Uk GAAP vs IFRS

Question 1

Differences on acquisition of a subsidiary

Answer 1

Goodwill measured the same for both

GAAP - can only use proportionate method - then goodwill amortized over useful life - usually 10 years

IFRS - has choice to measure NcI using proportionate or fair value method - amortization not permitted instead annual impairment review

Question 2

Differences on disposal of a subsidiary

Answer 2

GAAP - requires detailed analysis of discontinued operations on face of P/L

IFRS - only require single line on face of P/L

Question 3

Difference between UK GAAP and IFRS for held for sale assets

Answer 3

UK GAAP - generally continues as normal without regard for the disposal, including depreciation until the date of disposal

IFRS 5 - depreciation ceases while held for sale, asset separately classified as non current asset held for sale as part of CA on SOFP

Question 4

Difference between UK GAAP and IFRS for discontinued operations

Answer 4

Uk GAAP - results of discontinued operations are presented in full in a separate column of the income statement and restated for comparatives

IFRS - single line in the P/L

Question 5

Difference in borrowing costs

Answer 5

IFRS - IAS 23 gives no choice on borrowing costs and must be capitalized on qualifying assets

UK GAAP- allowed the choice of either to capitalize borrowing costs or Recognise as an expense when incurred

Question 6

Differences in government grants

Answer 6

IFRS - allows either the deferred income approach or the netting off approach

GAAP- can use the performance model or the accrual model (performance model is income) accrual model (basically deferred income)

Question 7

Non controlling interests

Answer 7

IFRS- can be measured by both proportionate and fair value

GAAP- can only be measured using proportionate

Question 8

Goodwill

Answer 8

IFRS- goodwill not amortized but subject to annual impairment reviews

GAAP- goodwill to be amortized over its useful life, usually less than 10 years

Question 9

Intangible assets

Answer 9

IFRS- all eligible development costs to be capitalized
Intangible assets can have an indefinite life and is subject to annual impairment review

Uk GAAP - choice on whether to capitalize development costs
Intangible assets have a finite useful life and must be amortized

Question 10

Revenue recognition

Answer 10

IFRS - revenue must be recognized on the basis of transfer of control
Uses the 5 step approach

UK GAAP- revenue recognized on the basis of transfer of risks and rewards
Relies on a reliable measurement and probability of transfer of economic benefits