities for accounting: The University of New South Wales, the University of Melbourne, and the University of Sydney. There is a range of online accounting certificates that cater to various levels of expertise within the accounting profession, from foundational courses to specialised accounting certificates. These certifications increase an accountant's credibility and open doors to higher-level positions, specialised roles, and even international opportunities.
Both countries offer the Certified Management Accountant (CMA) certification, which is globally recognised. The CMA is offered by the Institute of Management Accountants (IMA) and is ideal for accountants who want to specialise in budgeting and financial planning. To be eligible for the CMA, candidates must have a bachelor's degree, 2 years of work experience in management accounting or financial management, and an IMA membership.
Other certifications available in the US include the CGFM certificate, which demonstrates expertise in government-specific accounting, auditing, financial reporting, internal controls, and budgeting practices. The CIA qualification is another globally recognised credential for internal auditors who work within companies and government agencies to ensure financial records are correct and compliant.
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Reporting standards: GAAP vs IFRS
In the United States, accountants follow the Generally Accepted Accounting Principles (GAAP) when compiling financial statements. GAAP is a rules-based system that addresses things like revenue recognition, balance sheets, item classification, and outstanding share measurements. It is established by the Financial Accounting Standards Board (FASB), which sets the accounting rules for the standard.
Outside the U.S., many countries follow the International Financial Reporting Standards (IFRS), which is a principles-based system. IFRS is issued by the International Accounting Standards Board (IASB), and it specifies how accountants must maintain and report their accounts. The aim of IFRS is to establish a common global language for company accounting, so businesses and accounts can be understood across companies and countries.
The two systems have several differences. For example, the way a balance sheet is formatted is different: under GAAP, current assets are listed first, while a sheet prepared under IFRS begins with non-current assets. GAAP also requires that non-GAAP measures are identified in financial statements and other public disclosures, such as press releases. IFRS, on the other hand, allows reversals of impairment losses for all types of assets except goodwill, while GAAP takes a more conservative approach and prohibits reversals for all types of assets.
While there have been discussions about transitioning the U.S. to the IFRS standard, there is little likelihood of that happening in the near future. However, work is being done to converge the two systems, and some companies may use both GAAP- and non-GAAP-compliant measures when reporting financial results.
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University courses
Australia is home to several world-class universities that offer accounting courses. The University of Western Australia, the University of South Australia (UniSA), the University of Sydney, the University of Melbourne, and the University of New South Wales are some of the top universities in Australia for accounting. These universities offer a range of undergraduate and postgraduate courses in accounting, providing students with various specialisation options.
The University of Western Australia's Business School offers an Accounting major as part of a Bachelor of Commerce or Bachelor of Philosophy degree. This major is accredited by Chartered Accountants Australia and New Zealand (CA ANZ) and CPA Australia. The university also provides honours and master's programs, such as the Master of Commerce and the Master of Business Administration, for students seeking further education. Additionally, the university facilitates industry-based learning through workshops, team exercises, and group projects, allowing students to gain practical experience in auditing and other areas.
The University of South Australia (UniSA) offers a Bachelor of Accounting degree, which serves as a solid foundation for students intending to pursue accounting specialisations. UniSA graduates are highly regarded in practice and commerce, influencing decision-making in various sectors. The university provides multiple application pathways for international students, including an online International Application System and applications through registered education agents.
The University of Sydney, ranked among the top 25 universities globally for accounting and finance, offers accounting programs that enhance students' capabilities and credibility, opening doors to numerous career opportunities.
The University of Melbourne and the University of New South Wales are also recognised for their excellence in accounting education, contributing to Australia's reputation for world-class accounting universities.
International students applying to Australian universities for accounting courses may need to meet English language proficiency requirements, such as a minimum IELTS score, and apply for student visas. It is recommended to check the specific entry requirements and prerequisites for each course and university.
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Career paths
In both Australia and the United States, aspiring accountants typically need to obtain a bachelor's degree in accounting from an accredited college or university. This usually involves at least three years of full-time study. However, the specifics of the career path to becoming an accountant may differ between the two countries.
In Australia, there are several top-ranked universities for accounting, including the University of New South Wales, the University of Melbourne, and the University of Sydney. After completing a bachelor's degree in accounting, individuals may pursue a Certified Practising Accountant (CPA) certification. This certification program includes compulsory subjects such as ethics and governance, strategic accounting management, financial reporting, and global strategy and leadership. Obtaining a CPA certification enhances job prospects and can lead to specialised careers and increased earning potential.
In the US, aspiring accountants can obtain certifications from various organisations, such as the American Institute of Certified Public Accountants (AICPA) or pursue the Certified Public Accountant (CPA) designation. While the requirements may vary by state, obtaining a CPA certification is often required for higher-level positions and can lead to increased career opportunities and earning potential. Additionally, individuals can focus on different areas of specialisation, such as management accounting, auditing, taxation, or financial management, by obtaining certifications from organisations like the Association of Chartered Certified Accountants (ACCA) or the Institute of Public and Finance Accountancy (CIPFA).
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International recognition
Accounting standards are essential for ensuring consistent and comparable financial reporting across industries and countries. While the United States and Australia have their own sets of accounting standards, they also recognise and adhere to international standards to varying degrees.
In the United States, accountants follow the Generally Accepted Accounting Principles (GAAP), which are set by the Financial Accounting Standards Board (FASB) for the Securities and Exchange Commission (SEC). GAAP is a comprehensive set of rules and guidelines that US companies must follow when preparing and distributing their financial statements. These standards address revenue recognition, balance sheet presentation, item classification, and outstanding share measurements.
On the other hand, Australia, like most countries worldwide, follows the International Financial Reporting Standards (IFRS). IFRS is issued by the International Accounting Standards Board (IASB) and provides a common framework for companies to maintain and report their accounts. The aim of IFRS is to establish a universal language for company accounting, enhancing stability and transparency in the global financial arena.
While Australia aligns with the globally prevalent IFRS, it's important to note that IFRS is not a mandatory standard. Instead, it serves as a recommended framework, allowing countries and companies flexibility in its adoption. This flexibility accommodates variations in local regulations and industry-specific requirements.
The differences between GAAP and IFRS go beyond their geographical scope. GAAP is considered rules-based, focusing on detailed prescriptions and legal authority. In contrast, IFRS is principles-based, emphasising a high-level approach with fewer mandatory disclosures. This distinction influences how financial statements are structured and interpreted, impacting investors' understanding and decision-making processes.
Despite the differences, there have been discussions about transitioning the US to IFRS. However, this shift is unlikely to occur in the near future due to the established nature of GAAP within the US accounting landscape.
In summary, while Australia and the United States have distinct accounting standards, they both contribute to and recognise the importance of international standards. The global influence of IFRS, even in countries like Australia that don't mandate its use, underscores the ongoing efforts to foster consistency and transparency in financial reporting across borders.
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Frequently asked questions
The path to becoming an accountant in Australia typically starts with at least 3 years of full-time study in college, covering subjects such as accounting principles, auditing, tax laws, and financial reporting. After completing their degree, aspiring accountants can pursue a Certified Practising Accountant (CPA) certification, which provides them with up to 6 years to complete the program, including subjects like ethics, financial reporting, and strategic accounting management.
In the United States, accountants follow the Generally Accepted Accounting Principles (GAAP) when compiling financial statements. GAAP is a rule-based system that is enforced by the Financial Accounting Standards Board (FASB) and mandated for all publicly traded companies in the US.
IFRS, or International Financial Reporting Standards, is a principles-based approach that serves as a common global language for company accounting and is used by most countries worldwide. On the other hand, GAAP is more detailed and prescriptive, rule-based, and focused on the historical cost of assets. IFRS allows for more flexibility in asset valuation and requires fewer disclosures compared to GAAP.
Australian accountants, like most countries around the world, follow the IFRS standards for financial reporting. The United States and Canada are notable exceptions, as they have not adopted IFRS and instead use GAAP for domestically traded companies.
The use of different accounting standards like GAAP and IFRS can pose challenges for international corporations and investors operating across multiple markets. However, a convergence towards IFRS could potentially benefit these entities by providing a common framework for financial reporting and decision-making. IFRS enables transparency and comparability between businesses and countries, facilitating educated financial decisions.
