To mark the 10-year anniversary of Katrina, a new risk bulletin from Allianz Global Corporate & Specialty (AGCS) – Hurricane Katrina 10: Catastrophe Management And Global Windstorm Peril Review – analyzes windstorm risks and losses and examines the lessons learned from Katrina for future global windstorm loss mitigation, given increasing weather volatility. It is a global peril with more than 50 countries having suffered significant windstorm losses in recent years, insurance claims analysis shows. However, severe windstorm loss is not exclusive to North America. Universal income statements make it easier for investors to compare companies, so I think that GAAP should become IFRS when it comes to the income statement.4,000 lives lost during the 2005 hurricane season, 80% of the city of New Orleans flooded, US$125 billion in overall damages and 1.7 million insurance claims filed: Hurricane Katrina, which struck the Gulf Coast of the US on August 29, 2005, remains the largest-ever windstorm loss. GAAP allows several ways for one thing to be done, whereas IFRS tells you it has to be done this way. IFRS’s guidelines make more sense because they make putting together the income statement easier and more universal. These are all simple differences, but have a huge impact of the income statement. However, under IFRS they have to be presented in a separate statement of comprehensive income. OCI, also known as Other Comprehensive Income, can be presented in three different ways under GAAP: a separate statement of comprehensive income, combined with the income statement, or a change in stockholder’s equity statement.
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Also, it is a lot easier for an operation to be considered discontinued under IFRS. GAAP requires expenses to be classified by function, whereas IFRS allows them to be classified by function or nature. There are some other minor differences between GAAP and IFRS. If these two events aren’t extraordinary, then no event should ever be classified as extraordinary, so there is no reason for there to be a section for it on the income statement. In both cases, the SEC ruled that neither event could be classified as extraordinary.
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In the past ten years, there have only been two major events that could be considered extraordinary, the attack on the World Trade Center and Hurricane Katrina. Also, it is so hard to measure the financial impact major catastrophes, so companies would just be guessing at the impact. Everyday things happen that no one would ever have believed could happen. In today’s world I don’t think that anything should be considered extraordinary. I think GAAP is doing the right thing by trying to get rid of extraordinary items. IFRS doesn’t believe that anything should be extraordinary, so it doesn’t allow any extraordinary items on the income statement.Īs of now, GAAP is trying to work towards adapting the IFRS guidelines for extraordinary items. This section allows a company to take a loss and put it after continuing operations, which makes the companies financials look better. GAAP allows companies to record a gain or loss from extraordinary events in a separate section of the income statement. A hurricane is Florida would not be extraordinary, but an earthquake would be. In order for something to be deemed extraordinary it has to be unusual or infrequent in nature. A major difference between GAAP and IFRS involves the treatment of extraordinary items.
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Under GAAP and IFRS, the statements can look completely different because both systems have different guidelines. This statement gives the most information about how well the company is doing. The income statement is the most important statement used in accounting. This blog will cover the differences between how the income statement looks and what can go on it. Over the next five blogs, I will pick out five ways in which these systems differ. GAAP accounting is used by the United States, while every other country uses IFRS. I have created this blog to explain the differences between GAAP accounting and IFRS accounting.