Final answer:
Accounting for deferred taxes is more similar than different under IFRS and U.S. GAAP, but there are still significant differences, especially in recognition, measurement, and classification that can affect the financial statements.
Step-by-step explanation:
The approaches for accounting for deferred taxes are more similar than they are different under IFRS and U.S. GAAP. However, there are still some significant differences that can lead to material impacts on the financial statements. Deferred tax liabilities and assets arise because of the differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements.
Both IFRS and U.S. GAAP require companies to account for these temporary differences, but there are variations in the recognition, measurement, and classification of deferred tax assets and liabilities. For example, IFRS uses a balance sheet approach, which focuses on the temporary differences that exist at the end of the reporting period, while U.S. GAAP focuses on the temporary differences that will result in taxable or deductible amounts in the future when the reported amounts of assets and liabilities are recovered or settled. Furthermore, the criteria for recognizing deferred tax assets related to unused tax losses or credits are slightly different between the two sets of standards.
Overall, deferred tax differences are indeed among the most common differences between IFRS and U.S. GAAP-based financial statements, and if U.S. companies were to switch to IFRS, these differences could be significant concerning deferred taxes.