IFRS vs US GAAP Flashcards
Extraordinary Items
IFRS
No items are classified as extraordinary
U.S. GAAP
Some items that are both (1) unusual in nature and (2) infrequent in occurrence in teh environment in which the entity operates are classified as extrardinary items in the statement of income.
Interim Financial Reporting
IFRS
Each iterim period is a discrete reporting period
US GAAP
Each iterim period is treated primarily as an integral part of an annual period
Equity Method of Accounting: Accounting method for significant influence investments (20-50%) ownership but not control)
IFRS
The equity method is applied for such investments
US GAAP
The investor may choose either the fair value option (FVO)
or
the equity method
to account for such investments
Equity Method of Accounting: Significant influence is achieved in stages
IFRS
The investor applies the equity methoid prospectively from the moment significant influence is achieved
US GAAP
The investor must retroactively adjust the carrying amount of the investment, results of operations for the current and prior periods presented, and retained earnings. The adjustments are made as if the equity method had been in effect during all of the previous periods in which any percentage was held
Equity Method of Accounting: Loss of significant influence
IFRS
When significant influence is lost, any retained investment is measured at fair value
US GAAP
When significant influence is lost, any retained investment is measured based on the carrying amount on that day
Inventories: cost flow methods
IFRS
LIFO is not permitted
US GAAP
LIFO is an acceptable method
Inventories: measurement
IFRS
Inventory is measured at the lower of cost or net realizable value (NRV). NRV is the estimated selling price minus estimated costs of completion and disposal
US GAAP
Inventory is measured at the lower of cost or market. Market is the current cost to replace inventory, subject to certain limitations. Market should not eceed a ceiling equal to net realizable value (NRV) or be less than a floor equal to NRV reduced by an allowance for an approximately normal profit margin
Inventories: reversals of an inventory write-down
IFRS
An inventory write-down may be reversed in subsequent periods but not above original cost
US GAAP
Reversals of write-downs of inventory are prohibited in subsequent periods
Inventories: measurement at interim periods
IFRS
An inventory loss from a market decline must be recognized in the interim peirod in which it occured even if no loss is reasonably expected for the year.
US GAAP
An inventory loss from a market decline may be deferred in the interim period if no loss is reasonably anticipated dor the year.
Notemporary inventrory losses from a market decline must be recognized at the interim date. If the loss is recovered in another quater, it is recognized as a gain and treated as a change in estimate. The amount recovered is limited to the losses previously recognized.
PPE: Accounting policies
IFRS
PPE items may be accounted for under either the cost model or revaluation model. The same accounting policy must apply to an entire class of PPE
US GAAP
PPE itemes are accounted for using the cost model. They are reported at historical cost minus accumulated depreciation and impairment losses
PPE: The revaluation model
IFRS
An item of PPE whose fair value can be reliably measured may be carried at a revalued amount equal to fair value at the revaluation date (minus susequent accumulated depreciation & impairment losses). Revaluation is needed whenever fair value and the asset’s carrying amount differ materially.
I revaluation increase must be recognized in other comprehensive income & accumulated in equity as revlauation surplus. But the increase must be recognized in profit or loss to the extent it reverses decrease of the carrying amt of the same asset that was recognized in profit or loss.
A revaluation decrease must be recognized in profit or loss. But the decrease must be recognized in other comprehensive income to the extent of any credit in revaluation surplus for the same asset.
US GAAP
The revaluation model is not permitted.
PPE: Investment property
IFRS
Investment property is property (land, building, part of a building, or both) held by the owner or by the lessee under a finance lease to earn rental income or for captial appreciation or both.
Investment property may be accounted for according to the cost model or the fair vale model.
If the fair value model is chosen as the acct policy, all of the entity’s invesment property must be measured at fair value at the end of the reporting period. A gain or loss resulting from a change in the fair value of investment property must be recognized in profit or loss for the period in which it occurred. Investment property that is accounted for according to the fair value model is not depreciated.
US GAAP
Investment property is not separately defined. Thus, it is accounted for using the cost model applied to other items of PPE.
PPE: Component depreciation
IFRS
each part of an item with a cost significant to the total cost must be depreciated separately.
US GAAP
Component depreciation is permitted but not required under US GAAP.
Impairment of Assets: Test for Impairment
IFRS
One-step impairment test. The carrying amound of an asset is compared with its recoverable amount. An impairment loss is recognized equal to the excess of the carrying amount over the recoverable amount.
The recoverable amount is the greater of an asset’s fair value mius cost to sell OR value in us. Value in use of the asset is the present value of its expected cash flows.
US GAAP
Two-step impairment test.
Step 1: The carrying amount of an asset is not recoverable if it exceeds the sum of the undiscounted future cash flows expected from the use & disposition of the asset.
Step 2: If the carrying amount is not recoverable, an impairment loss may be recogniezed. It equals the excess of the carrying amount of the asset over its fair value.
Impairment of Assets: Reversals of impairment loss
IFRS
An impairment loss may be reversed in a subsequent period if a change in the estimates used to meaure the recoverable amount has occured. The reversal of a impairment loss is recognized immediately in profit or loss as income from continued operations.
US GAAP
A previously recognized impairment loss must not be reversed.
Intangible Assets: Accounting policies
IFRS
Intangible assets may be accounted for under either the cost model or revaluation model. The revalution model can be applied only if the intagible asset is traded in an active market.
US GAAP
Intangible assets are accounted for using the cost model.
Intangible Assets: Test for Impairment-Intangible asset with finite useful life
IFRS
One-step impairment test. The same test as for items of PPE. The carrying amt of an asset is compared with its recoverable amt.
An impairment loss may be reversed in a subsequent period if a chane in the estimates used to meaure the recvoerable amt has occurred.
US GAAP
Two-step impairment test. The same test as for items of PPE.
A previously recognized impairment loss must not be reversed.
Intangible Assets: Test for impairment-intangible asset with indefinite useful life other than goodwill
IFRS
A qualitative assesment is not an option.
One-step impairment test. The same test as for items of PPE. The carrying amt of an asset is compared with its recoverable amt.
US GAAP
An entity may first perform a qulitative assessment to determine whether it is necessary to perform the quantitative impairment test.
The quantiitative test compares the carrying amt with teh fair value of an asset. An impairment loss is recognized equal to the excess of the carrying amt over the fair value.
Intangible Assets: Test for impairment-goodwill
IFRS
A qualitative assesment is not an option.
The test for impairment of a cash-generating unti (CGU) to which goodwill has been allocated is wheather the carrying amt of the CGU (including allocated goodwill) exceeds its recoverable amt. Thus, the test has one step. An impairment loss for a CGU is allocated first to reduce allocated goodwill to zero and then pro rata to other assets of the CGU.
US GAAP
An entity may first perform a qualitative assessment to determine whether it is necessary to perform the quantitative impairment test.
Quantitative test. The fair value of the reporting unit is comared with its carrying amt, including goodwill. If the fair value is less than the carrying amt, the implied fair value of reporting-unit goodwill is compared with the carrying amt of that goodwill. an impairment loss is recognized for the excess of the carrying amt of reporting-unit goodwill over its implied fair value.
Intangible Assets: Research and development costs (other than computer software)
IFRS
Research costs must be expensed as incurred.
Development costs may result in recognition of an intangile asset if the:
1-entity can demonstrate the technical feasibility of the completion of the asset
2-intent to complet
3-ability to use or sell the asset
4-way in which it will generate probable future economic benefits
5-availability of resources to complete and use or sell the asset and
6-ability to measure reliably expenditures attributable to the asset.
US GAAP
Research and development (R&D) costs must be expensed as incurred.
Income Tax Accounting: Valuation allowance
IFRS
No valuation allowance is recognized.
US GAAP
A valuation allowance reduces a deferred tax asset. It is recognized if it is more likely than not (probability > 50%) that come portion of the asset will not be realized.
Income Tax Accounting: Deferred tax amounts-classification in the balance sheet
IFRS
All deferred tax amounts are classified as noncurrent.
US GAAP
Deferred tax amounts must be classified as current or noncurrent based on the classification of the realated asset or liability. If a deferred tax item is not related to an asset or liability for financial reporting, it is classified based on the expected reversal date of the temporary differences.
Defined Benefit Pension Plan: Prior service cost or credit
IFRS
Past service cost or credit is recognized as a component of pension expense in the period in which it arises.
US GAAP
Prior service cost or credit is initially recognized in accumulated other comprehensive income. subsequently, the amt recognized is amortized & reclassifeid from accum OCI to net pension expcense. The required amortization of prior service cost or credit assigns an equal amt to each future period of service of each employee who is expected to receive benefits under the plan.
Defined Benefit Pension Plan: Actuarial gains and losses
IFRS
Remeasurements of the net defiend benefit liability (asset) are recognized in OCI. They are never relassified to profit or loss in subsequent periods. Remeasurements iclude actuarial gains and losses.
US GAAP
An entity may choose among 3 methods of accounting for the net acuarial gain or loss:
1-The coridor method.
2-Net gains or losses can be recognized immediately in teh statement of income in the period in which they arise as a component of pension expense.
3-Any systematic method of amortizing net gains or losses included in accumulated OCI may be used.
Defined Benefit Pension Plan: Return on plan assets
IFRS
No expected return on plan assets is recognized. Instead, interest income on plan assets for the period is recognized in profit or loss. This interest income is calculated by using the same rate used to discount the dfined benefit obligation.
US GAAP
The expected return on plan assets component of pension expense is the market related value of plan assets at the beginning of the period multiplied by the expected long-term rate of return.
Convertible financial instruments
IFRS
The debt & equity elements of convertible debt are treated as separable. The issuer allocates to the liability component its fair value. The equity component is allocated the residual amt of the intial carrying amt of the instrument.
US GAAP
The debt & equity elements of convertible debt are reated as inseparable. The entire proceeds should be accounted for & reported as a liability until conversion.
Estimate stated within a range
IFRS
If the estimate of a provision is stated within a continuous range of possible outcomes & each point in the range is as likely as any other, the midpoint is used.
US GAAP
If the estimate is stated within a range and no amount within that range appears to be a better estimate than any other, the minimum should be accrued.
Noncontrolling Interest: Measurement
IFRS
A NCI may be measured at fair value or a proportionate share of the fair value of the acquiree’s identifiable net assets.
US GAAP
An NCI is measured at its acquisition-date fair value.
Statement of Cash Flows: Classification of dividends paid
IFRS
Dividends paid are classified as cash outflows either from: operating activites or financing activities.
US GAAP
Dividends paid are cash outflows from financing activities.
Statement of Cash Flows: classification of interest paid
IFRS
Interest paid is classified as a cash outflow either from: operating activites or financing activities.
US GAAP
Interest paid is a cash outflow from operating activities.
Statement of Cash Flows: Classification of interest and dividends received
IFRS
Interest & dividends received are classified as cash inflows either from: operating activities or investing activities.
US GAAP
Interest and dividends received are cash inflows from operating activities.
Statement of Cash Flows: Cash flows of a discontinued operation
IFRS
An entity must disclose the operating, investing, and financing csh flows of a discontinued operation.
US GAAP
No such requirement exists under US GAAP.
