UK GAAP differences

Question 1

Conceptual framework characteristics

Answer 1

IFRS:
- 6 qualitative characteristics included

UK GAAP:
- 10 qualitative characteristics
- does not differentiate between fundamental and enhancing qualitative characteristics

Question 2

Concepts of conceptual framework

Answer 2

IFRS:
- does not identify materiality, substance over form, prudence, balance between benefit and cost

UK GAAP:
- identifies a wider range of qualitative characteristics with materiality, substance over form, prudence etc given explicit reference

Question 3

Conceptual framework assets

Answer 3

IFRS:
- states an asset has the potential to produce economic benefits

UK GAAP:
- asset definition is expected economic benefits are expected to flow to the entity

Question 4

IAS 1 Presentation of financial statements

Answer 4

IFRS:
- IAS 1 provides recommended proformas
- does not allow a statement of income and retained earnings in place of the SOCI and SOCE
- requirement for fair presentation which is similar to companies act true and fair view

UK GAAP:
- prepared in accordance with companies act 2006, therefore a prescribed format
- allows the option under certain circumstances to replace SOCI and SOCE with above
- uses the term true and fair view

Question 5

IAS 2 inventories

Answer 5

IFRS:
- net realisable value is based on a fair value

UK GAAP:
- refers to estimated selling price less costs to complete and sell

Question 6

IFRS 5 Discontinued operations

Answer 6

IFRS:
- discontinued operations are shown as one line on the SPL

UK GAAP:
- discontinued operations are shown in a separate column of the income statement

Question 7

IFRS 5 assets held for sale

Answer 7

IFRS:
- when criteria are met, NCA HFS is categorised as current and no longer depreciated

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

Question 8

IFRS 15 Revenue

Answer 8

IFRS:
- adopts 5 stage approach COPAR

UK GAAP:
- does not have a 5 stage approach although treatment gives similar outcome

Question 9

IAS 23 Borrowing costs

Answer 9

IFRS:
- eligible borrowing costs must be capitalised

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

Question 10

IAS 38 Intangible assets development costs

Answer 10

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

UK GAAP:
- there is a choice to capitalised or expense development costs

Question 11

IAS 38 intangible assets useful lives of intangibles

Answer 11

IFRS:
- intangibles can have an indefinite useful life

UK GAAP:
- all intangibles have a finite useful life, with a rebuttable presumption that this does not exceed 10 years

Question 12

IAS 20 government grants, capital grants

Answer 12

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

UK GAAP:
- deferred income method only

Question 13

IFRS 9 financial instruments

Answer 13

IFRS:
- initial measurement at fair value

UK GAAP:
- initial measurement at transaction price

Question 14

IFRS 3 business combinations, goodwill and gain on bargain purchase

Answer 14

IFRS:
- goodwill is not amortised but tested annually for impairment
- impairment reversal not allowed for goodwill
- gain on bargain purchase is recognised through the SPL

UK GAAP:
- goodwill amortised over useful life (10 year rebuttable presumption)
- impairment reversal on goodwill allowed
- gain on bargain purchase called negative goodwill and is shown separately in the asset section of CSFP as a deduction from positive goodwill

Question 15

IFRS 3 business combinations acquisition costs

Answer 15

IFRS:
- acquisition costs are expensed to the SPL

UK GAAP:
- acquisition costs are added to consideration

Question 16

IFRS 3 business combinations NCI

Answer 16

IFRS:
- choice of fair value method or proportionate method

UK GAAP:
- only the proportionate method is allowed