IFRS vs UK GAAP

Question 1

Formats of FSs

Answer 1

IAS:

1. Provides recommended formats
2. Does not allow a ‘Statement of income and retained earnings’ in place of the SOCI and SOCE
3. ‘Fair presentation’ or ‘true and fair override’

UK GAAP:

1. Prepared in accordance with CA2006 (prescribed format)
2. Allows a ‘Statement of income and retained earnings’
3. ‘True and fair’/’fair presentation’/’presents fairly’ + override

Question 2

Inventories

Answer 2

IFRS:
1. NRV is based on fair value achieved in the open market

UK GAAP:
1. NRV is referred to as the estimated selling price less costs to complete and sell (selling price is estimated by the specific entity)

Question 3

Discontinued Operations

Answer 3

IFRS:
Shown as one line on the SPL with further detail in the notes

UK GAAP:
CA2006 dictates they are shown in a separate column in income

Question 4

Assets held for sale

Answer 4

IFRS:
When criteria are met, NCA HFS are categorised as current and no longer depreciated

UK GAAP:
No NCA HFS category exists so assets continue to be depreciated up to disposal

Question 5

Revenue

Answer 5

IFRS:
Adopts 5 stage approach

UK GAAP:
Does not have a 5 stage approach although treatment gives similar outcomes

Question 6

Borrowing Costs

Answer 6

IFRS:
Eligible borrowing costs must be capitalised

UK GAAP:
There is a choice to capitalise or expense borrowing costs

Question 7

Development Costs

Answer 7

IFRS:
When the criteria are met, development costs must be capitalised

UK GAAP:
There is a choice to capitalise or expense development costs

Question 8

UL of Intangibles

Answer 8

IFRS:
Intangibles can have an indefinite UL

UK GAAP:
All intangibles have a finite UL, with a rebuttable presumption that this does not exceed 10 years

Question 9

Capital/Government Grants

Answer 9

IFRS:
Choice of using either the deferred income or netting off method

UK GAAP:
Only the deferred income method is prescribed

Question 10

Initial recognition of financial instruments

Answer 10

IFRS:
Initial measurement at fair value

UK GAAP:
Initial measurement at transaction price

Question 11

Goodwill

Answer 11

IFRS:

1. Goodwill is not amortised but tested annually for impairment
2. Impairment reversal not allowed for goodwill
3. Gain on bargain purchase is recognised through the SPL

UK GAAP:

1. Goodwill amortised over UL (10 year rebuttal presumption)
2. Impairment reversal is allowed for goodwill
3. Gain on bargain purchase is called negative GW and is shown separately in the asset section of the CSFP as a deduction

Question 12

Acquisition Costs

Answer 12

IFRS:
Acquisition costs are expensed to the SPL

UK GAAP:
Acquisition costs are added to consideration

Question 13

NCI

Answer 13

IFRS:
Choice of FV or proportionate method

UK GAAP:
Only the proportionate method is allowed

Question 14

Exclusions

Answer 14

IFRS:
No exclusions allowed from consolidation

UK GAAP:
Sub should be excluded from consol where severe long term restrictions apply or where sub is held exclusively for resale

Question 15

Goodwill (JVs or Associates)

Answer 15

IFRS:
No separate goodwill is recognised

UK GAAP:
Implicit goodwill should be recognised and amortised

Question 16

Accounting policies, changes in accounting estimates

Answer 16

IFRS:
Does not comment on whether a change to the cost model when FV can no longer be determined reliably is a change of accounting policy or not

UK GAAP:
Change to cost model (when reliable measure of FV no longer available) not to be treated as a change of accountancy policy

Question 17

Related Party Disclosures

Answer 17

UK GAAP:
Does not require the disclosure of transactions entered between 2+ members of a group (as long as sub is wholly owned by the other party)

Question 18

Leases

Answer 18

IFRS:
Leases are either identified as leases or not at all (No finance/operating split)
1. All leased assets (>12 months) are now to be capitalised and recognised as ‘Right of use’ assets by lessees
2. Leases of <12 months are charge to the SPL on a straightline basis

UK GAAP:
Either recognised as finance or operating leases
1. Finance lease is a lease that transfers substantially all the risks and rewards of ownership to the party using the asset (like ROU)
2. Operating lease is any lease other than a finance lease, they are charged to P&L a/c on a straightline basis