(25) IFRS and GAAP comparison-document-2016.pdf

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Unformatted text preview: Comparison between U.S. GAAP and International Financial Reporting Standards April 2016 © 2016 Grant Thornton LLP All rights reserved U.S. member firm of Grant Thornton International Ltd Comparison between U.S. GAAP and International Financial Reporting Standards 2 Contents 1. Introduction ...................................................................................................................................... 5 International standards and the IASB ................................................................................................ 5 Financial accounting and reporting in the United States .................................................................... 5 IFRS and U.S. GAAP comparison ..................................................................................................... 6 2. 2.1 2.2 2.3 2.4 2.5 2.6 Overall financial statement presentation ....................................................................................... 9 General .............................................................................................................................................. 9 Statement of financial position / balance sheet ................................................................................ 11 Statement of comprehensive income / income statement ............................................................... 14 Statement of changes in equity ........................................................................................................ 18 Statement of cash flows ................................................................................................................... 18 Non-current assets held for sale and discontinued operations ........................................................ 21 3. 3.1 3.2 Accounting policies – general ...................................................................................................... 26 Accounting policies .......................................................................................................................... 26 Changes in accounting policies and correction of errors ................................................................. 28 4. 4.1 4.2 4.3 4.4 4.5 Assets ............................................................................................................................................. 31 Property, plant and equipment ......................................................................................................... 31 Investment property ......................................................................................................................... 36 Intangible assets .............................................................................................................................. 40 Impairment ....................................................................................................................................... 45 Inventories ........................................................................................................................................ 48 5. 5.1 5.1a 5.2 5.3 Liabilities ......................................................................................................................................... 52 Leases .............................................................................................................................................. 52 Leases (IFRS 16) ............................................................................................................................. 57 Provisions, contingent liabilities, and contingent assets .................................................................. 66 Taxation ........................................................................................................................................... 69 6. 6.1 6.1a 6.2 6.3 6.4 Income and expenditure ................................................................................................................ 76 Revenue ‒ general ........................................................................................................................... 76 Revenue ‒ general (IFRS 15) .......................................................................................................... 83 Revenue ‒ long-term contracts/construction contracts .................................................................... 89 Employee benefits ............................................................................................................................ 91 Share-based payments .................................................................................................................. 101 7. 7.1 7.2 7.3 7.4 7.1a 7.2a 7.3a 7.4a Financial instruments .................................................................................................................. 107 Recognition and measurement of financial assets ......................................................................... 109 Presentation, recognition, and measurement of financial liabilities and equity .............................. 113 Recognition and measurement of derivatives ................................................................................ 118 Hedge accounting .......................................................................................................................... 120 Recognition and measurement of financial assets (IFRS 9) .......................................................... 122 Recognition and measurement of financial liabilities and equity (IFRS 9) ..................................... 131 Recognition and measurement of derivatives (IFRS 9) ................................................................. 137 Hedge accounting (IFRS 9) ............................................................................................................ 140 8. 8.1 8.2 Group accounts, associates, equity method investees, and joint ventures .......................... 144 Basic requirements for group accounts .......................................................................................... 144 Joint arrangements ........................................................................................................................ 155 © 2016 Grant Thornton LLP All rights reserved U.S. member firm of Grant Thornton International Ltd Comparison between U.S. GAAP and International Financial Reporting Standards 3 8.3 Associates, joint ventures, and equity method investees ‒ equity method .................................... 159 9. Business combinations ............................................................................................................... 165 10. 10.1 10.2 10.3 10.4 10.5 10.6 10.7 Other matters ................................................................................................................................ 173 Fair value measurement ................................................................................................................ 173 Foreign currency translation ........................................................................................................... 179 Government grants and disclosure of government assistance ...................................................... 187 Earnings per share ......................................................................................................................... 188 Events after the reporting period .................................................................................................... 195 Operating segments ....................................................................................................................... 200 Related party disclosures ............................................................................................................... 205 Appendix A ............................................................................................................................................. 209 Listing of IFRS standards ........................................................................................................................ 209 Appendix B ............................................................................................................................................. 212 Listing of FASB Codification Topics ........................................................................................................ 212 Appendix C ............................................................................................................................................. 215 U.S. GAAP standards (Accounting Standards Updates (ASUs)) ............................................................ 215 Appendix D ............................................................................................................................................. 218 Listing of pre-codification U.S. GAAP standards ..................................................................................... 218 Appendix E ............................................................................................................................................. 219 Listing of SEC standards ......................................................................................................................... 219 This Grant Thornton LLP document provides information and comments on current accounting issues and developments as of April 2016. It is not a comprehensive analysis of the subject matter covered and is not intended to provide accounting or other advice with respect to the matters addressed. This document supports Grant Thornton LLP’s marketing of professional services, and is not written accounting or tax advice directed at the particular facts and circumstances of any person. If you are interested in the subject of this document we encourage you to contact us or an independent accounting or tax adviser to discuss the potential application to your particular situation. All relevant facts and circumstances, including the pertinent authoritative literature, need to be considered to arrive at conclusions that comply with matters addressed in this document. Moreover, nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein. To the extent this document may be considered to contain written tax advice, any written advice contained in, forwarded with, or attached to this document is not intended by Grant Thornton LLP to be used, and cannot be used, by any person for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code. For additional information on topics covered in this document, contact your Grant Thornton LLP Adviser. © 2016 Grant Thornton LLP All rights reserved U.S. member firm of Grant Thornton International Ltd Comparison between U.S. GAAP and International Financial Reporting Standards 4 Preface Over 120 countries currently require or permit the use of International Financial Reporting Standards (IFRS). Although public entities in the United States are required to apply U.S. GAAP, the Securities and Exchange Commission (SEC) continues to explore whether, and if so, when and how to incorporate IFRS into the U.S. financial reporting system. Currently, the SEC staff is discussing with the SEC Commissioners a potential path to allow domestic registrants to provide, in addition to U.S. GAAP financial statements, supplemental IFRS financial information with reconciliation to U.S. GAAP. The SEC staff’s current thinking is not to require the supplemental information to be a complete set of financial statements prepared in accordance with IFRS or to require such information to be audited. The SEC also continues to urge the FASB and the IASB to maintain their commitment to collaboration in support of the objective of a single set of high-quality, globally accepted accounting standards. While the SEC has accepted the financial statements of foreign private issuers prepared using IFRS as issued by the IASB for several years now, and despite the SEC’s Work Plan regarding the potential use of IFRS by domestic issuers, a difference in reporting requirements for these two groups of registrants remains, with no timeline for bridging this gap. Standard setters and regulators continue to emphasize the value of converged accounting standards, citing the recently issued revenue recognition standard as an example of convergence at work. However, consistency and comparability of published financial results for domestic versus foreign private issuers remains a topic of discussion. Even though the SEC has delayed making a final decision, many observers still believe that the U.S. capital markets eventually will incorporate IFRS into the U.S. financial reporting system in some manner. In the meantime, it is incumbent on preparers, auditors, and regulators to be aware of the differences that currently exist between IFRS and U.S. GAAP. We have prepared the Comparison between U.S. GAAP and International Financial Reporting Standards (Comparison) to help readers grasp some of the major similarities and differences between IFRS and U.S. GAAP. More emphasis is placed on recognition, measurement, and presentation guidelines, and less emphasis is placed on disclosure requirements. As more fully explained in Section 1, “Introduction,” this Comparison covers only those differences that we believe are most commonly encountered in practice. The Comparison includes standards issued as of April 2016. Recently issued guidance included in this Comparison but that is not yet effective has been shaded in the tables below for those entities that may wish to early adopt the guidance, if permitted. We have included Appendices that list the titles of all IFRS and U.S. GAAP standards, as well as SEC rules, regulations, and practices, that are referred to in this document. The Comparison is written by the IFRS Consulting Group of Grant Thornton LLP. The contributors are Sheri Fabian, Partner and Helen Bachman, Managing Director. © 2016 Grant Thornton LLP All rights reserved U.S. member firm of Grant Thornton International Ltd Comparison between U.S. GAAP and International Financial Reporting Standards 5 1. Introduction International standards and the IASB The IASB is responsible for the preparation and issuance of IFRS. Upon its inception in 2001, the IASB adopted the body of International Accounting Standards (IAS) issued by its predecessor, the International Accounting Standards Committee (IASC). The IFRS Interpretations Committee (IFRIC) assists the IASB in establishing and improving standards of financial accounting and reporting for the benefit of users, preparers, and auditors of financial statements. The IFRIC was established in 2002 when it replaced its predecessor, the Standing Interpretations Committee (SIC). Under IFRS, when a standard or an interpretation specifically applies to a transaction, other event, or condition, an entity would apply that guidance as well as any relevant implementation guidance issued by the IASB. In this document, the term “IFRS” refers collectively to standards issued by the IASB, IAS issued by the IASC, and Interpretations issued by the IFRIC and the SIC. The IASB uses the guidance in the Conceptual Framework for Financial Reporting to develop or revise IFRS as it establishes the underlying concepts for the preparation and presentation of financial statements and the recognition and measurement requirements in IFRS. In May 2015, the IASB issued an exposure draft, Conceptual Framework for Financial Reporting. The IASB hopes that the proposed amendments to the Conceptual Framework will improve financial reporting by providing a more complete, clearer and updated set of concepts to be used by the IASB in the development of IFRS and others in understanding and applying IFRS. The proposals include new guidance on measurement, financial performance, presentation and disclosure, derecognition and the reporting entity. At the same time, the IASB also issued an exposure draft, Updating References to the Conceptual Framework, which proposes to update, in existing IFRS, references to the existing Conceptual Framework. The IASB expects to issue a final revised Conceptual Framework by the end of 2016. In October 2015, the IASB issued an Exposure Draft, IFRS Practice Statement Application of Materiality to Financial Statements, which would provide guidance to assist management in applying the concept of materiality to general purpose financial statements prepared in accordance with IFRS. Financial accounting and reporting in the United States The FASB is the designated private-sector body responsible for establishing and improving standards of financial accounting and reporting in the United States for nongovernmental public and private enterprises, including small businesses and not-for-profit organizations. Those standards, collectively referred to as U.S. GAAP, govern the preparation of financial reports and are provided for the guidance and education of the public, including issuers, auditors, and users of financial information. The FASB Accounting Standards CodificationTM is the sole source of authoritative nongovernmental GAAP, except SEC guidance. SEC registrants must also comply with the Commission’s financial reporting requirements, including those promulgated in SEC Regulations S-X and S-K, Financial Reporting Releases (FRR), and Staff Accounting © 2016 Grant Thornton LLP All rights reserved U.S. member firm of Grant Thornton International Ltd Comparison between U.S. GAAP and International Financial Reporting Standards 6 Bulletins (SAB). The SABs represent practices followed by the staff in administering SEC disclosure requirements. In 2012, the Financial Accounting Foundation established the Private Company Council (PCC) to improve the standard setting process in the U.S. for private companies. The responsibilities of the PCC are to: Work with the FASB to establish criteria to decide whether and when to make exceptions or modifications to U.S. GAAP for private companies, and Serve as the primary advisory body on private companies to the FASB The final ASUs related to changes to U.S. GAAP for private companies are listed in Appendix C. In December 2013, the FASB also issued ASU 2013-12, Definition of a Public Business Entity, which adds that definition to the Master Glossary. The definition will be used by the FASB, the PCC, and the Emerging Issues Task Force in setting the scope of future financial accounting and reporting guidance in U.S. GAAP. The amendments; however, do not impact existing GAAP. Also, the definition of a public business entity is different than small and medium-sized entities as used by the IASB in providing financial accounting and reporting alternatives for those entities. The definition of small and medium-sized entities under IFRS focuses on whether an entity has public accountability rather than on a cost-benefit basis as used by the FASB in setting accounting and reporting guidance for private entities. In August 2015, the FASB issued a proposed ASU, Conceptual Framework for Financial Reporting. The proposed amendments would change the definition of materiality in Chapter 3, Qualitative Characteristics of Useful Financial Information, to indicate materiality is a legal concept. The FASB also has projects on its agenda related to measurement and presentation as it relates to the Conceptual Framework. The FASB is developing measurement concepts related to the meanings of key terms and what the objectives and qualitative characteristic imply for measurement, identifying appropriate types for measurement, and determining which measurements to use in specific circumstances. As it relates to presentation, the FASB is discussing how to group information in the financial sta...
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  • Summer '17
  • raman
  • Balance Sheet, International Financial Reporting Standards, Grant Thornton LLP

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