Us Gaap Versus Ifrs: The Basics

US GAAP versus IFRS
The basics
November 2012
!@#
Table of contents
Introduction..................................................................... 2
Financial statement presentation ..................................... 3
Interim financial reporting................................................ 6
Consolidation, joint venture accounting and equity
method investees/associates ........................................... 7
Business combinations ................................................... 12
Inventory ....................................................................... 14
Long-lived assets ........................................................... 15
Intangible assets............................................................ 17
Impairment of long-lived assets, goodwill and intangible
assets ........................................................................... 19
Financial instruments..................................................... 22
Foreign currency matters .............................................. 28
Leases ........................................................................... 30
Income taxes ................................................................. 33
Provisions and contingencies ......................................... 35
Revenue recognition ...................................................... 37
Share-based payments................................................... 39
Employee benefits other than share-based payments ..... 41
Earnings per share ......................................................... 43
Segment reporting ......................................................... 44
Subsequent events ........................................................ 45
Related parties .............................................................. 47
Appendix The evolution of IFRS ................................... 48
US GAAP versus IFRS The basics 1

Introduction
Introduction
Convergence continued to be a high priority on Key updates

the agendas of both the US Financial Our analysis generally reflects guidance
Accounting Standards Board (FASB) and the effective in 2012 and finalized by the FASB
International Accounting Standards Board and the IASB before 31 May 2012; however,
(IASB) (collectively, the Boards) in 2012. we have not included differences related to
However, the convergence process is designed IFRS 9, Financial Instruments, IFRS 10,
to address only the most significant Consolidated Financial Statements and
differences and/or areas that the Boards have IFRS 11, Joint Arrangements, except in our
identified as having the greatest need for discussion of convergence.
improvement. While the converged standards
will be more similar, differences will continue We will continue to update this publication
to exist between US GAAP as promulgated by periodically for new developments.
the FASB and International Financial Reporting * * * * *
Standards (IFRS) as promulgated by the IASB.
The Ernst & Young US GAAP-IFRS Differences
In this guide, we provide an overview by Identifier Tool provides a more in-depth review
accounting area of where the standards are of differences between US GAAP and IFRS. The
similar and where differences exist. We believe Identifier Tool was developed as a resource for
that any discussion of this topic should not lose companies that need to analyze the numerous
sight of the fact that the two sets of standards accounting decisions and changes inherent in
are generally more alike than different for most a conversion to IFRS. Conversion is of course
commonly encountered transactions, with IFRS more than just an accounting exercise, and
being largely, but not entirely, grounded in the identifying accounting differences is only the
same basic principles as US GAAP. The general first step in the process. Successfully converting
principles and conceptual framework are often to IFRS also entails ongoing project
the same or similar in both sets of standards, management, systems and process change
leading to similar accounting results. The analysis, tax considerations and a review of all
existence of any differences and their company agreements that are based on
materiality to an entitys financial statements financial data and measures. Ernst & Youngs
depends on a variety of specific factors, assurance, tax and advisory professionals are
including the nature of the entity, the details of available to share their experiences and to
the transactions, interpretation of the more assist companies in analyzing all aspects of the
general IFRS principles, industry practices and conversion process, from the earliest diagnostic
accounting policy elections where US GAAP stages through ultimate adoption of the
and IFRS offer a choice. This guide focuses on international standards.
differences most commonly found in present
practice and, when applicable, provides an To learn more about the Identifier Tool, please
overview of how and when those differences contact your local Ernst & Young professional.
are expected to converge.
November 2012

Financial statement presentation
Similarities changes in shareholders equity to be presented

There are many similarities in US GAAP and in the notes to the financial statements while
IFRS guidance on financial statement IFRS requires the changes in shareholders
presentation. Under both sets of standards, equity to be presented as a separate statement.
the components of a complete set of financial Further, both require that the financial
statements include: a statement of financial statements be prepared on the accrual basis
position, a statement of profit and loss of accounting (with the exception of the cash
(i.e., income statement) and a statement of flow statement) except for rare circumstances.
comprehensive income (either a single Both sets of standards have similar concepts
continuous statement or two consecutive regarding materiality and consistency that
statements), a statement of cash flows and entities have to consider in preparing their
accompanying notes to the financial financial statements. Differences between the
statements. Both standards also require the two sets of standards tend to arise in the level
changes in shareholders equity to be of specific guidance provided.
presented. However, US GAAP allows the
Significant differences
US GAAP IFRS
Financial periods Generally, comparative financial Comparative information must be
required statements are presented; however, a disclosed with respect to the previous
single year may be presented in certain period for all amounts reported in the
circumstances. Public companies must current periods financial statements.
follow SEC rules, which typically require
balance sheets for the two most recent
years, while all other statements must
cover the three-year period ended on
the balance sheet date.
Layout of balance sheet No general requirement within IFRS does not prescribe a standard
and income statement US GAAP to prepare the balance sheet layout, but includes a list of minimum
and income statement in accordance line items. These minimum line items
with a specific layout; however, public are less prescriptive than the
companies must follow the detailed requirements in Regulation S-X.
requirements in Regulation S-X.
Balance sheet Debt for which there has been a Debt associated with a covenant
presentation of debt as covenant violation may be presented violation must be presented as current
current versus as non-current if a lender agreement to unless the lender agreement was
non-current waive the right to demand repayment reached prior to the balance sheet date.
for more than one year exists before
the financial statements are issued or
available to be issued.

US GAAP IFRS
Balance sheet Current or non-current classification, All amounts classified as non-current in
classification of deferred generally based on the nature of the the balance sheet.
tax assets and liabilities related asset or liability, is required.
Income statement No general requirement within US Entities may present expenses based on
classification of GAAP to classify income statement either function or nature (e.g., salaries,
expenses items by function or nature. However, depreciation). However, if function is
SEC registrants are generally required selected, certain disclosures about the
to present expenses based on function nature of expenses must be included in
(e.g., cost of sales, administrative). the notes.
Income statement Restricted to items that are both Prohibited.

extraordinary items unusual and infrequent.
criteria
Income statement Discontinued operations classification Discontinued operations classification

discontinued operations is for components held for sale or is for components held for sale or
criteria disposed of, provided that there will disposed of that are either a separate
not be significant continuing cash flows major line of business or geographical
or involvement with the disposed area or a subsidiary acquired
component. exclusively with an intention to resell.
Disclosure of No general requirements within US Certain traditional concepts such as

performance measures GAAP that address the presentation of operating profit are not defined;
specific performance measures. SEC therefore, diversity in practice exists
regulations define certain key regarding line items, headings and
measures and require the presentation subtotals presented on the income
of certain headings and subtotals. statement. IFRS permits the
Additionally, public companies are presentation of additional line items,
prohibited from disclosing non-GAAP headings and subtotals in the
measures in the financial statements statement of comprehensive income
and accompanying notes. when such presentation is relevant to
an understanding of the entitys
financial performance.
Third balance sheet Not required. A third balance sheet is required as of

the beginning of the earliest
comparative period when there is a
retrospective application of a new
accounting policy, or a retrospective
restatement or reclassifications that
have a material effect on the balances
of the third balance sheet. Related
notes to the third balance sheet are
not required.

Convergence The Boards have also delayed work on

Convergence efforts in this area have been put their efforts to converge presentation of
on hold and further action is not expected in discontinued operations. The Boards
the near term. The Boards suspended their tentatively decided that the definition of
efforts on the joint project on financial discontinued operations would be consistent
statement presentation so they could focus on with the current definition in IFRS 5,
priority convergence projects. Before putting Non-current Assets Held for Sale and
the project on hold, the Boards issued a staff Discontinued Operations, and that certain
draft of the proposed standards and engaged requirements in existing US GAAP for
in a targeted outreach program. discontinued operations classification
(i.e., elimination of cash flows of the
component and prohibition of significant
continuing involvement) would be eliminated,
although disclosure of those and additional
items would be required. There have been no
further developments on this topic.

Interim financial reporting
Interim financial reporting
Similarities allow for condensed interim financial

ASC 270, Interim Reporting, and IAS 34, statements and provide for similar disclosure
Interim Financial Reporting, are substantially requirements. Neither standard requires
similar except for the treatment of certain costs entities to present interim financial information.
described below. Both require an entity to apply That is the purview of securities regulators
the accounting policies that were in effect in the such as the SEC, which requires US public
prior annual period, subject to the adoption of companies to comply with Regulation S-X.
new policies that are disclosed. Both standards
US GAAP IFRS
Treatment of certain Each interim period is viewed as an Each interim period is viewed as a
costs in interim periods integral part of an annual period. As a discrete reporting period. A cost that
result, certain costs that benefit more does not meet the definition of an asset
than one interim period may be at the end of an interim period is not
allocated among those periods, deferred, and a liability recognized at
resulting in deferral or accrual of an interim reporting date must
certain costs. represent an existing obligation.
Income taxes are accounted for
based on an annual effective tax rate
(similar to US GAAP).
Convergence
The FASB planned to address presentation
and display of interim financial information
in US GAAP as part of the joint financial
statement presentation project. As noted in
the Financial statement presentation section,
further action is not expected on this project
in the near term.

Consolidation, joint venture accounting and
Consolidation, joint venture accounting and equity method investees/associates
equity method investees/associates

Similarities companies). Further, uniform accounting
The principal guidance for consolidation of policies are used for all of the entities within a
financial statements, including variable interest consolidated group, with certain exceptions
entities (VIEs), under US GAAP is ASC 810, under US GAAP (e.g., a subsidiary within a
Consolidation. IAS 27 (as revised), Consolidated specialized industry may retain the specialized
and Separate Financial Statements, and SIC-12, accounting policies in consolidation).
Consolidation Special Purpose Entities, An equity investment that gives an investor
contain the IFRS guidance. significant influence over an investee (referred
Under both US GAAP and IFRS, the to as an associate in IFRS) is considered an
determination of whether entities are equity method investment under both
consolidated by a reporting entity is based on US GAAP (ASC 323, Investments Equity
control, although differences exist in the Method and Joint Ventures) and IFRS (IAS 28,
definition of control. Generally, all entities Investments in Associates). Further, the equity
subject to the control of the reporting entity method of accounting for such investments, if
must be consolidated (although there are applicable, generally is consistent under both
limited exceptions in US GAAP for investment US GAAP and IFRS.
US GAAP IFRS
Consolidation model Focus is on controlling financial Focus is on the power to control, with
interests. All entities are first control defined as the parents ability
evaluated as potential VIEs. If a VIE, to govern the financial and operating
the applicable guidance in ASC 810 is policies of an entity to obtain benefits.
followed (below). If an entity is not a Control is presumed to exist if the
VIE, it is evaluated for control by parent owns more than 50% of the
voting rights. Potential voting rights votes, and potential voting rights must
are generally not included in either be considered. Notion of de facto
evaluation. control also may be considered.
Special purpose entities The guidance in ASC 810 requires the Under SIC-12, SPEs (entities created to
(SPE) / VIEs primary beneficiary (determined based accomplish a narrow and well-defined
on the consideration of power and objective) are consolidated when the
benefits) to consolidate the VIE. For substance of the relationship indicates
certain specified VIEs, the primary that an entity controls the SPE.
beneficiary is determined
quantitatively based on a majority of
the exposure to variability.

US GAAP IFRS
Preparation of Required, although certain Generally required, but there is a limited

consolidated financial industry-specific exceptions exist exemption from preparing consolidated
statements general (e.g., investment companies). financial statements for a parent
company that is itself a wholly owned
subsidiary, or is a partially owned
subsidiary, if certain conditions are met.
Preparation of The reporting entity and the The financial statements of a parent and
consolidated financial consolidated entities are permitted its consolidated subsidiaries are
statements different to have different year-ends of up to prepared as of the same date. When the
reporting dates of parent three months. end of the reporting period differs for
and subsidiary(ies) The effects of significant events the parent and a subsidiary, the
occurring between the reporting dates subsidiary prepares (for consolidation
of the reporting entity and the purposes) additional financial
controlled entities are disclosed in the statements as of the same date as the
financial statements. financial statements of the parent
unless it is impracticable to do so.
However, when the difference between
the end of the reporting period of the
parent and subsidiary is three months or
less, the financial statements of the
subsidiary may be adjusted for the
effects of significant transactions and
events, rather than preparing additional
financial statements as of the parents
reporting date.
Changes in ownership Transactions that result in decreases Consistent with US GAAP, except that
interest in a subsidiary in ownership interest in a subsidiary this guidance applies to all subsidiaries
without loss of control without a loss of control are accounted under IAS 27(R), even those that are
for as equity transactions in the not businesses or nonprofit activities,
consolidated entity (that is, no gain or those that involve sales of in substance
loss is recognized) when: (1) subsidiary real estate or conveyance of oil and gas
is a business or nonprofit activity (with mineral rights. In addition, IAS 27(R)
two exceptions: a sale of in substance does not address whether that guidance
real estate and a conveyance of oil and should be applied to transactions
gas mineral rights); or (2) subsidiary is involving non-subsidiaries that are
not a business or nonprofit activity, businesses or nonprofit activities.
but the substance of the transaction is
not addressed directly by other
ASC Topics.

US GAAP IFRS
Loss of control of a For certain transactions that result in a Consistent with US GAAP, except that
subsidiary loss of control of a subsidiary or a this guidance applies to all subsidiaries
group of assets, any retained under IAS 27(R), even those that are
noncontrolling investment in the not businesses or nonprofit activities or
former subsidiary or group of assets is those that involve sales of in substance
re-measured to fair value on the date real estate or conveyance of oil and gas
control is lost, with the gain or loss mineral rights. In addition, IAS 27(R)
included in income along with any gain does not address whether that guidance
or loss on the ownership interest sold. should be applied to transactions
involving non-subsidiaries that are
This accounting is limited to the
businesses or nonprofit activities.
following transactions: (1) loss of
IAS 27(R) also does not address the
control of a subsidiary that is a
derecognition of assets outside the
business or nonprofit activity or a
loss of control of a subsidiary.
group of assets that is a business or
nonprofit activity (with two exceptions:
a sale of in substance real estate, or a
conveyance of oil and gas mineral
rights); (2) loss of control of a
subsidiary that is not a business or
nonprofit activity if the substance of
the transaction is not addressed
directly by other ASC Topics.
Equity method Potential voting rights are generally In determining significant influence,
investments not considered in the determination of potential voting rights are considered if
significant influence. currently exercisable.
ASC 825-10, Financial Instruments, The fair value option is not available to
gives entities the option to account for investors (other than venture capital
certain investments at fair value. If organizations, mutual funds, unit trusts,
management does not elect to use the and similar entities) to account for their
fair value option, the equity method of investments in associates.
accounting is required.
IAS 28 generally requires investors
(other than venture capital
organizations, mutual funds, unit trusts,
and similar entities) to use the equity
method of accounting for their
investments in associates in consolidated
financial statements. If separate financial
statements are presented (i.e., by a
parent or investor), subsidiaries and
associates can be accounted for at either
cost or fair value.
Uniform accounting policies between Uniform accounting policies between

investor and investee are not required. investor and investee are required.

US GAAP IFRS
Joint ventures Generally accounted for using the IAS 31, Interests in Joint Ventures,
equity method of accounting (or at fair permits either the proportionate
value, if the fair value option is consolidation method or the equity
elected). Proportionate consolidation method of accounting for interests in
may be permitted in limited jointly controlled entities. The fair value
circumstances to account for interests option is not available to investors
in unincorporated entities in certain (other than venture capital
industries where it is an established organizations, mutual funds, unit trusts,
practice (i.e., in the construction and and similar entities) to account for their
extractive industries). investments in jointly controlled entities.
Convergence Contributions by Venturers. IFRS 11 establishes

In May 2011, the IASB issued IFRS 10, a principles-based approach to determining the
Consolidated Financial Statements, which accounting for joint arrangements. In doing so,
replaces IAS 27(R) and SIC-12 and provides a IFRS 11 eliminates proportionate consolidation
single control model. The FASB chose not to and requires joint arrangements classified as
pursue a single consolidation model at this time joint ventures to be accounted for using the
and instead is making targeted revisions to the equity method. This change is expected to
consolidation models within US GAAP. The reduce differences between IFRS and US GAAP.
FASBs proposed amendments to the Jointly controlled assets and jointly controlled
consideration of kick-out rights and principal operations under IAS 31 are generally expected
versus agent relationships would more closely to be considered joint operations subject to joint
align the consolidation guidance under operation accounting under IFRS 11. Joint
US GAAP with IFRS. However, certain operations will recognize their assets, liabilities,
differences between consolidation guidance revenues and expenses, and relative shares
under IFRS and US GAAP (e.g., effective thereof. IFRS 11 is effective for annual periods
control, potential voting rights) will continue to beginning on or after 1 January 2013, with
exist. IFRS 10 is effective for annual periods earlier application permitted.
beginning on or after 1 January 2013, with In May 2011, the IASB also issued a revised
earlier application permitted. The FASBs IAS 28, Investments in Associates and Joint
exposure draft was issued on 3 November Ventures (referred as IAS 28 (2011) in this
2011 and comments were received by 15 publication). The revised standard resulted
February 2012. The FASB technical plan calls from the IASBs consolidation project. IAS 28
for a final Accounting Standards Update to be was amended to include the application of the
issued in the first half of 2013. equity method to investments in joint ventures
In May 2011, the IASB also issued IFRS 11, (as defined in IFRS 11). IAS 28 (2011) is
Joint Arrangements, which replaces IAS 31, effective for annual periods beginning on
Interests in Joint Ventures, and SIC-13, or after 1 January 2013, with earlier
Jointly Controlled Entities Non-monetary application permitted.

The IASB also issued IFRS 12, Disclosure of

Interests in Other Entities, in May 2011, which
includes all of the disclosure requirements for
subsidiaries, joint arrangements, associates
and consolidated and unconsolidated
structured entities. IFRS 12 is effective for
annual periods beginning on or after 1 January
2013, with earlier application permitted.
Note that this publication does not address the
differences between US GAAP and IFRS
resulting from IFRS 10, IFRS 11 and IFRS 12.
The FASB is addressing the accounting for
equity method investments in the
redeliberation of its May 2010 Exposure Draft,
Accounting for Financial Instruments and
Revisions to the Accounting for Derivative
Instruments and Hedging Activities.
The FASB and the IASB have issued proposals
to establish consistent criteria for determining
whether an entity is an investment company
(the IASB uses the term investment entity).
In October 2012, the IASB issued an
amendment to IFRS 10 to provide an
exception to the consolidation requirement
for entities that meet the definition of an
investment company. Generally, investment
companies would be excluded from
consolidating controlled investments. The
FASB is continuing to work on its proposed
amendments to the US GAAP definition of an
investment company, which may bring
US GAAP and IFRS further into alignment.
However, US GAAP and IFRS differences
in accounting and reporting for investment
companies will remain. The FASB intends to
issue its final standard in the first half of 2013.

Business combinations
Similarities underlying transaction is measured at fair

The principal guidance for business value, establishing the basis on which the
combinations in US GAAP (ASC 805, Business assets, liabilities and noncontrolling interests
Combinations) and IFRS (IFRS 3(R), Business of the acquired entity are measured. As
Combinations) represents the culmination of described below, IFRS 3(R) provides an
the first major convergence project between alternative to measuring noncontrolling
the IASB and the FASB. Pursuant to ASC 805 interest at fair value with limited exceptions.
and IFRS 3(R), all business combinations are Although the new standards are substantially
accounted for using the acquisition method. converged, certain differences still exist.
Upon obtaining control of another entity, the
US GAAP IFRS
Measurement of Noncontrolling interest is measured at Noncontrolling interest components
noncontrolling interest fair value, including goodwill. that are present ownership interests
and entitle their holders to a
proportionate share of the acquirees
net asset in the event of liquidation may
be measured at: (1) fair value, including
goodwill, or (2) at the noncontrolling
interests proportionate share of the
fair value of the acquirees identifiable
net assets, exclusive of goodwill.
All other components of noncontrolling
interest are measured at fair value
unless another measurement basis is
required by IFRS.
The choice is available on a
transaction-by-transaction basis.
Acquirees operating If the terms of an acquiree operating Separate recognition of an intangible

leases lease are favorable or unfavorable asset or liability is required only if the
relative to market terms, the acquirer acquiree is a lessee. If the acquiree is the
recognizes an intangible asset or lessor, the terms of the lease are taken
liability, respectively, regardless of into account in estimating the fair value
whether the acquiree is the lessor or of the asset subject to the lease.
the lessee. Separate recognition of an intangible
asset or liability is not required.

US GAAP IFRS
Assets and liabilities Initial recognition and measurement Initial recognition and measurement
arising from Assets and liabilities arising from Liabilities arising from contingencies
contingencies contingencies are recognized at fair are recognized as of the acquisition
value (in accordance with ASC 820, date if there is a present obligation that
Fair Value Measurement) if the fair arises from past events and the fair
value can be determined during the value can be measured reliably.
measurement period. Otherwise, those Contingent assets are not recognized.
assets or liabilities are recognized at
the acquisition date in accordance with
ASC 450, Contingencies, if those
criteria for recognition are met.
Contingent assets and liabilities that
do not meet either of these recognition
criteria at the acquisition date are
subsequently accounted for in
accordance with other applicable
literature, including ASC 450.
(See Provisions and Contingencies
for differences between ASC 450
and IAS 37).
Subsequent measurement Subsequent measurement
If contingent assets and liabilities are Liabilities subject to contingencies are
initially recognized at fair value, an subsequently measured at the higher
acquirer should develop a systematic of: (1) the amount that would be
and rational basis for subsequently recognized in accordance with IAS 37,
measuring and accounting for those or (2) the amount initially recognized
assets and liabilities depending on less, if appropriate, cumulative
their nature. amortization recognized in accordance
If amounts are initially recognized and with IAS 18.
measured in accordance with ASC 450,
the subsequent accounting and
measurement should be based on
that guidance.
Combination of entities The receiving entity records the net Outside the scope of IFRS 3(R). In
under common control assets at their carrying amounts in practice, either follow an approach
the accounts of the transferor similar to US GAAP (historical cost) or
(historical cost). apply the acquisition method (fair
value) if there is substance to the
transaction (policy election).
Other differences may arise due to different contingent consideration, initial recognition and
accounting requirements of other existing measurement of income taxes, initial recognition
US GAAP and IFRS literature (e.g., identifying and measurement of employee benefits).
the acquirer, definition of control, replacement
of share-based payment awards, initial Convergence
classification and subsequent measurement of No further convergence is planned at this time.

Inventory
Inventory
Similarities such as retail inventory method, are similar

ASC 330, Inventory, and IAS 2, Inventories, under both US GAAP and IFRS. Further, under
are based on the principle that the primary both sets of standards, the cost of inventory
basis of accounting for inventory is cost. Both includes all direct expenditures to ready
define inventory as assets held for sale in the inventory for sale, including allocable
ordinary course of business, in the process of overhead, while selling costs are excluded from
production for such sale or to be consumed the cost of inventories, as are most storage
in the production of goods or services. costs and general administrative costs.
Permissible techniques for cost measurement,
US GAAP IFRS
Costing methods LIFO is an acceptable method. LIFO is prohibited. Same cost formula
Consistent cost formula for all must be applied to all inventories
inventories similar in nature is not similar in nature or use to the entity.
explicitly required.
Measurement Inventory is carried at the lower of cost Inventory is carried at the lower of cost
or market. Market is defined as current or net realizable value. Net realizable
replacement cost, but not greater than value is defined as the estimated selling
net realizable value (estimated selling price less the estimated costs of
price less reasonable costs of completion and the estimated costs
completion and sale) and not less than necessary to make the sale.
net realizable value reduced by a
normal sales margin.
Reversal of inventory Any write-down of inventory to the Previously recognized impairment

write-downs lower of cost or market creates a new losses are reversed up to the amount
cost basis that subsequently cannot of the original impairment loss when
be reversed. the reasons for the impairment no
longer exist.
Permanent inventory Permanent markdowns do not affect Permanent markdowns affect the
markdowns under the the gross margins used in applying the average gross margin used in applying
retail inventory method RIM. Rather, such markdowns reduce the RIM. Reduction of the carrying cost
(RIM) the carrying cost of inventory to net of inventory to below the lower of cost
realizable value, less an allowance for or net realizable value is not allowed.
an approximately normal profit margin,
which may be less than both original
cost and net realizable value.
Convergence
No further convergence is planned at this time.

Long-lived assets
Long-lived assets
Similarities Depreciation
Although US GAAP does not have a Depreciation of long-lived assets is required
comprehensive standard that addresses on a systematic basis under both accounting
long-lived assets, its definition of property, plant models. ASC 250, Accounting Changes and
and equipment is similar to IAS 16, Property, Error Corrections, and IAS 8, Accounting
Plant and Equipment, which addresses tangible Policies, Changes in Accounting Estimates and
assets held for use that are expected to be used Errors, both treat changes in residual value and
for more than one reporting period. Other useful economic life as a change in accounting
concepts that are similar include the following: estimate requiring prospective treatment.
Cost Assets held for sale

Both accounting models have similar Assets held for sale criteria are similar in the
recognition criteria, requiring that costs be Impairment or Disposal of Long-Lived Assets
included in the cost of the asset if future subsections of ASC 360-10, Property, Plant
economic benefits are probable and can be and Equipment, and IFRS 5, Non-current Assets
reliably measured. Neither model allows the Held for Sale and Discontinued Operations.
capitalization of start-up costs, general Under both standards, the asset is measured
administrative and overhead costs or regular at the lower of its carrying amount or fair
maintenance. Both US GAAP and IFRS require value less costs to sell, the assets are not
that the costs of dismantling an asset and depreciated and they are presented separately
restoring its site (i.e., the costs of asset on the face of the balance sheet. Exchanges of
retirement under ASC 410-20, Asset nonmonetary similar productive assets are also
Retirement and Environmental Obligations treated similarly under ASC 845, Nonmonetary
Asset Retirement Obligations or IAS 37, Transactions, and IAS 16, Property, Plant and
Provisions, Contingent Liabilities and Equipment, both of which allow gain or loss
Contingent Assets) be included in the cost recognition if the exchange has commercial
of the asset when there is a legal obligation, substance and the fair value of the exchange
but IFRS requires provision in other can be reliably measured.
circumstances as well.
Capitalized interest
ASC 835-20, Interest Capitalization of
Interest, and IAS 23, Borrowing Costs,
require the capitalization of borrowing costs
(e.g., interest costs) directly attributable to
the acquisition, construction or production of
a qualifying asset. Qualifying assets are
generally defined similarly under both
accounting models. However, there are
differences between US GAAP and IFRS in
the measurement of eligible borrowing costs
for capitalization.

Long-lived assets
US GAAP IFRS
Revaluation of assets Revaluation not permitted. Revaluation is a permitted accounting

policy election for an entire class of
assets, requiring revaluation to fair
value on a regular basis.
Depreciation of asset Component depreciation permitted but Component depreciation required if

components not common. components of an asset have differing
patterns of benefit.
Measurement of Eligible borrowing costs do not include Eligible borrowing costs include
borrowing costs exchange rate differences. Interest exchange rate differences from foreign
earned on the investment of borrowed currency borrowings. For borrowings
funds generally cannot offset interest associated with a specific qualifying
costs incurred during the period. asset, actual borrowing costs are
For borrowings associated with a capitalized offset by investment
income earned on those borrowings.
specific qualifying asset, borrowing
costs equal to the weighted-average
accumulated expenditures times the
borrowing rate are capitalized.
Costs of a major Multiple accounting models have Costs that represent a replacement of
overhaul evolved in practice, including: expense a previously identified component of an
costs as incurred, capitalize costs and asset are capitalized if future economic
amortize through the date of the next benefits are probable and the costs can
overhaul, or follow the IFRS approach. be reliably measured.
Investment property Investment property is not separately Investment property is separately

defined and, therefore, is accounted defined in IAS 40, Investment Property,
for as held for use or held for sale. as property held to earn rent or for
capital appreciation (or both) and may
include property held by lessees under a
finance or operating lease. Investment
property may be accounted for on a
historical cost basis or on a fair value
basis as an accounting policy election.
Capitalized operating leases classified as
investment property must be accounted
for using the fair value model.
Other differences include: hedging gains and Convergence

losses related to the purchase of assets, The FASB has an ongoing project to consider
constructive obligations to retire assets, the whether entities should be provided an option
discount rate used to calculate asset or be required to measure investment
retirement costs and the accounting for properties at fair value.
changes in the residual value.

Intangible assets
Intangible assets
Similarities research phase of research and development

Both US GAAP (ASC 805, Business are expensed as incurred under both
Combinations, and ASC 350, Intangibles accounting models.
Goodwill and Other) and IFRS (IFRS 3(R), Amortization of intangible assets over their
Business Combinations, and IAS 38, Intangible estimated useful lives is required under both
Assets) define intangible assets as US GAAP and IFRS, with one US GAAP minor
nonmonetary assets without physical exception in ASC 985-20, Software Costs of
substance. The recognition criteria for both Software to be Sold, Leased or Marketed,
accounting models require that there be related to the amortization of computer
probable future economic benefits from costs software sold to others. In both sets of
that can be reliably measured, although some standards, if there is no foreseeable limit to
costs are never capitalized as intangible assets the period over which an intangible asset is
(e.g., start-up costs). Goodwill is recognized expected to generate net cash inflows to the
only in a business combination. With the entity, the useful life is considered to be
exception of development costs (addressed indefinite and the asset is not amortized.
below), internally developed intangibles are not Goodwill is never amortized under either
recognized as assets under either ASC 350 or US GAAP or IFRS.
IAS 38. Moreover, internal costs related to the
US GAAP IFRS
Development costs Development costs are expensed as Development costs are capitalized
incurred unless addressed by guidance when technical and economic feasibility
in another ASC Topic. Development of a project can be demonstrated in
costs related to computer software accordance with specific criteria,
developed for external use are including: demonstrating technical
capitalized once technological feasibility feasibility, intent to complete the asset,
is established in accordance with and ability to sell the asset in the
specific criteria (ASC 985-20). In the future. Although application of these
case of software developed for internal principles may be largely consistent
use, only those costs incurred during with ASC 985-20 and ASC 350-40,
the application development stage (as there is no separate guidance
defined in ASC 350-40, Intangibles addressing computer software
Goodwill and Other Internal-Use development costs.
Software) may be capitalized.
Advertising costs Advertising and promotional costs are Advertising and promotional costs are
either expensed as incurred or expensed as incurred. A prepayment
expensed when the advertising takes may be recognized as an asset only
place for the first time (policy choice). when payment for the goods or
Direct response advertising may be services is made in advance of the
capitalized if the specific criteria in entity having access to the goods or
ASC 340-20, Other Assets and receiving the services.
Deferred Costs Capitalized
Advertising Costs, are met.

Intangible assets
US GAAP IFRS
Revaluation Revaluation is not permitted. Revaluation to fair value of intangible

assets other than goodwill is a
permitted accounting policy election
for a class of intangible assets. Because
revaluation requires reference to an
active market for the specific type of
intangible, this is relatively uncommon
in practice.
Convergence

Impairment of long-lived assets, goodwill and
Impairment of long-lived assets, goodwill and intangible assets
intangible assets
Similarities ASC 350, Intangibles Goodwill and Other,
Under both US GAAP and IFRS, long-lived Impairment or Disposal of Long-Lived Assets
assets are not tested annually, but rather when subsections of ASC 360-10, Property, Plant
there are similarly defined indicators of and Equipment, and IAS 36, Impairment of
impairment. Both standards require goodwill Assets, apply to most long-lived and intangible
and intangible assets with indefinite useful lives assets, although some of the scope exceptions
to be tested at least annually for impairment listed in the standards differ. Despite the
and more frequently if impairment indicators similarity in overall objectives, differences exist
are present. In addition, both US GAAP and in the way impairment is tested, recognized
IFRS require that the impaired asset be written and measured.
down and an impairment loss recognized.
US GAAP IFRS
Method of determining Two-step approach requires that a One-step approach requires that
impairment long-lived recoverability test be performed first impairment loss calculation be
assets (carrying amount of the asset is performed if impairment indicators
compared with the sum of future exist.
undiscounted cash flows generated
through use and eventual disposition).
If it is determined that the asset is not
recoverable, an impairment loss
calculation is required.
Impairment loss The amount by which the carrying The amount by which the carrying
calculation long-lived amount of the asset exceeds its fair amount of the asset exceeds its
assets value, as calculated in accordance with recoverable amount; recoverable
ASC 820. amount is the higher of: (1) fair value
less costs to sell and (2) value in use
(the present value of future cash flows
in use, including disposal value).
Assignment of goodwill Goodwill is assigned to a reporting unit, Goodwill is allocated to a

which is defined as an operating cash-generating unit (CGU) or group of
segment or one level below an CGUs that represents the lowest level
operating segment (component). within the entity at which the goodwill
is monitored for internal management
purposes and cannot be larger than an
operating segment (before
aggregation) as defined in IFRS 8,
Operating Segments.

US GAAP IFRS
Method of determining Companies have the option to One-step approach requires that an
impairment goodwill qualitatively assess whether it is more impairment test be done at the CGU
likely than not that the fair value of a level by comparing the CGUs carrying
reporting unit is less than its carrying amount, including goodwill, with its
amount. If so, a two-step approach recoverable amount.
requires a recoverability test to be
performed first at the reporting unit level
(carrying amount of the reporting unit is
compared with the reporting unit fair
value). If the carrying amount of the
reporting unit exceeds its fair value, then
impairment testing must be performed.
Impairment loss The amount by which the carrying Impairment loss on the CGU (amount
calculation goodwill amount of goodwill exceeds the implied by which the CGUs carrying amount,
fair value of the goodwill within its including goodwill, exceeds its
reporting unit. recoverable amount) is allocated first
to reduce goodwill to zero, then,
subject to certain limitations, the
carrying amount of other assets in the
CGU are reduced pro rata, based on the
carrying amount of each asset.
Level of assessment Indefinite-lived intangible assets If the indefinite-lived intangible asset

indefinite-lived separately recognized should be does not generate cash inflows that are
intangible assets assessed for impairment individually largely independent of those from
unless they operate in concert with other assets or groups of assets, then
other indefinite-lived intangible assets the indefinite-lived intangible asset
as a single asset (i.e., the should be tested for impairment as part
indefinite-lived intangible assets are of the CGU to which it belongs, unless
essentially inseparable). Indefinite-lived certain conditions are met.
intangible assets may not be combined
with other assets (e.g., finite-lived
intangible assets or goodwill) for
purposes of an impairment test.
Impairment loss The amount by which the carrying value The amount by which the carrying
calculation of the asset exceeds its fair value. value of the asset exceeds its
indefinite-lived recoverable amount.
intangible assets
Reversal of loss Prohibited for all assets to be held Prohibited for goodwill. Other
and used. long-lived assets must be reviewed at
the end of each reporting period for
reversal indicators. If appropriate, loss
should be reversed up to the newly
estimated recoverable amount, not to
exceed the initial carrying amount
adjusted for depreciation.

Convergence
In July 2012, the FASB issued guidance that
gives companies the option to perform a
qualitative impairment assessment for
indefinite-lived intangible assets that may allow
them to skip the annual fair value calculation.
The guidance is effective for annual and interim
impairment tests performed for fiscal years
beginning after 15 September 2012. Early
adoption is permitted. The guidance is similar
to the qualitative screen to test goodwill
for impairment.

Financial instruments
Similarities IFRS 7, Financial Instruments: Disclosures;

The US GAAP guidance for financial instruments IFRS 9, Financial Instruments, if early adopted;
is located in numerous ASC Topics, including and IFRS 13, Fair Value Measurement.
ASC 310, Receivables; ASC 320, Investments Both US GAAP and IFRS (1) require financial
Debt and Equity Securities; ASC 470, Debt; instruments to be classified into specific
ASC 480, Distinguishing Liabilities from Equity; categories to determine the measurement of
ASC 815, Derivatives and Hedging; ASC 820, those instruments, (2) clarify when financial
Fair Value Measurement; ASC 825, Financial instruments should be recognized or
Instruments; ASC 860, Transfers and derecognized in financial statements, (3) require
Servicing; and ASC 948, Financial Services the recognition of all derivatives on the balance
Mortgage Banking. sheet and (4) require detailed disclosures in
IFRS guidance for financial instruments, on the the notes to the financial statements for the
other hand, is limited to IAS 32, Financial financial instruments reported in the balance
Instruments: Presentation; IAS 39, Financial sheet. Both sets of standards also allow hedge
Instruments: Recognition and Measurement; accounting and the use of a fair value option.
US GAAP IFRS
Debt vs. equity
Classification US GAAP specifically identifies certain Classification of certain instruments

instruments with characteristics of with characteristics of both debt and
both debt and equity that must be equity focuses on the contractual
classified as liabilities. obligation to deliver cash, assets or an
entitys own shares. Economic
compulsion does not constitute a
contractual obligation.
Certain other contracts that are Contracts that are indexed to, and
indexed to, and potentially settled in, potentially settled in, an entitys own
an entitys own stock may be classified stock are classified as equity if settled
as equity if they either: (1) require only by delivering a fixed number of
physical settlement or net-share shares for a fixed amount of cash.
settlement, or (2) give the issuer a
choice of net-cash settlement or
settlement in its own shares.
Compound (hybrid) Compound (hybrid) financial instruments Compound (hybrid) financial

financial instruments (e.g., convertible bonds) are not split into instruments are required to be split
debt and equity components unless into a debt and equity component and,
certain specific conditions are met, but if applicable, a derivative component.
they may be bifurcated into debt and The derivative component may be
derivative components, with the subject to fair value accounting.
derivative component subject to fair
value accounting.

US GAAP IFRS
Recognition and measurement
Impairment recognition Declines in fair value below cost may Generally, only objective evidence of
available-for-sale (AFS) result in an impairment loss being one or more credit loss events result
debt instruments recognized in the income statement on in an impairment being recognized in
an AFS debt instrument due solely to a the statement of comprehensive
change in interest rates (risk-free or income for an AFS debt instrument.
otherwise) if the entity has the intent The impairment loss is measured as
to sell the debt instrument or it is more the difference between the debt
likely than not that it will be required instruments amortized cost basis and
to sell the debt instrument before its fair value.
its anticipated recovery. In this
circumstance, the impairment loss is
measured as the difference between
the debt instruments amortized cost
basis and its fair value.
When a credit loss exists, but (1) the
entity does not intend to sell the debt
instrument, or (2) it is not more likely
than not that the entity will be required
to sell the debt instrument before the
recovery of the remaining cost basis,
the impairment is separated into the
amount representing the credit loss
and the amount related to all other
factors. The amount of the total
impairment related to the credit loss is
recognized in the income statement
and the amount related to all other
factors is recognized in other
comprehensive income, net of
applicable taxes.
When an impairment loss is recognized Impairment losses for AFS debt

in the income statement, a new cost instruments may be reversed through
basis in the instrument is established the statement of comprehensive
equal to the previous cost basis less the income if the fair value of the
impairment recognized in earnings. instrument increases in a subsequent
Impairment losses recognized in the period and the increase can be
income statement cannot be reversed objectively related to an event
for any future recoveries. occurring after the impairment loss
was recognized.

US GAAP IFRS
Impairment Impairment of an AFS equity Impairment of an AFS equity

recognition instrument is recognized in the income instrument is recognized in the
available-for-sale (AFS) statement if the equity instruments statement of comprehensive income
equity instruments fair value is not expected to recover when there is objective evidence that
sufficiently in the near term to allow a the AFS equity instrument is impaired
full recovery of the entitys cost basis. and the cost of the investment in the
An entity must have the intent and equity instrument may not be
ability to hold an impaired equity recovered. A significant or prolonged
instrument until such near-term decline in the fair value of an equity
recovery; otherwise an impairment loss instrument below its cost is considered
must be recognized in the income objective evidence of an impairment.
statement.
Impairment recognition The impairment loss of an HTM The impairment loss of an HTM
held-to-maturity (HTM) instrument is measured as the instrument is measured as the
debt instruments difference between its fair value and difference between the carrying
amortized cost basis. The amount of amount of the instrument and the
the total impairment related to the present value of estimated future cash
credit loss is recognized in the income flows discounted at the instruments
statement, and the amount related to original effective interest rate. The
all other factors is recognized in other carrying amount of the instrument is
comprehensive income. reduced either directly or through the
The carrying amount of an HTM use of an allowance account. The
investment after recognition of an amount of impairment loss is
impairment is the fair value of the debt recognized in the statement of
instrument at the date of the comprehensive income.
impairment. The new cost basis of the
debt instrument is equal to the
previous cost basis less the impairment
recognized in the income statement.
The impairment recognized in other
comprehensive income is accreted to
the carrying amount of the HTM
instrument through other
comprehensive income over its
remaining life.
Derivatives and hedging
Definition of a derivative To meet the definition of a derivative, The IFRS definition of a derivative does
and scope exceptions an instrument must have one or more not include a requirement that a
underlyings, one or more notional notional amount be indicated, nor is
amounts or payment provisions or net settlement a requirement. Certain
both, must require no initial net of the scope exceptions under IFRS
investment, as defined, and must be differ from those under US GAAP.
able to be settled net, as defined.
Certain scope exceptions exist for
instruments that would otherwise meet
these criteria.

US GAAP IFRS
Hedging a risk The risk components that may be Allows risks associated with only a
component of a financial hedged are specifically defined by the portion of the instruments cash flows
instrument literature, with no additional flexibility. or fair value (such as one or more
selected contractual cash flows or
portions of them or a percentage of the
fair value) provided that effectiveness
can be measured: that is, the portion is
identifiable and separately measurable.
Hedge effectiveness The shortcut method for interest rate The shortcut method for interest rate
swaps hedging recognized debt swaps hedging recognized debt is not
instruments is permitted. permitted.
The long-haul method of assessing and Under IFRS, assessment and
measuring hedge effectiveness for a fair measurement of hedge effectiveness
value hedge of the benchmark interest considers only the change in fair value
rate component of a fixed rate debt of the designated hedged portion of the
instrument requires that all contractual instruments cash flows, as long as the
cash flows be considered in calculating portion is identifiable and separately
the change in the hedged items fair measurable.
value even though only a component of
the contractual coupon payment is the
designated hedged item.
Hedge effectiveness Permitted. Not permitted.
inclusion of options
time value
Derecognition
Derecognition of Derecognition of financial assets Derecognition of financial assets is
financial assets (i.e., sales treatment) occurs when based on a mixed model that considers
effective control over the financial transfer of risks and rewards and
asset has been surrendered: control. Transfer of control is
The transferred financial assets are considered only when the transfer of
legally isolated from the transferor risks and rewards assessment is not
conclusive. If the transferor has neither
Each transferee (or, if the retained nor transferred substantially
transferee is a securitization entity all of the risks and rewards, there is
or an entity whose sole purpose is to then an evaluation of the transfer of
facilitate an asset-backed financing, control. Control is considered to be
each holder of its beneficial surrendered if the transferee has the
interests), has the right to pledge or practical ability to unilaterally sell the
exchange the transferred financial transferred asset to a third party
assets (or beneficial interests) without restrictions. There is no legal
The transferor does not maintain isolation test.
effective control over the
transferred financial assets or
beneficial interests (e.g., through a
call option or repurchase
agreement)

US GAAP IFRS
The derecognition criteria may be The derecognition provisions may be
applied to a portion of a financial asset applied to a portion of a financial asset
only if it mirrors the characteristics of if the cash flows are specifically
the original entire financial asset. identified or represent a pro rata share
of the financial asset or a pro rata
share of specifically identified cash
flows.
Loans and receivables
Measurement effective Requires catch-up approach, Requires the original effective interest
interest method retrospective method or prospective rate to be used throughout the life of the
method of calculating the interest for instrument for all financial assets and
amortized cost-based assets, liabilities, except for certain reclassified
depending on the type of instrument. financial assets, in which case the effect
of increases in cash flows are recognized
as prospective adjustments to the
effective interest rate.
Measurement loans Unless the fair value option is elected, Loans and receivables are carried at
and receivables loans and receivables are classified as amortized cost unless classified into
either: (1) held for investment, which the fair value through profit or loss
are measured at amortized cost, or category or the available for sale
(2) held for sale, which are measured category, both of which are carried at
at the lower of cost or fair value. fair value on the balance sheet.
Fair value after the adoption of IFRS 13
Day one gains and losses Entities are not precluded from Day one gains and losses on financial
recognizing day one gains and losses on instruments are recognized only when
financial instruments reported at fair their fair value is evidenced by a
value even when all inputs to the quoted price in an active market for an
measurement model are not identical asset or liability (i.e., a level 1
observable. Unlike IFRS, US GAAP or level 2 input) or based on a valuation
contains no specific requirements technique that uses only data from
regarding the observability of inputs, observable markets.
thereby potentially allowing for the
recognition of gains or losses at initial
recognition of an asset or liability even
when the fair value measurement is
based on a valuation model with
significant unobservable inputs
(i.e., Level 3 measurements).
Practical expedient for Entities are provided a practical No practical expedient to assume that
alternative investments expedient to estimate the fair value of NAV represents the fair value of
certain alternative investments (e.g., a certain alternative investments.
limited partner interest in a Private
Equity fund) using net asset value per
share (NAV) or its equivalent.

Other differences include: (1) definitions of a Impairment

derivative and embedded derivative, (2) cash The FASB is currently developing a single
flow hedge basis adjustment and measurement model (referred to as the
effectiveness testing, (3) normal purchase Current Expected Credit Loss model), which
and sale exception, (4) foreign exchange differs from the three-bucket model that was
gain and/or losses on AFS investments, jointly deliberated with the IASB. The FASB
5) recognition of basis adjustments when and the IASB anticipate issuing separate
hedging future transactions, (6) macro exposure drafts in the fourth quarter of 2012.
hedging, (7) hedging net investments, (8) cash Final standards are expected in 2013.
flow hedge of intercompany transactions,
(9) hedging with internal derivatives, Hedging
(10) impairment criteria for equity investments, The IASB finished redeliberating its hedging
(11) puttable minority interest, (12) netting and proposals (other than macro hedging). The
offsetting arrangements, (13) unit of account IASB posted a review draft of the hedge
eligible for derecognition and (14) accounting accounting portion of IFRS 9 to its website in
for servicing assets and liabilities. September 2012 and intends to finalize the
draft document during the fourth quarter of
Convergence 2012. The FASB has not yet begun its
The FASB and the IASB are engaged in redeliberations and will consider whether
projects to simplify and improve the and how to incorporate some of the IASBs
accounting for financial instruments. concepts into the FASB hedging model. The
Classification and measurement FASB will re-expose any changes to the
The Boards have completed their joint Codification before issuing final guidance.
deliberations on classification and
measurement, but the FASB continues to
re-deliberate certain aspects of the model.
The FASB has tentatively agreed to more
closely align its proposed model with the
IASBs approach in IFRS 9. In addition, the
IASB agreed to certain limited amendments
to IFRS 9 to promote convergence. The
FASBs published technical plan indicates
that the Board expects to fully re-expose its
classification and measurement model in the
first half of 2013. The IASB is expected to
expose its proposed limited amendments to
IFRS 9 sometime in the fourth quarter of 2012.

Foreign currency matters
Similarities resulting from changes in exchange rates

ASC 830, Foreign Currency Matters, and reported in income. Except for the translation
IAS 21, The Effects of Changes in Foreign of financial statements in hyperinflationary
Exchange Rates, are similar in their approach economies, the method used to translate
to foreign currency translation. Although the financial statements from the functional
criteria to determine an entitys functional currency to the reporting currency is the
currency are different under US GAAP and same. In addition, both US GAAP and IFRS
IFRS, both ASC 830 and IAS 21 generally require remeasurement into the functional
result in the same determination (i.e., the currency before translation into the reporting
currency of the entitys primary economic currency. Assets and liabilities are translated
environment). In addition, although there are at the period-end rate and income statement
differences in accounting for foreign currency amounts generally are translated at the
translation in hyperinflationary economies average rate, with the exchange differences
under ASC 830 and IAS 29, Financial reported in equity. Both sets of standards also
Reporting in Hyperinflationary Economies, require certain foreign exchange effects
both sets of standards require the related to net investments in foreign
identification of hyperinflationary economies operations to be accumulated in shareholders
and generally consider the same economies equity (i.e., the cumulative translation
to be hyperinflationary. adjustment portion of other comprehensive
income). In general, these amounts are
Both US GAAP and IFRS require foreign reflected in income when there is a sale,
currency transactions to be remeasured into complete liquidation or abandonment of the
an entitys functional currency with amounts foreign operation.
US GAAP IFRS
Translation/functional Local functional currency financial The functional currency must be

currency of foreign statements are remeasured as if the maintained. However, local functional
operations in a functional currency was the reporting currency financial statement amounts
hyperinflationary currency (US dollar in the case of a US not already measured at the current
economy parent) with resulting exchange rate at the end of the reporting period
differences recognized in income. (current and prior period) are indexed
using a general price index
(i.e., restated in terms of the
measuring unit current at the balance
sheet date with the resultant effects
recognized in income), and are then
translated to the reporting currency at
the current rate.

US GAAP IFRS
Consolidation of foreign A bottom-up approach is required in The method of consolidation is not

operations order to reflect the appropriate foreign specified and, as a result, either the
currency effects and hedges in place. direct or the step-by-step method
As such, an entity should be of consolidation is used. Under the
consolidated by the enterprise that direct method, each entity within
controls the entity. Therefore, the the consolidated group is directly
step-by-step method of consolidation translated into the functional currency
is used, whereby each entity is of the ultimate parent and then
consolidated into its immediate parent consolidated into the ultimate parent
until the ultimate parent has (i.e., the reporting entity) without regard
consolidated the financial statements to any intermediate parent. The choice
of all the entities below it. of consolidation method used could
affect the cumulative translation
adjustments deferred within equity at
intermediate levels, and therefore the
recycling of such exchange rate
differences upon disposal of an
intermediate foreign operation.
Convergence

Leases
Leases
Similarities Under both US GAAP and IFRS, a lessee would

The overall accounting for leases under record a capital (finance) lease by recognizing
US GAAP and IFRS (ASC 840, Leases and an asset and a liability, measured at the lower
IAS 17, Leases, respectively) is similar, of the present value of the minimum lease
although US GAAP has more specific application payments or fair value of the asset. A lessee
guidance than IFRS. Both focus on classifying would record an operating lease by
leases as either capital (IAS 17 uses the term recognizing expense on a straight-line basis
finance) or operating, and both separately over the lease term. Any incentives under an
discuss lessee and lessor accounting. operating lease are amortized on a
straight-line basis over the term of the lease.
Lessee accounting (excluding real estate)
Both US GAAP and IFRS require the party that Lessor accounting (excluding real estate)
bears substantially all the risks and rewards of Lessor accounting under ASC 840 and IAS 17
ownership of the leased property to recognize is similar and uses the above tests to determine
a lease asset and corresponding obligation, whether a lease is a sales-type/direct financing
and provide criteria (ASC 840) or indicators lease (referred to as a finance lease under
(IAS 17) to determine whether a lease is IAS 17) or an operating lease. ASC 840
capital or operating. The criteria or indicators specifies two additional criteria (i.e., collection
of a capital lease are similar in that both of lease payments is reasonably predictable
standards include the transfer of ownership to and no important uncertainties surround the
the lessee at the end of the lease term and a amount of unreimbursable costs to be incurred
purchase option that, at inception, is by the lessor) for a lessor to qualify for
reasonably expected to be exercised. ASC 840 sales-type/direct financing lease accounting
requires capital lease treatment if the lease that IAS 17 does not. Although not specified in
term is equal to or greater than 75% of the IAS 17, it is reasonable to expect that if these
assets economic life, while IAS 17 requires conditions exist, the same conclusion may be
such treatment when the lease term is a reached under both standards. If a lease is a
major part of the assets economic life. sales-type/direct financing (finance) lease,
ASC 840 specifies capital lease treatment if the leased asset is replaced with a lease
the present value of the minimum lease receivable. If a lease is classified as operating,
payments exceeds 90% of the assets fair rental income is recognized on a straight-line
value, while IAS 17 uses the term basis over the lease term, and the leased asset
substantially all of the fair value. In practice, is depreciated by the lessor over its useful life.
while ASC 840 specifies bright lines in certain
instances, IAS 17s general principles are
interpreted similarly to the bright-line tests.
As a result, lease classification is often the
same under ASC 840 and IAS 17.

Leases
US GAAP IFRS
Lease of real estate A lease of land and buildings that The land and building elements of the
transfers ownership to the lessee or lease are considered separately when
contains a bargain purchase option evaluating all indicators unless the
would be classified as a capital lease by amount that would initially be
the lessee, regardless of the relative recognized for the land element is
value of the land. immaterial, in which case they would
If the fair value of the land at inception be treated as a single unit for purposes
represents less than 25% of the total of lease classification. There is no 25%
fair value of the lease, the lessee test to determine whether to consider
accounts for the land and building the land and building separately when
components as a single unit for evaluating certain indicators.
purposes of evaluating the 75% and
90% tests noted above.
Otherwise, the lessee must consider
the land and building components
separately for purposes of evaluating
other lease classification criteria.
(Note: Only the building is subject to
the 75% and 90% tests in this case.)
Recognition of a gain or If the seller does not relinquish more Gain or loss is recognized immediately,
loss on a sale and than a minor part of the use of the subject to adjustment if the sales price
leaseback when the asset, gain or loss is generally deferred differs from fair value.
leaseback is an and amortized over the lease term. If
operating leaseback the seller relinquishes more than a
minor part of the use of the asset, then
part or all of a gain may be recognized
depending on the amount relinquished.
(Note: Does not apply if real estate is
involved, as the specialized rules are
very restrictive with respect to the
sellers continuing involvement, and
they may not allow for recognition of
the sale).
Recognition of gain or Generally, same as above for operating Gain or loss deferred and amortized
loss on a sale-leaseback leaseback in which the seller does not over the lease term.
when the leaseback is a relinquish more than a minor part of
capital leaseback the use of the asset.
Other differences include: (1) the treatment of rate used to discount minimum lease payments
a leveraged lease by a lessor under ASC 840 to the present value for purposes of
(IAS 17 does not have such classification), determining lease classification and
(2) real estate sale-leasebacks, (3) real estate subsequent recognition of a capital lease,
sales-type leases, (4) leases of land and (5) the including in the event of a renewal.

Leases
Convergence
As part of their convergence efforts, the
Boards are jointly redeliberating their
exposure drafts on lease accounting that
would create a common standard for lease
accounting and require lessees to recognize
the assets and liabilities arising under most
lease contracts on their balance sheets.
The Boards plan to re-expose their proposals in
2013 due to the significant changes made
during redeliberations.

Income taxes
Income taxes
Similarities temporary differences arising from

ASC 740, Income Taxes, and IAS 12, Income non-deductible goodwill are not recorded under
Taxes, require entities to account for both both US GAAP and IFRS, and tax effects of
current tax effects and expected future tax items accounted for directly in equity during the
consequences of events that have been current year are allocated directly to equity.
recognized (i.e., deferred taxes) using an asset Neither US GAAP nor IFRS permits the
and liability approach. Deferred taxes for discounting of deferred taxes.
US GAAP IFRS
Tax basis Tax basis is a question of fact under the Tax basis is generally the amount
tax law. For most assets and liabilities, deductible or taxable for tax purposes.
there is no dispute on this amount; The manner in which management
however, when uncertainty exists, it is intends to settle or recover the
determined in accordance with carrying amount affects the
ASC 740-10-25. determination of tax basis.
Taxes on intercompany Requires taxes paid on intercompany Requires taxes paid on intercompany
transfers of assets that profits to be deferred and prohibits the profits to be recognized as incurred
remain within a recognition of deferred taxes on and requires the recognition of
consolidated group temporary differences between the tax deferred taxes on temporary
bases of assets transferred between differences between the tax bases of
entities/tax jurisdictions that remain assets transferred between entities/tax
within the consolidated group. jurisdictions that remain within the
consolidated group.
Uncertain tax positions ASC 740-10-25 requires a two-step IFRS does not include specific guidance.
process, separating recognition from IAS 12 indicates that tax assets and
measurement. A benefit is recognized liabilities should be measured at the
when it is more likely than not to be amount expected to be paid based on
sustained based on the technical merits enacted or substantively enacted tax
of the position. Detection risk is legislation. Some adopt a one-step
precluded from being considered in approach that recognizes all uncertain
the analysis. The amount of benefit to tax positions at an expected value.
be recognized is based on the largest Others adopt a two-step approach
amount of tax benefit that is greater that recognizes only those uncertain
than 50% likely of being realized upon tax positions that are considered more
ultimate settlement. likely than not to result in a cash
outflow. Practice varies regarding
the consideration of detection risk in
the analysis.

Income taxes
US GAAP IFRS
Initial recognition Does not include an exemption like that Deferred tax effects arising from the
exemption under IFRS for non-recognition of initial recognition of an asset or liability
deferred tax effects for certain assets are not recognized when: (1) the
or liabilities. amounts did not arise from a business
combination, and (2) upon occurrence,
the transaction affects neither
accounting nor taxable profit
(e.g., acquisition of non-deductible
assets).
Recognition of deferred Recognized in full (except for certain Amounts are recognized only to the
tax assets outside basis differences), but extent it is probable (similar to more
valuation allowance reduces asset to likely than not under US GAAP) that
the amount that is more likely than not they will be realized.
to be realized.
Calculation of deferred Enacted tax rates must be used. Enacted or substantively enacted tax
tax asset or liability rates as of the balance sheet date must
be used.
Classification of deferred Current or non-current classification, All amounts classified as non-current in

tax assets and liabilities based on the nature of the related the balance sheet.
in balance sheet asset or liability, is required.
Recognition of deferred Recognition not required for Recognition required unless the
tax liabilities from investment in a foreign subsidiary or reporting entity has control over the
investments in corporate JV that is essentially timing of the reversal of the temporary
subsidiaries or joint permanent in duration, unless it difference and it is probable (more
ventures (JVs) (often becomes apparent that the difference likely than not) that the difference will
referred to as outside will reverse in the foreseeable future. not reverse in the foreseeable future.
basis differences)
Other differences include: (1) the allocation of Convergence

subsequent changes to deferred taxes to The Boards have abandoned plans for a joint
components of income or equity, (2) the convergence project. However, the IASB
calculation of deferred taxes on foreign and FASB have separately agreed to consider
nonmonetary assets and liabilities when the as a potential longer term project undertaking
local currency of an entity is different than its a fundamental review of accounting for income
functional currency, (3) the measurement of taxes.
deferred taxes when different tax rates apply
to distributed or undistributed profits and
(4) the recognition of deferred tax assets on
basis differences in domestic subsidiaries and
domestic joint ventures that are permanent
in duration.

Provisions and contingencies
Similarities Concept Statements in US GAAP (CON 5,

While the sources of guidance under US GAAP Recognition and Measurement in Financial
and IFRS differ significantly, the general Statements of Business Enterprises, and
recognition criteria for provisions are similar. CON 6, Elements of Financial Statements) is
IAS 37, Provisions, Contingent Liabilities and similar to the specific recognition criteria
Contingent Assets, provides the overall provided in IAS 37. Both US GAAP and IFRS
guidance for recognition and measurement require recognition of a loss based on the
criteria of provisions and contingencies. While probability of occurrence, although the
there is no equivalent single standard under definition of probability is different under
US GAAP, ASC 450, Contingencies, and a US GAAP and IFRS. Both US GAAP and IFRS
number of other standards deal with specific prohibit the recognition of provisions for costs
types of provisions and contingencies associated with future operating activities.
(e.g., ASC 410, Asset Retirement and Further, both US GAAP and IFRS require
Environmental Obligations; ASC 420, Exit or disclosures about a contingent liability whose
Disposal Cost Obligations). In addition, occurrence is more than remote but does not
although nonauthoritative, the guidance in two meet the recognition criteria.
US GAAP IFRS
Recognition threshold A loss must be probable (in which A loss must be probable (in which
probable is interpreted as likely) to be probable is interpreted as more likely
recognized. While ASC 450 does not than not) to be recognized. More likely
ascribe a percentage to probable, it is than not refers to a probability of
intended to denote a high likelihood greater than 50%.
(e.g., 70% or more).
Discounting provisions Provisions may be discounted only Provisions should be recorded at the
when the amount of the liability and estimated amount to settle or transfer
the timing of the payments are fixed the obligation taking into consideration
or reliably determinable, or when the the time value of money. The discount
obligation is a fair value obligation rate to be used should be a pre-tax
(e.g., an asset retirement obligation rate (or rates) that reflect(s) current
under ASC 410-20). The discount rate market assessments of the time value
to be used is dependent upon the nature of money and the risks specific to the
of the provision, and may vary from liability.
that used under IFRS. However, when a
provision is measured at fair value, the
time value of money and the risks
specific to the liability should be
considered.

US GAAP IFRS
Measurement of Most likely outcome within range Best estimate of obligation should be
provisions range of should be accrued. When no one accrued. For a large population of
possible outcomes outcome is more likely than the others, items being measured, such as
the minimum amount in the range of warranty costs, best estimate is
outcomes should be accrued. typically expected value, although
midpoint in the range may also be used
when any point in a continuous range is
as likely as another. Best estimate for a
single obligation may be the most likely
outcome, although other possible
outcomes should still be considered.
Restructuring costs Under ASC 420, once management has Once management has demonstrably
committed to a detailed exit plan, each committed (i.e., a legal or constructive
type of cost is examined to determine obligation has been incurred) to a
when recognized. Involuntary employee detailed exit plan, the general
termination costs under a one-time provisions of IAS 37 apply. Costs
benefit arrangement are recognized typically are recognized earlier than
over future service period, or under US GAAP because IAS 37
immediately if there is no future service focuses on the exit plan as a whole,
required. Other exit costs are expensed rather than individual cost components
when incurred. of the plan.
Convergence
The IASB proposed amendments to IAS 37 in
2005 and then proposed amendments to
IAS 37s measurement provisions in January
2010. The IASB is reviewing the project as part
of its agenda consultation process in 2012.

Revenue recognition
Revenue recognition
Similarities Significant differences

Revenue recognition under both US GAAP and Despite the similarities, differences in revenue
IFRS is tied to the completion of the earnings recognition may exist as a result of differing
process and the realization of assets from such levels of specificity between the two GAAPs.
completion. Under IAS 18, Revenue, revenue There is extensive guidance under US GAAP,
is defined as the gross inflow of economic which can be very prescriptive and often
benefits during the period arising in the course applies only to specific industries. For example,
of the ordinary activities of an entity when under US GAAP there are specific rules for the
those inflows result in increases in equity other recognition of software revenue and sales of
than increases relating to contributions from real estate, while comparable guidance does
equity participants. Under US GAAP (which is not exist under IFRS. In addition, the detailed
primarily included in ASC 605, Revenue US rules often contain exceptions for
Recognition), revenues represent actual or particular types of transactions. Further,
expected cash inflows that have occurred or public companies in the US must follow
will result from the entitys ongoing major additional guidance provided by the SEC staff.
operations. Under both US GAAP and IFRS, Conversely, a primary standard (IAS 18) exists
revenue is not recognized until it is both under IFRS, which contains general principles
realized (or realizable) and earned. Ultimately, and illustrative examples
both US GAAP and IFRS base revenue of specific transactions. Exclusive of the
recognition on the transfer of risks, and both industry-specific differences between the two
attempt to determine when the earnings GAAPs, following are the major differences in
process is complete. Both sets of standards revenue recognition.
contain revenue recognition criteria that,
while not identical, are similar. For example,
under IFRS, one recognition criterion is that
the amount of revenue can be measured
reliably, while US GAAP requires that the
consideration to be received from the buyer be
fixed or determinable.
US GAAP IFRS
Sale of goods Public companies must follow SAB Revenue is recognized only when risks
Topic 13, Revenue Recognition, which and rewards of ownership have been
requires that delivery has occurred (the transferred, the buyer has control of
risks and rewards of ownership have the goods, revenues can be measured
been transferred), there is persuasive reliably and it is probable that the
evidence of an arrangement, the fee is economic benefits will flow to the
fixed or determinable and collectibility company.
is reasonably assured.

Revenue recognition
US GAAP IFRS
Rendering of services Certain types of service revenue, Revenue may be recognized in

primarily relating to services sold accordance with long-term contract
with software, have been addressed accounting whenever revenues, costs
separately in US GAAP literature. and the stage of completion can be
All other service revenue should measured reliably and it is probable
follow SAB Topic 13. Application of that economic benefits will flow to
long-term contract accounting the company.
(ASC 605-35, Revenue Recognition
Construction-Type and Production-Type
Contracts) generally is not permitted for
non-construction services.
Multiple elements Specific criteria are required in order IAS 18 requires recognition of revenue
for each element to be a separate unit related to an element of a transaction if
of accounting, including delivered that element has commercial
elements must have standalone value. substance on its own; otherwise, the
If those criteria are met, revenue for separate elements must be linked and
each element of the transaction may be accounted for as a single transaction.
recognized when the element is IAS 18 does not provide specific
complete. criteria for making that determination.
Deferred receipt of Discounting to present value is Considered to be a financing

receivables required only in limited situations. agreement. Value of revenue to be
recognized is determined by
discounting all future receipts using an
imputed rate of interest.
Construction contracts Construction contracts are accounted Construction contracts are accounted
for using the percentage-of-completion for using the percentage-of-completion
method if certain criteria are met. method if certain criteria are met.
Otherwise, the completed contract Otherwise, revenue recognition is
method is used. limited to recoverable costs incurred.
The completed contract method is
not permitted.
Construction contracts may be, but Construction contracts are combined
are not required to be, combined or or segmented if certain criteria are
segmented if certain criteria are met. met. Criteria under IFRS differ from
those in US GAAP.
Convergence principle is that an entity would recognize

The FASB and the IASB are currently revenue to depict the transfer of goods or
conducting a joint project to develop a single services to customers at an amount that
revenue recognition standard for all contracts reflects the consideration the entity expects to
with customers. The Boards re-exposed their receive in exchange for those goods or
proposal in November 2011. The core services. The Boards intend to issue a final
standard in the first half of 2013.

Share-based payments
Similarities and IFRS 2 define the fair value of the

The US GAAP guidance for share-based transaction to be the amount at which the asset
payments, ASC 718, Compensation Stock or liability could be bought or sold in a current
Compensation, and ASC 505-50, Equity transaction between willing parties. Further,
Equity-Based Payments to Non-Employees, is they require the fair value of the shares to be
largely converged with the guidance in IFRS 2, measured based on a market price (if available)
Share-Based Payment. Both require a fair or estimated using an option-pricing model. In
value-based approach in accounting for the rare cases in which fair value cannot be
share-based payment arrangements whereby determined, both sets of standards allow the
an entity (1) acquires goods or services in use of intrinsic value, which is remeasured until
exchange for issuing share options or other settlement of the shares. In addition, the
equity instruments (collectively referred to as treatment of modifications and settlements of
shares in this guide), or (2) incurs liabilities share-based payments is similar in many
that are based, at least in part, on the price of respects. Finally, both standards require similar
its shares or that may require settlement in its disclosures in the financial statements to
shares. Under both US GAAP and IFRS, this provide investors with sufficient information to
guidance applies to transactions with both understand the types and extent to which the
employees and non-employees and is entity is entering into share-based payment
applicable to all companies. Both ASC 718 transactions.
US GAAP IFRS
Transactions with The US GAAP definition of an employee IFRS has a more general definition of
non-employees focuses primarily on the common law an employee that includes individuals
definition of an employee. who provide services similar to those
rendered by employees.
Either the fair value of: (1) the goods or Fair value of the transaction should be
services received, or (2) the equity based on the fair value of the goods or
instruments granted is used to value services received, and only on the fair
the transaction, whichever is more value of the equity instruments granted
reliably measurable. in the rare circumstance that the fair
value of the goods and services cannot
be reliably estimated.
Measurement date is the earlier of: Measurement date is the date the
(1) the date at which a commitment entity obtains the goods or the
for performance by the counterparty counterparty renders the services.
is reached, or (2) the date at which the No performance commitment
counterpartys performance is complete. concept exists.

US GAAP IFRS
Measurement and Entities make an accounting policy Entities must recognize compensation
recognition of expense election to recognize compensation cost on an accelerated basis and each
awards with graded cost for awards containing only service individual tranche must be separately
vesting features conditions either on a straight-line measured.
basis or on an accelerated basis,
regardless of whether the fair value of
the award is measured based on the
award as a whole or for each individual
tranche.
Equity repurchase Liability classification is not required if Liability classification is required (no
features at employees employee bears risks and rewards of six-month consideration exists).
election equity ownership for at least six
months from the date the shares are
issued or vest.
Deferred taxes Calculated based on the cumulative Calculated based on the estimated tax
GAAP expense recognized and trued up deduction determined at each
or down upon realization of the reporting date (e.g., intrinsic value).
tax benefit. If the tax deduction exceeds cumulative
If the tax benefit exceeds the deferred compensation cost, deferred tax based
tax asset, the excess (windfall benefit) on the excess is credited to
is credited directly to shareholders shareholders equity. If the tax deduction
equity. Any shortfall of the tax benefit is less than or equal to cumulative
below the deferred tax asset is charged compensation cost, deferred taxes are
to shareholders equity to the extent of recorded in income.
prior windfall benefits, and to tax
expense thereafter.
Modification of vesting If an award is modified such that the Probability of achieving vesting terms
terms that are service or performance condition, before and after modification is not
improbable of which was previously improbable of considered. Compensation cost is the
achievement achievement, is probable of achievement grant date fair value of the award,
as a result of the modification, the together with any incremental fair
compensation cost is based on the fair value at the modification date.
value of the modified award at the
modification date. Grant date fair value
of the original award is not recognized.
Convergence

Employee benefits other than
Employee benefits other than share-based payments
share-based payments
(subsequent to the adoption of IAS 19 amendments, Employee Benefits)
Similarities accounting for defined benefit plans has many
ASC 715, Compensation Retirement Benefits, similarities as well. The defined benefit
and ASC 712, Compensation Nonretirement obligation is the present value of benefits that
Post-Employment Benefits, and IAS 19, have accrued to employees through services
Employee Benefits, as amended, are the rendered up to that date, based on actuarial
principal sources of guidance for employee methods of calculation. Both US GAAP and
benefits other than share-based payments IFRS require the funded status of the defined
under US GAAP and IFRS, respectively. Under benefit plan to be recognized on the balance
both US GAAP and IFRS, the net periodic sheet as the difference between the present
benefit cost recognized for defined value of the benefit obligation and the fair
contribution plans is based on the contribution value of plan assets, although IAS 19 limits the
due from the employer in each period. The net plan asset recognized for overfunded plans.
US GAAP IFRS
Actuarial method used Different methods are required Projected unit credit method is
for defined benefit plans depending on the characteristics of the required in all cases.
plans benefit formula.
Calculation of the Based on either the fair value of plan Limited to the net interest on the net
expected return on plan assets or a calculated value that defined benefit liability (asset)
assets smoothes the effect of short-term calculated using the benefit obligations
market fluctuations over five years. discount rate.
Treatment of actuarial May be recognized in net income as Must be recognized immediately in

gains and losses in net they occur or deferred through a other comprehensive income. Gains
income corridor approach. and losses are not subsequently
recognized in net income.
Recognition of prior Initially deferred in other Immediate recognition in net income

service costs from plan comprehensive income and for vested and unvested benefits.
amendments subsequently recognized in net income
over the average remaining service
period of active employees or, when all
or almost all participants are inactive,
over the average remaining life
expectancy of those participants.
Settlements and Settlement gain or loss is recognized Gain or loss from settlement is
curtailments when the obligation is settled. recognized when it occurs. Change in
Curtailment losses are recognized when the defined benefit obligation from a
the curtailment is probable of occurring, curtailment is recognized at the earlier
while curtailment gains are recognized of when it occurs or when related
when the curtailment occurs. restructuring costs or termination
benefits are recognized.

Employee benefits other than share-based payments
US GAAP IFRS
Multi-employer pension Accounted for similar to a defined Plan is accounted for as either a defined
plans contribution plan. contribution or defined benefit plan
based on the terms (contractual and
constructive) of the plan. If a defined
benefit plan, must account for the
proportionate share of the plan similar
to any other defined benefit plan unless
sufficient information is not available.
Convergence

Earnings per share
Earnings per share
Similarities and diluted EPS on the face of the income

Entities whose common shares are publicly statement, and both use the treasury stock
traded, or that are in the process of issuing method for determining the effects of stock
such shares in the public markets, must options and warrants in the diluted EPS
disclose substantially the same earnings per calculation. Although both US GAAP and IFRS
share (EPS) information under ASC 260 and use similar methods of calculating EPS, there
IAS 33 (both titled Earnings Per Share). Both are a few detailed application differences.
standards require the presentation of basic
US GAAP IFRS
Contracts that may be Such contracts are presumed to be Such contracts are always assumed to
settled in shares or cash settled in shares unless evidence is be settled in shares.
at the issuers option provided to the contrary (i.e., the
issuers intent or stated policy is to
settle in cash).
Computation of For year-to-date and annual Regardless of whether the period is

year-to-date and annual computations when each period is profitable, the number of incremental
diluted EPS for options profitable, the number of incremental shares is computed as if the entire
and warrants (using the shares added to the denominator is the year-to-date period were the period
treasury stock method) weighted average of the incremental (that is, do not average the current
and for contingently shares that were added to the quarter with each of the prior quarters).
issuable shares denominator in each of the quarterly
computations.
Treatment of Potentially issuable shares are included Potentially issuable shares are
contingently convertible in diluted EPS using the if-converted considered contingently issuable and
debt method if one or more contingencies are included in diluted EPS using the
relate to a market price trigger if-converted method only if the
(e.g., the entitys share price), even if contingencies are satisfied at the end
the market price trigger is not satisfied of the reporting period.
at the end of the reporting period.
Convergence
The Boards previously began a short-term
convergence project on earnings per share,
but now consider the project a lower priority and
do not expect further action in the near term.

Segment reporting
Segment reporting
Similarities
The requirements for segment reporting under
both ASC 280, Segment Reporting, and
IFRS 8, Operating Segments, apply to entities
with public reporting requirements and are
based on a management approach in
identifying the reportable segments. The two
standards are largely converged, and only
limited differences exist.
US GAAP IFRS
Determination of Entities with a matrix form of All entities determine segments based
segments organization (i.e., in some public on the management approach,
entities, the chief operating decision regardless of form of organization.
maker (CODM) is responsible for
different product and service lines
worldwide, while other CODMs are
responsible for specific geographic
areas) must determine segments based
on products and services
Disclosure requirements Entities are not required to disclose If regularly reported to the CODM,
segment liabilities even if reported to segment liabilities are a required
the CODM. disclosure.
Convergence

Subsequent events
Subsequent events
Similarities adjustment to the financial statements. If the

Despite differences in terminology, the event occurring after the balance sheet date
accounting for subsequent events under but before the financial statements are issued
ASC 855, Subsequent Events, and IAS 10, relates to conditions that arose after the
Events after the Reporting Period, is largely balance sheet date, the financial statements
similar. An event that occurs during the are not adjusted, but disclosure may be
subsequent events period that provides necessary to keep the financial statements
additional evidence about conditions existing from being misleading.
at the balance sheet date usually results in an
US GAAP IFRS
Date through which Subsequent events are evaluated Subsequent events are evaluated
subsequent events must through the date the financial through the date that the financial
be evaluated statements are issued or available to be statements are authorized for issue.
issued. Financial statements are Depending on an entitys corporate
considered issued when they are widely governance structure and statutory
distributed to shareholders or other requirements, authorization may come
users in a form that complies with from management or a board of
US GAAP. Financial statements are directors.
considered available to be issued when
they are in a form that complies with
US GAAP and all necessary approvals
have been obtained. SEC registrants
and conduit-bond obligors evaluate
subsequent events through the date the
financial statements are issued, while all
other entities evaluate subsequent
events through the date that the
financial statements are available to
be issued.

Subsequent events
US GAAP IFRS
Reissuance of financial If the financial statements are reissued, IAS 10 does not specifically address the
statements events or transactions may have reissuance of financial statements and
occurred that require disclosure in the recognizes only one date through
reissued financial statements to keep which subsequent events are evaluated,
them from being misleading. However, that is, the date that the financial
an entity should not recognize events statements are authorized for issuance,
occurring between the time the even if they are being reissued. As a
financial statements were issued or result, only one date will be disclosed
available to be issued and the time the with respect to the evaluation of
financial statements were reissued subsequent events, and an entity could
unless the adjustment is required by have adjusting subsequent events in
US GAAP or regulatory requirements reissued financial statements.
(e.g., stock splits, discontinued
If financial statements are reissued, the
operations, or the effect of adopting a
date the reissued statements are
new accounting standard authorized for reissuance is disclosed.
retrospectively would give rise to an
adjustment). Entities must disclose
both the date that the financial
statements were originally issued and
the date that they were reissued if the
financial statements were revised due
to an error correction or retrospective
application of US GAAP.
Short-term loans Short-term loans are classified as Shortterm loans refinanced after the
refinanced with long-term if the entity intends to balance sheet date may not be
long-term loans after refinance the loan on a long-term basis reclassified to long-term liabilities
balance sheet date and, prior to issuing the financial unless the entity expected and had the
statements, the entity can discretion to refinance the obligation
demonstrate an ability to refinance the for at least 12 months at the balance
loan by meeting specific criteria. sheet date.
Convergence

Related parties
Related parties
Similarities outstanding balances) be disclosed for related

The reporting objective of both ASC 850 and party transactions. Neither standard contains
IAS 24 (both titled Related Party Disclosures) is any measurement or recognition requirements
to make financial statement users aware of the for related-party transactions. ASC 850 does
effect of related-party transactions on the not require disclosure of compensation of key
financial statements. The definitions of a management personnel as IAS 24 does, but the
related party are broadly similar, and both financial statement disclosure requirements of
standards require that the nature of the IAS 24 are similar to those required by the SEC
relationship, a description of the transaction outside the financial statements.
and the amounts involved (including
US GAAP IFRS
Scope ASC 850 requires disclosure of all IAS 24 provides a partial exemption
material related party transactions, from the disclosure requirements for
other than compensation transactions between
arrangements, expense allowances and government-related entities as well as
other similar items in the ordinary with the government itself.
course of business.
Convergence
No further convergence is planned at this time

Appendix The evolution of IFRS
This appendix summarizes key events in the evolution of international accounting standards.
Phase I The early years
1973: International Accounting 1999: IASC Board approved a
Standards Committee (IASC) formed. restructuring that resulted in the current
The IASC was founded to formulate and International Accounting Standards
publish International Accounting Standards Board (IASB). The newly constituted
(IAS) that would improve financial reporting IASB structure comprises: (1) the
and that could be accepted worldwide. IASC Foundation, an independent
In keeping with the original view that organization with 22 trustees who appoint
the IASCs function was to prohibit the IASB members, exercise oversight and
undesirable accounting practices, the raise the funds needed, (2) the IASB (Board),
original IAS permitted several alternative which has 12 full-time, independent board
accounting treatments. members and two part-time board members
with sole responsibility for setting
1994: IOSCO (International Organization
accounting standards, (3) the Standards
of Securities Commissions) completed
Advisory Council and (4) the International
its review of IASC standards and
Financial Reporting Interpretations
communicated its findings to the IASC.
Committee (IFRIC) (replacing the SIC) and
The review identified areas that required
is mandated with interpreting existing IAS
improvement before IOSCO would consider
and IFRS standards, and providing timely
recommending IAS for use in cross-border
guidance on matters not addressed by
listings and offerings.
current standards.
1994: IASC Advisory Council formed to
2000: IOSCO recommended that
oversee the IASC and manage its finances.
multinational issuers be allowed to use
1995: IASC developed its Core Standards IAS in cross-border offerings and listings.
Work Program. IOSCOs Technical
April 2001: IASB assumed
Committee agreed that the Work Program
standard-setting responsibility. The IASB
would result, upon successful completion,
met with representatives from eight national
in IAS comprising a comprehensive core
standard-setting bodies to coordinate
set of standards. The European
agendas and discuss convergence, and
Commission (EC) supported this agreement
adopted existing IAS standards and SIC
between IASC and IOSCO and associated
Interpretations.
itself with the work of the IASC toward
international harmonization of accounting February 2002: IFRIC assumed
standards. responsibility for interpretation of IFRS.
1997: Standing Interpretations Committee
(SIC) established to interpret IAS.

Phase II 2002 to 2005 Phase III 2006 to present

July 2002: EC required EU-listed February 2006: FASB and IASB published
companies to prepare their consolidated a Memorandum of Understanding (MOU).
financial statements in accordance with The MOU reaffirmed the Boards shared
IFRS as endorsed by the EC, generally objective to develop high quality, common
from 2005 onward. This was a critical accounting standards, and further
milestone that drove the expanded use elaborated on the Norwalk Agreement. The
of IFRS. Boards agreed to proceed along two tracks:
(1) a series of short-term projects designed
September 2002: FASB and IASB
to eliminate major differences in focused
execute the Norwalk Agreement and
areas and (2) the development of new
document a Memorandum of
common standards for accounting practices
Understanding. The Boards agreed to use
regarded as candidates for improvement.
best efforts to make their existing standards
fully compatible as soon as practicable and August 2006: CESR/SEC published a
to coordinate future work programs. joint work plan. The regulators agreed that
they could share issuer-specific matters,
December 2004: EC issued its
following set protocols, and that their
Transparency Directive. This directive
regular reviews of issuer filings would be
required non-EU companies with listings on
used to identify IFRS and US GAAP areas
an EU exchange to use IFRS unless the
that raise questions about quality and
Committee of European Securities
consistent application.
Regulators (CESR) determined that national
GAAP was equivalent to IFRS. CESR said November 2007: SEC eliminated the
in 2005 that US GAAP was equivalent, US GAAP reconciliation for foreign
subject to certain additional disclosure private issuers.
requirements.
Mid-2007, through 2008: SEC explored
April 2005: SEC published the the use of IFRS by US companies. The SEC
Roadmap. An article published by the issued a Concept Release seeking comment
SEC Chief Accountant discussed the on the possible use of IFRS by US domestic
possible elimination of the US GAAP registrants. In November 2008 the SEC
reconciliation for foreign private issuers issued for comment an updated Roadmap
that use IFRS by 2009, if not sooner. that anticipated mandatory reporting under
IFRS beginning in 2014, 2015 or 2016,
depending on the size of the company.

February 2010: SEC reaffirmed its July 2011: SEC staff sponsored a
commitment to IFRS. In February 2010, roundtable to discuss benefits or
the SEC voted unanimously to publish a challenges in potentially incorporating
statement reaffirming its commitment to IFRS into the financial reporting system
the goal of a single set of high-quality global for US issuers. The participants discussed
accounting standards and expressing investors understanding of IFRS, the impact
support for the continued convergence of on smaller public companies and on the
US GAAP and IFRS. The SEC said that after benefits and challenges in potentially
executing a Work Plan to address certain incorporating IFRS into the financial
questions, it would be able to make an reporting system for US issuers.
informed decision in 2011 about the further
November 2011: SEC staff issued
incorporation of IFRS into the US financial
two papers as part of its Work Plan:
reporting system.
An Analysis of IFRS in Practice and
October 2010: SEC issued a Progress A Comparison of US GAAP and IFRS.
Report on its Work Plan. The SEC staff papers provide additional
information for the SEC to review before it
May 2011: SEC staff published a paper
makes its decision.
detailing a possible approach for
incorporating IFRS into the US financial July 2012: SEC staff issued its final
reporting system. The SEC staff said the progress report on its Work Plan for
approach could achieve the goal of a single the Consideration of Incorporating
set of high-quality accounting standards and International Financial Reporting
could minimize the cost and effort needed Standards into the Financial Reporting
to incorporate IFRS into the US financial System for U.S. Issuers (The Final Report).
reporting system. The report summarized what the staff
learned in carrying out the work plan.
Spring through fall 2011: Convergence
schedule delayed. The FASB and the IASB The report does not include a
extend their timetables for completing their recommendation to the Commission about
priority convergence projects beyond their whether or how to incorporate IFRS into the
target of June 2011. The Boards decided US financial reporting system.
to re-expose proposals on revenue
The report notes that the Commission still
recognition and leases, which will result
needs to analyze and consider the threshold
in additional delays.
question whether and, if so, how and
when IFRS should be incorporated into the
US financial reporting system.
As a result, we do not expect a decision
from the Commission before 2013.

IFRS resources
Ernst & Young offers a variety of online resources that provide more detail about IFRS as well as
things to consider as you research the potential impact of IFRS on your company.
www.ey.com/ifrs AccountingLink
Ernst & Youngs global website contains a AccountingLink, at ey.com/us/accountinglink,
variety of free resources, including: is a virtual newsstand of US technical
accounting guidance and financial reporting
IFRS Outlook a bimonthly magazine with
thought leadership. It is a fast and easy way
articles that address matters such as
to get access to the publications produced by
Ernst & Youngs views on activities of the
Ernst & Youngs US Professional Practice
IASB and IFRS Interpretations Committee,
Group as well as the latest guidance proposed
the political environment surrounding the
by the standard setters. AccountingLink is
current state of standard setting or the
available free of charge.
broader implications of IFRS.
Global Accounting & Auditing
IFRS Developments announces significant
Information Tool (GAAIT)
decisions on technical topics that have a
GAAIT-Client Edition contains Ernst & Youngs
broad audience, application or appeal.
comprehensive proprietary technical guidance,
Other technical publications including a as well as all standard setter content.
variety of publications focused on specific GAAIT-Client Edition is available through a
standards and industries. paid subscription.
International GAAP Illustrative Financial International GAAP

Statements a set of illustrative interim Written by Ernst & Young and updated
and annual financial statements that annually, this is a comprehensive guide to
incorporates applicable presentation and interpreting and implementing IFRS and
disclosure requirements. Also provided is a provides insights into how complex practical
range of industry-specific illustrative issues should be resolved in the real world of
financial statements. global financial reporting.
From here you can also link to several

country-specific IFRS pages, including
Canada and the United States, and locate
information about free web-based IFRS
training and our Thought center
webcast series.
Please contact your local Ernst & Young representative for information about any of these resources.

Ernst & Young
Assurance | Tax | Transactions |

Advisory
About Ernst & Young

Ernst & Young is a global leader in
assurance, tax, transaction and advisory
services. Worldwide, our 167,000 people
are united by our shared values and an
unwavering commitment to quality. We
make a difference by helping our people,
our clients and our wider communities
achieve their potential.
Ernst & Young refers to the global

organization of member firms of
Ernst & Young Global Limited, each
of which is a separate legal entity.
Ernst & Young Global Limited, a UK
company limited by guarantee, does
not provide services to clients. For more
information about our organization,
please visit www.ey.com.
About Ernst & Youngs International

Financial Reporting Standards Group
The move to International Financial
Reporting Standards (IFRS) is the single
most important initiative in the financial
reporting world, the impact of which
stretches far beyond accounting to affect
every key decision you make, not just how
you report it. We have developed the
global resources people and knowledge
to support our client teams. And we work
to give you the benefit of our broad sector
experience, our deep subject matter
knowledge and the latest insights from our
work worldwide. Its how Ernst & Young
makes a difference.
2012 Ernst & Young LLP.

All Rights Reserved.
SCORE no. BB2435
This publication has been carefully prepared but it

necessarily contains information in summary form and
is therefore intended for general guidance only; it is
not intended to be a substitute for detailed research or
the exercise of professional judgment. The information
presented in this publication should not be construed
as legal, tax, accounting, or any other professional
advice or service. Ernst & Young LLP can accept no
responsibility for loss occasioned to any person acting
or refraining from action as a result of any material in
this publication. You should consult with
Ernst & Young LLP or other professional advisors
familiar with your particular factual situation for advice
concerning specific audit, tax or other matters before
making any decision.
ED None

Us Gaap Versus Ifrs: The Basics

Загружено:

Сведения о документе

Оригинальное название

Авторское право

Доступные форматы

Поделиться этим документом

Поделиться или встроить документ

Параметры публикации

Этот документ был вам полезен?

Это неприемлемый материал?

Авторское право:

Доступные форматы

Us Gaap Versus Ifrs: The Basics

Загружено:

Авторское право:

Доступные форматы

US GAAP versus IFRS

US GAAP versus IFRS The basics 1

Convergence continued to be a high priority on Key updates

US GAAP versus IFRS The basics 2

Similarities changes in shareholders equity to be presented

US GAAP versus IFRS The basics 3

Income statement Restricted to items that are both Prohibited.

Income statement Discontinued operations classification Discontinued operations classification

Disclosure of No general requirements within US Certain traditional concepts such as

Third balance sheet Not required. A third balance sheet is required as of

US GAAP versus IFRS The basics 4

Convergence The Boards have also delayed work on

US GAAP versus IFRS The basics 5

Similarities allow for condensed interim financial

US GAAP versus IFRS The basics 6

equity method investees/associates

US GAAP versus IFRS The basics 7

Preparation of Required, although certain Generally required, but there is a limited

US GAAP versus IFRS The basics 8

Uniform accounting policies between Uniform accounting policies between

US GAAP versus IFRS The basics 9

Convergence Contributions by Venturers. IFRS 11 establishes

US GAAP versus IFRS The basics 10

The IASB also issued IFRS 12, Disclosure of

US GAAP versus IFRS The basics 11

Similarities underlying transaction is measured at fair

Acquirees operating If the terms of an acquiree operating Separate recognition of an intangible

US GAAP versus IFRS The basics 12

US GAAP versus IFRS The basics 13

Similarities such as retail inventory method, are similar

Reversal of inventory Any write-down of inventory to the Previously recognized impairment

US GAAP versus IFRS The basics 14

Cost Assets held for sale

US GAAP versus IFRS The basics 15

Revaluation of assets Revaluation not permitted. Revaluation is a permitted accounting

Depreciation of asset Component depreciation permitted but Component depreciation required if

Investment property Investment property is not separately Investment property is separately

Other differences include: hedging gains and Convergence

US GAAP versus IFRS The basics 16

Similarities research phase of research and development

US GAAP versus IFRS The basics 17

Revaluation Revaluation is not permitted. Revaluation to fair value of intangible

US GAAP versus IFRS The basics 18

Assignment of goodwill Goodwill is assigned to a reporting unit, Goodwill is allocated to a

US GAAP versus IFRS The basics 19

Level of assessment Indefinite-lived intangible assets If the indefinite-lived intangible asset

US GAAP versus IFRS The basics 20

US GAAP versus IFRS The basics 21

Similarities IFRS 7, Financial Instruments: Disclosures;

Debt vs. equity

Classification US GAAP specifically identifies certain Classification of certain instruments

Compound (hybrid) Compound (hybrid) financial instruments Compound (hybrid) financial

US GAAP versus IFRS The basics 22

Recognition and measurement

When an impairment loss is recognized Impairment losses for AFS debt

US GAAP versus IFRS The basics 23

Impairment Impairment of an AFS equity Impairment of an AFS equity

Derivatives and hedging

US GAAP versus IFRS The basics 24

US GAAP versus IFRS The basics 25

US GAAP versus IFRS The basics 26

Other differences include: (1) definitions of a Impairment

US GAAP versus IFRS The basics 27