9A: IFRS VS GAAP Flashcards
Major Differences- US GAAP VS IFRS:
Financial Statement Presentation: comparative information
GAAP: no specific requirement for comparative info, (true for
nonpublic, SEC requires for public)
IFRS: requires comparative info for prior year
Major Differences- US GAAP VS IFRS:
Financial Statement Presentation: comprehensive income and changes in equity
GAAP: comprehensive income may be presented as standalone statement or at bottom of income statement, changes in equity May be presented in notes
IFRS: requires separate statement of comprehensive income and Statement of changes in equity or single statement of profit or loss and comprehensive income
Major Differences- US GAAP VS IFRS:
Financial Statement Presentation: extraordinary items
GAAP: presentation of certain items as extraordinary is required
IFRS: extraordinary items are not allowed
Major Differences- US GAAP VS IFRS:
Financial Statement Presentation: classification of deferred taxes
GAAP: deferred taxes are classified as current or Noncurrent in The balance sheet based on nature of related asset
IFRS: deferred taxes must be classified as Noncurrent in the Balance sheet
Major Differences- US GAAP VS IFRS:
Financial Statement Presentation: subsequent events evaluation
GAAP: subsequent events evaluated through the financial statement Issuance date
IFRS: subsequent events evaluated through financial statement Authorization to be issued date
Major Differences- US GAAP VS IFRS:
Revenue Recognition: construction contracts
GAAP: accounted for using percentage Completion method if certain criteria met, otherwise completed Contract method is used
IFRS: accounted for using percentage completion method if Certain criteria met, otherwise revenue recognition is limited to Cost incurred. Completed contract method not allowed
Major Differences- US GAAP VS IFRS:
Consolidated Financial Statements: subsidiary requirements
GAAP: no exemption from consolidating subsidiaries in generalPurpose financial statements
IFRS: under certain restrictive situations a subsidiary (normally Required to be consolidated) may exempt from the requirement
Major Differences- US GAAP VS IFRS:
Consolidated Financial Statements: noncontrolling interest measurement
GAAP: noncontrolling interest measured at fair value including goodwill
IFRS: noncontrolling interest may be measured either at fair value including goodwill or proportionate share of value of identifiable Net assets of acquiree excluding goodwill
Major Differences- US GAAP VS IFRS:
Consolidated Financial Statements: fair value option
GAAP: fair value option allowed for equity method investments And joint ventures
IFRS: fair value option prohibited for equity method investments And joint ventures
Major Differences- US GAAP VS IFRS:
Monetary Current Assets and Current Liabilities: Short term obligations expected to be refinanced
GAAP: can be classified as Noncurrent if entity has intent and Ability to refinanced as of balance sheet date
IFRS: can be classified as Noncurrent only if entity has entered Into agreement to refinance prior to balance sheet date
Major Differences- US GAAP VS IFRS:
Monetary Current Assets and Current Liabilities: Contingencies that are probable
GAAP: contingencies that are probable (>=70%) and can be Reasonably estimated are accrued
IFRS: contingencies that are probable (>=50%) and are measurable Are considered provisions and accrued
Major Differences- US GAAP VS IFRS:
Monetary Current Assets and Current Liabilities: accrue guidelines for contingencies
GAAP: for contingencies, accrue minimum in range if no amount is more likely than another
IFRS: for contingencies, accrue the midpoint in a range if no Amount is more likely than another
Major Differences- US GAAP VS IFRS:
Inventory: LIFO
GAAP: LIFO cost flow assumption is an acceptable method
IFRS: LIFO cost flow assumption is not allowed
Major Differences- US GAAP VS IFRS:
Inventory: inventory valuation
GAAP: inventories are valued at lower cost of market (betweenA ceiling and floor)
IFRS: inventories are valued at lower cost or net realizable value
Major Differences- US GAAP VS IFRS:
Inventory: impairment losses
GAAP: any impairment write downs create a new cost basis; Previously recognized impairment losses aren’t reversed
IFRS: previously recognized impairment losses are reversed
Major Differences- US GAAP VS IFRS:
Fixed Assets: revaluation
GAAP: revaluation not permitted
IFRS: revaluation of assets is permitted as an election for an Entire class of assets but must be done consistently
Major Differences- US GAAP VS IFRS:
Fixed Assets: investment property
GAAP: no separate accounting for investment property
IFRS: separate accounting is prescribed for investment property Versus property, plant and equipment
Under GAAP unless fixed assets are held for sale, they are valued using the…
Cost model
Under IFRS, fixed assets that are investment property are measured at…
Fair value
Major Differences- US GAAP VS IFRS:
Fixed Assets: allowable borrowing cost capitalization is calculated using…
GAAP: (weighted average accumulated expenditure) X(borrowing rate)
IFRS: (Actual borrowing costs) - (any earnings on investments of borrowing)
Major Differences- US GAAP VS IFRS:
Fixed Assets: biological assets
GAAP: biological assets are not a separate category
IFRS: biological assets are a separate category and not included In property, plant and equipment
Major Differences- US GAAP VS IFRS:
Fixed Assets: separate components of an asset
GAAP: there is no requirement to account for separate components Of an asset
IFRS: major components of an asset have significantly different Patterns of consumption or economic benefits, the entity must Allocate costs to major components and depreciate them separately
Major Differences- US GAAP VS IFRS:
Fixed Assets: impairment approach
GAAP: 2-step impairment approach
IFRS: one-step impairment approach
Major Differences- US GAAP VS IFRS:
Fixed Assets: impairment is a function of…
GAAP: impairment is a function of fair value and carrying value
IFRS: impairment is a function of recoverable amount and carrying Value
Major Differences- US GAAP VS IFRS:
Fixed Assets: impairment losses
GAAP: impairment losses are not reversed
IFRS: impairment losses may be reversed in future periods
Major Differences- US GAAP VS IFRS:
Intangible assets: development costs
GAAP: unless specific ASC guidance exists (software) development Costs are expensed
IFRS: development costs may be capitalized if specific criteria Are met
Major Differences- US GAAP VS IFRS:
Intangible assets: revaluation
GAAP: revaluation is not permitted
IFRS: revaluation of intangible assets other than goodwill is permitted although uncommon
Major Differences- US GAAP VS IFRS:
Intangible assets: goodwill impairment
GAAP: goodwill impairment may be qualitatively assessed to Determine if 2-step impairment test is necessary
IFRS: one-step impairment test for goodwill must be performed
Major Differences- US GAAP VS IFRS:
Intangible assets: impairment loss is a function of…
GAAP: impairment loss is a function of carrying value and fair Value
IFRS: impairment loss is a function of carrying value and recoverable amount
Major Differences- US GAAP VS IFRS:
Intangible assets: impairment losses
GAAP: impairment losses are not reversed
IFRS: Impairment losses, except those related to goodwill may, be Reversed
Major Differences- US GAAP VS IFRS:
Financial Investments: compound financial instruments
GAAP: compound (hybrid) financial instruments are not split into Debt and equity components unless certain requirements are met, But they may bifurcate into debt and derivative components
IFRS: compound financial interests (convertible bonds) are Split into debt, equity and derivative components (if applicable)
Major Differences- US GAAP VS IFRS:
Financial Investments: result in impairment loss
GAAP: declines in fair value below cost result in impairment loss Solely based on change in interest rate unless entity has ability And intent to hold debt till maturity
IFRS: generally, only evidence of credit default results in impairment Loss for an available for sale debt instrument
Major Differences- US GAAP VS IFRS:
Under GAAP, when an impairment is recognized for financial investments through the income statement, a new…
Cost basis is established and such losses can’t be reversed
Major Differences- US GAAP VS IFRS:
Under IFRS, impairment losses in available for sale investments…
May be reversed in future periods
Under GAAP for financial investments, unless the fair value option is elected, loans and receivables are classified as either…2 things (and how they are measured)
1 held for investment (measured at amortized cost)
2 held for sale, which is measured at lower of cost or fair value
Major Differences- US GAAP VS IFRS:
Under IFRS for financial investments, loans and receivables are measured at amortized cost unless classified into the…
Fair Value Through Profit or Loss category
or the Available for Sale category, both which are carried at fair value
Major Differences- US GAAP VS IFRS:
Financial Investments: impairment losses related to AFS
GAAP: impairment losses related to AFS securities are recognized in the income statement and can’t be reversed
IFRS: Impairment losses for AFS securities are recognized in the statement of other comprehensive income and may be reversed
Major Differences- US GAAP VS IFRS:
Leased Assets: operating leases
GAAP: operating leased assets are never recorded on the balance Sheet
IFRS: assets held by lessee under operating leases may be Capitalized on the balance sheet if certain criteria are met
Major Differences- US GAAP VS IFRS:
Under GAAP, a lease for land and building that transfers ownership to the lessee or contains a bargain purchase option would be classified as a…
2) if the fair value of the land at inception represents 25% or more of total fair value, the lessee must consider…
Capital lease, regardless of relative value of land
2) the components separately when evaluating the lease
Major Differences- US GAAP VS IFRS:
Under IFRS, when land and buildings are leased, elements of the lease are considered…
Separately when evaluating the lease unless the amount for the Land element is immaterial
Major Differences- US GAAP VS IFRS:
Pensions: Actuarial gains and losses
GAAP: actuarial gains and losses are recognized through the Corridor approach or recognized as they occur
IFRS: actuarial gains and losses must be recognized in other Comprehensive income immediately
Major Differences- US GAAP VS IFRS:
Pensions: prior service cost
GAAP: prior service cost is initially deferred in other comprehensive Income and recognized using the future years of service method Or average remaining service period method
IFRS: prior service cost is recognized immediately in income
Major Differences- US GAAP VS IFRS:
Income Taxes: deferred tax assets
GAAP: recognized in full, but valuation allowances reduce them to Amount that’s more likely than not to be realized
IFRS: deferred tax assets are recognized immediately only to extent It is probable that they will be realized
