What characteristic distinguishes IFRS from U.S. GAAP in terms of rules?

The characteristic that distinguishes IFRS from U.S. GAAP is that IFRS is less codified. This means that IFRS tends to provide broader principles and frameworks for reporting and financial practices, allowing for more interpretation and flexibility in application. In contrast, U.S. GAAP is more prescriptive and detailed, providing specific rules and guidelines that must be followed. This codification in U.S. GAAP aims to reduce ambiguity and enhance comparability across financial statements, but it also means less room for judgment or diverse application.

The flexibility inherent in IFRS can lead to a greater variety of accounting practices among entities reporting under it, as companies may tailor their financial reporting more to their individual circumstances and the economic environment in which they operate. This principle-based approach encourages entities to think critically about the economic reality of their transactions rather than strictly adhering to a set list of rules, promoting transparency and relevance in financial reporting.