International V UK GAAP

Question 1

Conceptual framework

Answer 1

IFRS :

Qualitative characteristics split into FUNDAMENTAL and ENHANCING

two main measurement basis :
-Historical

-Current value ; one of :
Fair value , value in use , current cost

UK GAAP :
Only one tier of qualitative characteristics

Two measurement basis :
Cost
Fair value

Question 2

IAS 1

Answer 2

Primary financial statements

IFRS:
Must always prepare a SOCIE

Terminology - SOFP SPL Retained earnings

Abnormal material items disclosed separately on SPL

“Exceptional item “ doesn’t exist

UK GAAP:

Only need to produce single income statements and retained earnings if no other comprehensive income

Terminology - BS/SOFP P+L/ income statement , Profit and loss reserve

Extraordinary items are presented as an individual item within P&L

Question 3

IAS 2

Answer 3

Inventories

IFRS - no such requirement (point one)

No such guidance in IAS 2

UK GAAP

Inventories held for distribution at no or normal consideration, measured at adjusted cost

Additional guidance provided on what to include in production overheads

Impairment losses can be reversed if changes in economic circumstances which led to the impairment no longer exist

Question 4

IAS 8

Answer 4

Accounting policies, changes in accounting estimates and errors

IFRS :

IAS 8 contains no such statement

UK GAAP:

Explicitly states that a change to the cost model when a reliable measure of fair value is no longer available is NOT a change in accounting policy

Question 5

IAS 10

Answer 5

Events after the reporting period

IFRS :

Dividends declared after the year end are not recognised but DISCLOSED in the notes

UK GAAP :

Dividends declared after year end are not a liability but may be presented as a separate part of equity

Question 6

IAS 12

FRS 102

Answer 6

Tax

IFRS :

IAS 12 silent on the issues

UK GAAP:

FRS 102 specifically states that current tax should not be discounted

Question 7

IAS 16

FRS 101

Answer 7

Property plant and equipment

IFRS:

IAS 16 has extensive disclosure requirements

UK GAAP:

FRS 101 - entities do not have to present comparative information in respect of reconciliations of PPE

Question 8

IFRS 16

FRS 102

Answer 8

Leases

IFRS:

IFRS 16 does not for lessees distinguish between finance and operating leases

But requires nearly all leases to be recognised in the SOFP

There are exemptions for short leases and leases of low value assets

UK GAAP :

FRS 102 - Makes a distinction for lessees, between finance leases (substantially all the risk and rewards of ownership transferred)

And operating leases (all other leases)

Question 9

IFRS 5

Answer 9

Discontinued operations and assets held for sale

IFRS:
Discontinued operations are presented in a single line in SPL

Analysis appears in a note or statements of comprehensive income

Assets classified as held for sale if meet criteria

UK GAAP :

Discontinued operations are presented in a separate column to continuing operations

No equivalent concept so continue to depreciate until sale

Question 10

IFRS 15

Answer 10

Revenue from contracts with customers

IFRS:

IFRS 15 - adopts a five step approach to revenue recognition

Recognised as or when the performance obligation has been satisfied (step 5)

UK GAAP:
FRS 102 - does not contain the five step approach. It focuses on the issue of control, which is only one aspect of step 5 under IFRS 15. Control under FRS 103 focuses on transferring risks and rewards

Question 11

IAS 20

Answer 11

Accounting for government grants and disclosure of government assistance

IFRS:

Grants accounted for using capital or income approach

Capital approach allows choice of deferred income or netting off

UK GAAP:
A government grant may be recognised using the performance model or the accrual model, made on a class by class basis 

Under the accrual model the deferred income method must be used

Question 12

IAS 21

Answer 12

Effects of change in foreign exchange rates

IFRS:
Cumulative foreign exchange differences are shown as a depórtate component of equity

UK GAAP:

No such requirement

Question 13

IAS 23

Answer 13

Borrowing costs

IFRS:
IAS 24 requires borrowing costs to be capitalised when criteria met

UK GAAP:

Entities allowed choice of whether to capitalise borrowing costs or to recognise them as an expense as incurred

Question 14

IAS 24

Answer 14

Related party disclosures

IFRS:

Inter company transactions cancelled on consolidation do not need disclosing in the group accounts

UK GAAP:

No disclosure of related party transactions required between two or more members of a group as long as any subsidiary is wholly owned.

Question 15

IAS 38

Answer 15

Intangible assets

IFRS:

Must capitalise development expenditure when criteria met

IAS 38 permits both intangible assets with finite and infinite useful lives

There is no such requirement with IAS 38

Requires disclosure of a reconciliation of carrying amounts (net book value) of intangible assets at the beginning and end of the period when presenting comparative info

UK GAAP:
-Have the option to capitalise development expenditure

• all intangible assets are considered to have a finite useful life. If no reliable estimate can be made, it should not exceed 10 years
• an intangible asset acquired in a business combination is not recognised when it arises from legal or other contractual rights but there is no history or evidence of exchange transactions on which to base an estimated fair value
• entities applying FRS 101 are exempt from this requirement

Question 16

IAS 32 / IFRS 9 / IFRS 7 / IFRS 13

Answer 16

Financial instruments

IFRS :

No such exemptions

Initially valued at fair value

Various categories of subsequent measurement

UK GAAP:
Exemptions from disclosure of IFRS 7 & IFRS 13 provided disclosures given in group accounts

Initially measure at transaction price

Subsequent measurement is generally amortised cost of FV through P+L

Question 17

IAS 7

Answer 17

Cash flows

IFRS:

Applies to all entities

UK GAAP:

Exemption from the preparation of a statement of cash flows is available for a member of group where the parent entity prepares publicly available consolidated financial statements and that member is included in the consolidation

Question 18

Groups

Answer 18

IFRS (UK GAAP)

-NCI either FV or proportionate
(Always proportionate)

-Acquisition costs expensed
(Added to cost of investment)

-At ACQ date the FV of contingent consideration is recognised as part of consideration transferred

(Reasonable estimate of the FV of the amounts payable as contingent consideration added to cost of investment at acquisition date) (where probable it can be paid and measured reliably)

-If subsequent adjustments to FV occur within measurement period and as a result additional information about facts / circumstances at the ACQ date, those adjustments are related back to ACQ date increasing / decreasing goodwill

However if subsequent adjustments to Thai occur and don’t meet criteria above, they are an expense in PL and do not increase/decrease goodwill

(All subsequent adjustments to amount of contingent consideration are related back to ACQ date, increasing / decreasing goodwill )

-Goodwill is not amortised but is tested annually for impairment

(Goodwill amortised over max 10 years)

-Negative goodwill is credited to PL as a gain in a bargain purchase

(Negative goodwill is a separate item on SOFP)

-NO such exemption
(Sub excluded from consolidation is long term restrictions prevent control)

-No implicit goodwill is recognised or amortised
(Goodwill is calculated on associate or JV and amortisation is charged)

-specific disclosures required about associate and JV

(Less detailed info disclosed)