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.
