Grant Thorton Comparison US GAAP To IFRS 2010

Comparison between U.S.
GAAP and
International Financial Reporting Standards
EDITION 1.5 — August 31, 2010
© 2010 Grant Thornton LLP

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U.S. member firm of Grant Thornton International Ltd
Comparison between U.S. GAAP and International Financial Reporting Standards 2
Contents
1. Introduction .................................................................................................................................................. 6
International standards and the IASB ............................................................................................................ 6
Financial accounting and reporting in the United States ................................................................................ 6
IFRS and U.S. GAAP comparison ................................................................................................................. 7
2. Overall financial statement presentation ................................................................................................. 10
2.1 General ........................................................................................................................................................ 10
2.2 Statement of financial position/balance sheet .............................................................................................. 12
2.3 Statement of comprehensive income/income statement ............................................................................. 16
2.4 Statement of changes in equity .................................................................................................................... 19
2.5 Statement of cash flows ............................................................................................................................... 19
2.6 Non-current assets held for sale and discontinued operations .................................................................... 22
3. Accounting policies – general .................................................................................................................. 28
3.1 Selection of accounting policies ................................................................................................................... 28
3.2 Changes in accounting policy and correction of errors ................................................................................ 30
4. Assets ......................................................................................................................................................... 32
4.1 Property, plant and equipment ..................................................................................................................... 32
4.2 Investment property ..................................................................................................................................... 36
4.3 Intangible assets .......................................................................................................................................... 41
4.4 Impairment ................................................................................................................................................... 44
4.5 Inventories.................................................................................................................................................... 46
5. Liabilities..................................................................................................................................................... 50
5.1 Leases.......................................................................................................................................................... 50
5.2 Provisions, contingent liabilities, and contingent assets .............................................................................. 54
5.3 Taxation ....................................................................................................................................................... 57
6. Income and expenditure ............................................................................................................................ 63
6.1 Revenue - general........................................................................................................................................ 63
6.1a Revenue - long-term contracts/construction contracts ................................................................................. 69
6.2 Employee benefits........................................................................................................................................ 71
6.3 Share-based payments ................................................................................................................................ 80
7. Financial instruments ................................................................................................................................ 85
7.1 Recognition and measurement of financial assets....................................................................................... 85
7.2 Presentation, recognition, and measurement of financial liabilities and equity ............................................ 89
7.3 Recognition and measurement of derivatives .............................................................................................. 93
7.4 Hedge accounting ........................................................................................................................................ 95
8. Group accounts.......................................................................................................................................... 97
8.1 Basic requirements for group accounts........................................................................................................ 97
8.2 Noncontrolling interests................................................................................................................................ 99
8.3 Special purpose entities/variable interest entities ...................................................................................... 102
8.4 Business combinations .............................................................................................................................. 104
9. Associates, equity method investees, and joint ventures ................................................................... 113
9.1 Associates and equity method investees ................................................................................................... 113

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9.2 Joint ventures ............................................................................................................................................. 118

10. Other matters............................................................................................................................................ 122
10.1 Foreign currency translation....................................................................................................................... 122
10.2 Government grants and disclosure of government assistance .................................................................. 129
10.3 Earnings per share ..................................................................................................................................... 131
10.4 Events after the reporting period ................................................................................................................ 138
10.5 Operating segments ................................................................................................................................... 143
10.6 Related party disclosures ........................................................................................................................... 149
Appendix A ......................................................................................................................................................... 153
Listing of IFRS standards .................................................................................................................................... 153
Appendix B ......................................................................................................................................................... 156
Listing of FASB Codification Topics .................................................................................................................... 156
Appendix C ......................................................................................................................................................... 159
Listing of post-codification U.S. GAAP standards (Accounting Standards Updates (ASUs)) .............................. 159
Appendix D ......................................................................................................................................................... 162
Listing of pre-codification U.S. GAAP standards ................................................................................................. 162
Appendix E ......................................................................................................................................................... 168
Listing of SEC standards ..................................................................................................................................... 168
Appendix F ......................................................................................................................................................... 169
Listing of other standards .................................................................................................................................... 169
This Grant Thornton LLP document provides information and comments on current accounting issues and
developments as of August 31, 2010. It is not a comprehensive analysis of the subject matter covered and is
not intended to provide accounting or other advice with respect to the matters addressed. This document
supports Grant Thornton LLP’s marketing of professional services, and is not written accounting or tax advice
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document we encourage you to contact us or an independent accounting or tax adviser to discuss the potential
application to your particular situation. All relevant facts and circumstances, including the pertinent
authoritative literature, need to be considered to arrive at conclusions that comply with matters addressed in
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For additional information on topics covered in this document, contact your Grant Thornton LLP Adviser.

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Preface
Approximately 120 countries require or permit the use of International Financial Reporting Standards (IFRS)
issued by the International Accounting Standards Board (IASB). For many years in the United States, the
Securities and Exchange Commission (SEC) required all foreign private issuer (FPI) companies to provide a
reconciliation between their home-country required generally accepted accounting principles and U.S. GAAP.
A number of parties had expressed interest in both the removal of the reconciliation requirement for FPIs
using IFRS and in the acceptance of IFRS as a set of high-quality, transparent global accounting standards. In
December 2007, the SEC adopted a final rule, Acceptance From Foreign Private Issuers of Financial Statements Prepared
in Accordance With International Financial Reporting Standards Without Reconciliation to U.S. GAAP, allowing FPIs
whose financial statements are prepared using IFRS as issued by the IASB to file their financial statements
without reconciliation to U.S. GAAP.
In September 2002, the Financial Accounting Standards Board (FASB) and the IASB issued a memorandum of
understanding (the Norwalk Agreement) wherein they “acknowledged their commitment to high-quality,
compatible accounting standards that could be used for both domestic and cross-border financial reporting.”
The memorandum notes that the Boards have “pledged to use their best efforts (a) to make their existing
financial reporting standards fully compatible as soon as is practicable and (b) to coordinate their future work
programs to ensure that once achieved, compatibility is maintained.” In February 2006, the Boards issued A
Roadmap for Convergence between IFRSs and US GAAP – 2006 - 2008; Memorandum of Understanding between the FASB
and the IASB and reaffirmed their commitment to the convergence of U.S. GAAP and IFRS. In September
2008, the Boards issued an update to the 2006 Memorandum of Understanding. The update reports on the
progress the Boards have made since 2006 and establishes a goal of completing their major joint projects by
2011. In November 2009, the Boards issued a joint statement, FASB and IASB Reaffirm Commitment to
Memorandum of Understanding, describing their plans and milestone targets for achieving the goal of completing
major joint Memorandum of Understanding projects by the end of June 2011. In June 2010, the IASB and
FASB announced the issuance of a joint statement on revisions to their convergence work plan. The modified
strategy retains the target completion date of June 2011 for many of the projects identified by the original
MoU, including those projects, as well as other issues not in the MoU, where a converged solution is urgently
required. The target completion dates for a few projects have extended into the second half of 2011. It is
expected that this action by the IASB and FASB will not negatively impact the Securities and Exchange
Commission’s work plan, announced in February 2010, to consider in 2011 whether and how to incorporate
IFRS into the U.S. financial system.
In August 2007, the SEC issued a concept release on allowing U.S. issuers to prepare financial statements in
accordance with IFRS. The comment period closed on November 13, 2007. Public roundtables were held at
the SEC in December 2007.
On November 14, 2008, the SEC issued its proposed Roadmap for the Potential Use of Financial Statements Prepared
in Accordance with International Financial Reporting Standards by U.S. Issuers (the Roadmap), which could lead to a
requirement for U.S. issuers to use IFRS as issued by the IASB as early as 2014. The proposed Roadmap
includes a rule that would permit domestic issuers meeting certain criteria to file financial statements prepared
according to IFRS beginning with fiscal years ending on or after December 15, 2009. The Roadmap proposes

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milestones that the SEC would assess in 2011 in order to determine whether to proceed with rulemaking to
mandate the use of IFRS by all domestic issuers, including:
• Improvements in IFRS accounting standards
• Adequate accountability, independence and funding of the International Accounting Standards Committee
Foundation
• Availability of more detailed tagging for interactive reporting
• Advances in IFRS education and training
If the SEC proceeds to mandate IFRS for all domestic issuers, the Roadmap proposes phased-in adoption
dates of 2014, 2015, and 2016, depending on the size of the issuer.
At its February 24, 2010 Open Meeting, the SEC approved issuing a statement reaffirming support for
convergence of accounting standards, but stated that more information is needed to allow the Commission to
make a well-informed decision on whether to incorporate use of International Financial Reporting Standards,
as issued by the IASB, by U.S. issuers in its financial reporting system. The SEC staff will develop and execute
a work plan to gather information to evaluate and provide further information to the Commission.
Although there are many issues that remain to be addressed, many observers believe that the U.S. capital
markets will adopt IFRS in the not too distant future. In the meantime, given the number of differences that
still exist between IFRS and U.S. GAAP, it is incumbent on preparers, auditors, and regulators to be aware of
differences between these two sets of standards.
We have prepared the Comparison between U.S. GAAP and International Financial Reporting Standards (Comparison)
to help readers identify similarities and differences between IFRS and U.S. GAAP. More emphasis is placed on
recognition, measurement, and presentation guidelines and less emphasis is placed on disclosure requirements.
As more fully explained in Section 1, “Introduction,” this Comparison covers only those differences that we
believe are more commonly encountered in practice. It includes standards issued up to August 31, 2010.
The FASB Accounting Standards Codification™ was launched on July 1, 2009 (see further explanation of the FASB
Codification in the Introduction below). The U.S. GAAP references in this document include citations from
both pre-Codification literature and their Codification counterparts.
We have included Appendices that list the titles of all IFRS, U.S. GAAP, and SEC standards that are referred
to in this document.

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1. Introduction
International standards and the IASB
The IASB is responsible for the preparation and issuance of International Financial Reporting Standards
(IFRS). Upon its inception in 2001, the IASB adopted the body of International Accounting Standards (IAS)
issued by its predecessor, the International Accounting Standards Committee (IASC).
The IFRS Interpretations Committee (IFRIC) assists the IASB in establishing and improving standards of
financial accounting and reporting for the benefit of users, preparers, and auditors of financial statements.
IFRIC was established in 2002 when it replaced its predecessor the Standing Interpretations Committee (SIC).
Under IFRS, when a standard or interpretation specifically applies to a transaction, other event or condition,
the accounting policy or policies applied to that item is determined by applying the standard or interpretation
and considering any relevant implementation guidance issued by the IASB. In this document, IFRS refers
collectively to International Financial Reporting Standards issued by the IASB, International Accounting
Standards issued by the IASC, and Interpretations issued by the IFRIC and the SIC.
Financial accounting and reporting in the United States
The FASB is the designated private sector body responsible for establishing and improving standards of
financial accounting and reporting in the United States for non-governmental public and private enterprises,
including small businesses and not-for-profit organizations. Those standards, which govern the preparation of
financial reports, are provided for the guidance and education of the public, including issuers, auditors and
users of financial information. In certain cases, financial accounting and reporting requirements in the United
States had been derived from U.S. Generally Accepted Auditing Standards (GAAS), as well as ethics
requirements established by the American Institute of Certified Public Accountants (AICPA). The “AU”
reference in this Comparison refers to GAAS promulgated by the AICPA.
On July 1, 2009, the structure of U.S. GAAP changed dramatically with the launch of the FASB Accounting
Standards Codification™ (Codification). On June 30, 2009, the FASB issued ASC 105 (SFAS 168), The FASB
Accounting Standards Codification™ and the Hierarchy of Generally Accepted Accounting Principles (Codification), to
establish the Codification as the sole source of authoritative nongovernmental GAAP, except for SEC
guidance. ASC 105 (SFAS 168) replaces the four-tiered U.S. GAAP hierarchy described in SFAS 162, The
Hierarchy of Generally Accepted Accounting Principles, with a two-level hierarchy consisting only of authoritative and
nonauthoritative guidance. ASC 105 (SFAS 168) is effective for financial statements issued for interim and
annual periods ending after September 15, 2009, except for nonpublic, nongovernmental entities that have not
followed the guidance in paragraphs 38 through 76 of AICPA Technical Inquiry Service section 5100,
“Revenue Recognition.” That guidance must be adopted for fiscal years beginning on or after December 15,
2009 and for interim periods within those years.
The Codification does not create new accounting or reporting guidance. The FASB developed the Codification
in response to constituents’ reported difficulties with applying guidance under the four-tiered GAAP hierarchy.
To address those concerns, the FASB designed the Codification to simplify the application of U.S. GAAP by
consolidating all authoritative guidance in a single document and by rewriting the guidance using a consistent

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organizational structure. The FASB launched the Codification after a one-year trial period during which
constituents provided feedback.
SEC registrants must also comply with U.S. Securities and Exchange Commission financial reporting
requirements including those promulgated in SEC Regulations S-X and S-K, Financial Reporting Releases
(FRR), and Staff Accounting Bulletins (SAB). The SABs represent practices followed by the staff in
administering SEC disclosure requirements.
IFRS and U.S. GAAP comparison
This Comparison highlights some of the more significant U.S. GAAP and IFRS requirements as well as the
major similarities and differences between current U.S. GAAP and IFRS. While not an exhaustive listing, we
highlight some of the more significant differences between U.S. GAAP and IFRS that we believe are most
commonly encountered in practice, which should assist those new to IFRS in gaining an appreciation of their
major requirements and how these differ from requirements in the United States. Disclosure requirements are
not addressed except in exceptional cases where those requirements constitute major differences between U.S.
GAAP and IFRS.
Companies reporting according to requirements established for the EU comply with IFRS as adopted by the
European Commission. Those standards may differ from IFRS as issued by the IASB because of the timing or
scope of endorsement by the EC. Other jurisdictions may have similar endorsement related differences. Such
differences are not addressed in this document.
This Comparison has been updated for standards issued through August 31, 2010. Effective dates for
standards vary and are generally noted where relevant. This Comparison does not address industry-specific
requirements for banks, other financial institutions, insurance companies, not-for-profit organizations,
retirement benefit plans, extractive industries, or agriculture. In particular, the following IFRS pronouncements
have not been included in the document due to their specialized nature:
• IFRS 4, Insurance Contracts
• IFRS 6, Exploration for and Evaluation of Mineral Resources
• IAS 26, Accounting and Reporting by Retirement Benefit Plans
• IAS 41, Agriculture
Each year the IASB considers minor amendments to IFRS in an annual improvements project. The
amendments represent non-urgent but necessary amendments to IFRS and are proposed each year in an
omnibus Exposure Draft. The IASB has issued Annual Improvements for 2010 which are included in this
Comparison where applicable.
This Comparison also does not include IFRS standards that address first-time adoption of IFRS and IFRS for
small and medium-sized companies:

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• In November 2008, the IASB issued a revised IFRS 1, First-time Adoption of International Financial Reporting
Standards, which is effective for reporting periods beginning on or after July 1, 2009 with earlier application
permitted. IFRS 1 covers the application of IFRS in a company's first IFRS financial statements. It starts
with the basic premise that an entity applies IFRS for the first time on a fully retrospective basis. However,
acknowledging the cost and complexity of that approach, it then establishes various exemptions for topics
where retrospective application would be too burdensome or impractical (e.g. business combinations and
pension liabilities.) In planning the conversion, management must develop a detailed and specific
understanding of IFRS 1's implications on their business.
• In July 2009, the IASB issued International Financial Reporting Standard for Small and Medium-sized Entities
(IFRS for SMEs). IFRS for SMEs is designed to meet the financial reporting needs of entities that (a) do
not have public accountability and (b) publish general purpose financial statements for external users. The
term Small and Medium-sized Entities is not associated with any size criteria in the Standard. The Standard
has essentially been designed to work as a standalone document, with no mandatory cross references to
full IFRS. IFRS for SMEs often permits simplified recognition and measurement and reduces the amount
of disclosure required, compared to full IFRS.
Also, in November 2009, the IASB issued IFRS 9, Financial Instruments. Entities are required to apply IFRS 9
for annual periods beginning on or after January 1, 2013. Earlier application is permitted. Note that this
document does not include IFRS 9.
IFRS 9 Appendix C includes the amendments to other IFRS resulting from IFRS 9. Those IFRS are as follows:
• IFRS 1, First-time Adoption of International Financial Reporting Standards
• IFRS 3, Business Combinations
• IFRS 4, Insurance Contracts
• IFRS 5, Non-Current Assets Held for Sale and Discontinued Operations
• IFRS 7, Financial Instruments: Disclosures
• IAS 1, Presentation of Financial Statements
• IAS 2, Inventories
• IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors
• IAS 12, Income Taxes
• IAS 18, Revenue
• IAS 21, The Effects of Changes in Foreign Exchange Rates

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• IAS 27, Consolidated and Separate Financial Statements
• IAS 28, Investments in Associates
• IAS 31, Interests in Joint Ventures
• IAS 32, Financial Instruments: Presentation
• IAS 36, Impairment of Assets
• IAS 39, Financial Instruments: Recognition and Measurement
• IFRIC 10, Interim Financial Reporting and Impairment
• IFRIC 12, Service Concession Arrangements
This Comparison is only a guide; for the complete details of IFRS and U.S. GAAP requirements, readers
should refer to the text of the standards themselves.

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2. Overall financial statement presentation

Note: IFRS and U.S. GAAP provide only limited financial statement presentation guidance. In addition, presentation
guidelines in U.S. GAAP are dispersed across the standards. Moreover, users of financial statements have often
expressed dissatisfaction that information is not linked across the different statements and that dissimilar items are in
some cases aggregated in one number.
The objective of the IASB/FASB joint financial statement presentation project is to establish a global standard that will
guide the organization and presentation of information in the financial statements. The Boards’ goal is to improve the
usefulness of the financial information provided in an entity’s financial statements to assist management to better
communicate its financial information to the users of its financial statements, and to help users in their decision making.
In October 2008, the IASB and the FASB (the Boards) jointly announced the issuance of their Discussion Papers on
the presentation of financial statements. The Discussion Paper, Preliminary Views on Financial Statement
Presentation, is an analysis of current issues in financial statement presentation and proposed responses to those
issues by the Boards. The objective of the Discussion Paper is to invite comments on a new format for financial
statements designed to communicate information to users following three new principles: cohesiveness,
disaggregation, and liquidity/financial flexibility. The staffs of the IASB and FASB also issued Snapshot: Preliminary
Views on Financial Statement Presentation, a summary of the major ideas presented in the Discussion Papers.
In June 2010, the Boards decided to engage in additional outreach activities before finalizing and publishing an
exposure draft on financial statement presentation. Those activities will focus primarily on two areas: (1) the perceived
benefits and costs of the proposals and (2) the implications of the proposals for financial reporting by financial services
entities.
In July 2010, the staff of the IASB and the FASB posted on each Board’s website a Staff Draft of an exposure draft that
reflects the Boards’ cumulative tentative decisions on financial statement presentation, through their joint meeting in
April 2010. The proposals in that Staff Draft are the basis for the staff outreach activities. As noted in the introduction
and summary that accompanied the staff draft, the Boards are not formally inviting comments on the staff draft;
however, they welcome input from interested parties.
2.1 General
IFRS U.S. GAAP

Relevant guidance: IAS 1 Relevant guidance: Form and content specified by
GAAP as set forth in FASB Accounting Standards
Codification™ (ASC) 205, 220, 505 (GAAP Hierarchy in
Note: Additional requirements may be specified by local SFAS 162) and SEC Regulation S-X, Rules 3-01(a) and
statute, regulators, or stock exchanges. 3-02(a). (Also, SFAS 130; APB 12; ARB 43).
An entity shall apply IAS 1 in preparing and presenting

general purpose financial statements in accordance
with IFRS (IAS 1.2).
IAS 1.15-.35 also apply to condensed interim financial
statements (IAS 1.4).
General purpose financial statements (referred to as
“financial statements”) are those intended to meet the
needs of users who are not in a position to require an
entity to prepare reports tailored to their particular
information needs (IAS 1.7).
A complete set of financial statements comprises Financial statements comprise:

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IFRS U.S. GAAP

(IAS 1.10):  Balance sheet
 A statement of financial position as at the end of  Income statement
the period
 A statement of comprehensive income. This
 A statement of comprehensive income for the statement may be reported separately or combined
period. As permitted by IAS 1.81, an entity may with the income statement or the statement of
present the components of profit or loss either as changes in stockholders’ equity (ASC 220-10-45-8)
part of a single statement of comprehensive (SFAS 130.22)
income or in a separate income statement. When
 Statement of changes in stockholders’ equity.
an income statement is presented it is part of a
Alternatively, disclosure of changes in the separate
complete set of financial statements and shall be
accounts comprising stockholders’ equity (in addition
displayed immediately before the statement of
to retained earnings) could be made in the notes to
comprehensive income (IAS 1.12).
financial statements (ASC 505-10-50-2) (APB 12.10)
 A statement of changes in equity for the period
 Statement of cash flows (limited exemptions; see
 A statement of cash flows for the period Section 2.5, “Statement of cash flows”)
 Notes, comprising a summary of significant  Notes to financial statements
accounting policies and other explanatory
 Unlike IFRS, U.S. GAAP does not have a similar
information
requirement for a third balance sheet
 A statement of financial position as at the
beginning of the earliest comparative period when
an entity applies an accounting policy
retrospectively or makes a retrospective
restatement of items in its financial statements, or
when it reclassifies items in its financial statements
An entity may use titles for the statements other than
those used in IAS 1 (IAS 1.10).
An entity shall present with equal prominence all of the
financial statements in a complete set of financial
statements (IAS 1.11).
Except when IFRS permit or require otherwise, an Unlike IFRS, under U.S. GAAP there is no specific
entity shall disclose comparative information in respect requirement to provide comparative statements but it is
of the previous period for all amounts reported in the desirable to do so (ASC 205-10-45-2) (ARB 43, Ch. 2A,
current period’s financial statements. An entity shall par. 2).
include comparative information for narrative and SEC rules require balance sheets for the two most recent
descriptive information when it is relevant to an fiscal years and three year statements of income and
understanding of the current period’s financial cash flows (SEC Regulation S-X; Rules 3-01(a) and 3-
statements (IAS 1.38). 02(a)).
An entity whose financial statements comply with IFRS Unlike IFRS, U.S. GAAP does not have a similar
shall make an explicit and unreserved statement of requirement.
such compliance in the notes. An entity shall not
describe financial statements as complying with IFRS
unless they comply with all the requirements of IFRS
(IAS 1.16).
An entity cannot rectify inappropriate accounting Similar to IFRS.

policies by disclosure of the accounting policies used or
by notes or explanatory material (IAS 1.18).
An entity shall clearly identify each financial statement Similar to IFRS.

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IFRS U.S. GAAP

and the notes. In addition, an entity shall display the
following information prominently, and repeat it when
necessary for the information presented to be
understandable (IAS 1.51):
 The name of the reporting entity or other means of
identification, and any change in that information
from the end of the preceding reporting period
 Whether the financial statements are of an
individual entity or a group of entities
 The date of the end of the reporting period or the
period covered by the set of financial statements or
notes
 The presentation currency; as defined in IAS 21
 The level of rounding used in presenting amounts
in the financial statements
2.2 Statement of financial position/balance sheet
IFRS U.S. GAAP

Relevant guidance: IAS 1 Relevant guidance: ASC 210, 215, 470, 505, and 740;
(ARB 43; SFAS 6, 47, 78 and 109; FIN 39; APB 12; EITF
D-43) SEC Regulation S-X, Rule 5-02
IAS 1 specifies items that must be presented on the Unlike IFRS, U.S. GAAP does not prescribe a standard
face of the statement of financial position, and lists format.
additional information that must be either on the face or SEC Regulation S-X, Rule 5-02 does require specific line
in the notes (IAS 1.54-.59). items to appear on the face of the balance sheet, where
At a minimum, the statement of financial position shall applicable.
include line items that present the following amounts
(IAS 1.54):
 Property, plant and equipment
 Investment property
 Intangible assets
 Financial assets (excluding amounts shown under
investments accounted for using the equity
method; trade and other receivables; and cash and
cash equivalents)
 Investments accounted for using the equity method
 Biological assets
 Inventories
 Trade and other receivables
 Cash and cash equivalents
 The total of assets classified as held for sale and
assets included in disposal groups classified as

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IFRS U.S. GAAP

held for sale in accordance with IFRS 5
 Trade and other payables
 Provisions
 Financial liabilities (excluding amounts shown
under trade and other payables; and provisions)
 Liabilities and assets for current tax, as defined in
IAS 12
 Deferred tax liabilities and deferred tax assets, as
defined in IAS 12
 Liabilities included in disposal groups classified as
held for sale in accordance with IFRS 5
 Non-controlling interests, presented within equity
 Issued capital and reserves attributable to owners
of the parent
An entity shall present additional line items, headings Similar to IFRS.

and subtotals in the statement of financial position when
such presentation is relevant to an understanding of the
entity’s financial position (IAS 1.55).
An entity shall present current and non-current assets, The balance sheets of most enterprises show separate
and current and non-current liabilities, as separate classifications of current assets and liabilities (ASC 210-
classifications in its statement of financial position in 10-05-4). However, unlike IFRS, an unclassified balance
accordance with IAS 1.66-.76, except when a sheet is commonplace for enterprises in specialized
presentation based on liquidity provides information that industries for which the distinction is deemed to have little
is reliable and more relevant. When that exception or no relevance (ASC 210-10-15-3) (SFAS 6.7).
applies, an entity shall present all assets and liabilities
in order of liquidity (IAS 1.60).
No subtotals are specified in IAS 1. Unlike IFRS, non-SEC reporting entities are required by
ASC 210-10-45-5 (SFAS 6.15) to present a total of current
liabilities if they present a classified balance sheet. As a
matter of practice, these non-SEC reporting entities also
present a subtotal for current assets as well.
SEC rules explicitly require subtotals for current assets
and current liabilities (Regulation S-X, Rule 5-02).
When an entity presents current and non-current Unlike IFRS, deferred tax assets and liabilities are
assets, and current and non-current liabilities, as separated into current and non-current amounts and the
separate classifications in its statement of financial net current deferred tax asset or liability and the net non-
position, it shall not classify deferred tax assets current deferred tax asset or liability, if any, is shown on
(liabilities) as current assets (liabilities) (IAS 1.56). the face of the balance sheet (ASC 740-10-45-4)
(SFAS 109.41-.42).
An entity shall classify an asset as current when (IAS Current assets are cash and other assets or resources
1.66): commonly identified as those which are reasonably
 It expects to realise the asset, or intends to sell or expected to be realized in cash or sold or consumed
consume it, in its normal operating cycle. The during the normal operating cycle of the business (ASC
normal operating cycle where not clearly Master Glossary, “Current Assets”) (ARB 43, Ch. 3A.4).
identifiable is assumed to be 12 months (IAS 1.68). In businesses where the period of the operating cycle is

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IFRS U.S. GAAP

 It holds the asset primarily for the purpose of more than 12 months, the longer period should be used.
trading Where a particular business has no clearly defined
operating cycle, the one-year rule governs (ASC 210-10-
 It expects to realise the asset within 12 months
45-3) (ARB 43, Ch. 3A.5).
after the reporting period
 The asset is cash or a cash equivalent (as defined
in IAS 7) unless the asset is restricted from being
exchanged or used to settle a liability for at least
12 months after the reporting period
An entity shall classify all other assets as non-current
(IAS 1.66).
An entity shall classify a liability as current when (IAS Current liabilities are obligations whose liquidation is
1.69): reasonably expected to require the use of existing
 It expects to settle the liability in its normal resources properly classifiable as current assets, or the
operating cycle. The normal operating cycle where creation of other current liabilities (ASC Master Glossary,
not clearly identifiable is assumed to be 12 months “Current Liabilities”) (ARB 43, Ch. 3A.7).
(IAS 1.70).
 It holds the liability primarily for the purpose of
trading
 The liability is due to be settled within 12 months
after the reporting period
 The entity does not have an unconditional right to
defer settlement of the liability for at least
12 months after the reporting period
An entity shall classify all other liabilities as non-current
(IAS 1.69).
An entity classifies its financial liabilities as current Unlike IFRS, short-term obligations, other than those
when they are due to be settled within 12 months after arising from transactions in the normal course of business
the reporting period, even if (IAS 1.72(b)): that are due in customary terms, are excluded from
 The original term was for a period longer than current liabilities only if the entity intends to refinance the
12 months, and obligation on a long-term basis and (ASC 470-10-45-14)
(SFAS 6.9-.11):
 An agreement to refinance, or to reschedule
payments, on a long-term basis is completed after  Before the balance sheet is issued there is a post-
the reporting period and before the financial balance sheet issuance of a long-term obligation or
statements are authorised for issue equity securities for the purpose of refinancing the
obligation on a long-term basis; or
 Before the balance sheet is issued the entity has
entered into a financing agreement that permits it to
refinance the short-term obligation on a long-term
basis and certain conditions are met
When an entity breaches a provision of a long-term loan Unlike IFRS, an entity must classify as current a long-term
arrangement on or before the end of the reporting obligation that is or will be callable by a creditor because
period with the effect that the liability becomes payable of the entity’s violation of a provision of the debt
on demand, it classifies the liability as current, even if agreement at the balance sheet date or because the
the lender has agreed, after the reporting period and violation, if not cured within a specified grace period, will
before authorisation of the financial statements for make the obligation callable unless (ASC 470-10-45-11)
issue, not to demand payment as a consequence of the (SFAS 78.5):

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IFRS U.S. GAAP

breach. An entity classifies the liability as current  The creditor has waived or subsequently lost the right
because, at the end of the reporting period, it does not to demand repayment for more than one year (or
have an unconditional right to defer its settlement for at operating cycle, if longer) from the balance sheet
least 12 months after that date (IAS 1.74). date; or
 For long-term obligations containing a grace period
within which the entity may cure the violation, it is
probable that the violation will be cured within that
period
An entity shall disclose the amount expected to be ASC 470-10-50-1 (SFAS 47.10) requires that the
recovered or settled after more than 12 months for each combined aggregate amount of maturities and sinking
asset and liability line item that combines amounts fund requirements for all long-term borrowings be
expected to be recovered or settled (IAS 1.61): disclosed for each of the five years following the date of
 No more than 12 months after the reporting date, the latest balance sheet presented.
and
 More than 12 months after the reporting period
An entity shall not offset assets and liabilities or income Unlike IFRS, offsetting is permitted only when (ASC 210-
and expenses, unless required or permitted by an IFRS 20-45-1) (FIN 39.5-.6 and EITF Topic D-43):
(IAS 1.32).  The parties owe each other determinable amounts
 There is a right and intention to set-off
 The right of set-off is enforceable by law
An entity shall disclose, either in the statement of Similar to IFRS.

financial position or in the notes, further
subclassifications of the line items presented, classified
in a manner appropriate to the entity’s operations
(IAS 1.77).
An entity shall disclose the following, either in the Disclosure of changes in the separate accounts
statement of financial position or the statement of comprising stockholders' equity (in addition to retained
changes in equity, or in the notes (IAS 1.79): earnings) is required. These disclosures may be made in
 For each class of share capital: the notes to the financial statements or through a
separate financial statement (ASC 505-10-50-2)
− The number of shares authorised (APB 12.10).
− The number of shares issued and fully paid,
and issued but not fully paid
− Par value per share, or that the shares have

no par value
− A reconciliation of the number of shares

outstanding at the beginning and at the end of
the period
− The rights, preferences and restrictions

attaching to that class including restrictions on
the distributions of dividends and the
repayment of capital
− Shares in the entity held by the entity or by its

subsidiaries or associates

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IFRS U.S. GAAP

− Shares reserved for issue under options and
contracts for the sale of shares, including
terms and amounts
 A description of the nature and purpose of each
reserve within equity
2.3 Statement of comprehensive income/income statement

Note: Current IFRS and U.S. GAAP allow reporting entities several alternatives for displaying other comprehensive
income and its components in financial statements. Accordingly, the IASB and the FASB (the Boards) decided to have
a separate joint project on the presentation of other comprehensive income in order to converge the requirements. In
May 2010 the Boards issued separate exposure drafts with consistent proposed requirements.
The IASB Exposure Draft, Presentation of Items of Other Comprehensive Income, proposes that entities present profit
or loss and other comprehensive income in separate sections of a continuous statement. The IASB is also proposing to
group items in other comprehensive income on the basis of whether they will eventually be “recycled” into the profit or
loss section of the income statement. The comment period ends September 30, 2010.
The FASB’s proposed Accounting Standards Update, Statement of Comprehensive Income also proposes that entities
present profit or loss and other comprehensive income in separate sections of a continuous statement. The
amendments in the proposed ASU would not change the items that must be reported in other comprehensive income
or when an item of other comprehensive income must be reclassified to net income. The comment period ends
September 30, 2010.
Although the Boards agree on how items of comprehensive income should be reported, other differences between U.S.
GAAP and IFRS will remain that affect the comparability of financial statements prepared under IFRS and U.S. GAAP.
In particular, there are differences between some types of items reported in other comprehensive income and the
requirements for reclassifying those items into net income.
IFRS U.S. GAAP

Relevant guidance: IAS 1; IFRS 5 Relevant guidance: ASC 220, 225, 320, 715, and 810
(ARB 43; SFAS 130, 144, and 160; APB 12 and 30) SEC
Regulation S-X, Rule 5-03
An entity shall present all items of income and expense The purpose of reporting comprehensive income is to
recognised in a period (IAS 1.81): report a measure of all changes in equity of an enterprise
 In a single statement of comprehensive income, or that result from recognized transactions and other
economic events of the period other than transactions
 In two statements: with owners in their capacity as owners (ASC 220-10-10-
− A statement displaying components of profit or 1) (SFAS 130.11).
loss (separate income statement), and Comprehensive income and its components must be
− A statement beginning with profit or loss and displayed in a financial statement that is displayed with
displaying components of other the same prominence as the other financial statements
comprehensive income (statement of that constitute a full set of financial statements. A specific
comprehensive income) format is not required but net income must be displayed
as a component of comprehensive income in the financial
statement that displays the comprehensive income
information. Comprehensive income may be displayed
 As part of the income statement,
 On a stand-alone basis, or

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IFRS U.S. GAAP

 As part of the statement of changes in stockholders’
equity (ASC 220-10-45-8 through 45-9) (SFAS
130.22-.23)
At a minimum, the statement of comprehensive income ASC 220 (SFAS 130) divides comprehensive income into
shall include line items that present the following net income and other comprehensive income. An
amounts for the period (IAS 1.82): enterprise shall continue to display an amount for net
 Revenue income. An enterprise that has no items of other
comprehensive income in any period presented is not
 Finance costs required to report comprehensive income (ASC 220-10-
 Share of the profit or loss of associates and joint 45-6) (SFAS 130.15).
ventures accounted for using the equity method Classifications within net income
 Tax expense Items included in net income are displayed in various
 A single amount comprising the total of: classifications. Those classifications can include income
from continuing operations, discontinued operations,
− The post-tax profit or loss of discontinued
extraordinary items, and cumulative effects of changes in
operations, and
accounting principle. ASC 220 (SFAS 130) does not
− The post-tax gain or loss recognised on the change those classifications or other requirements for
measurement to fair value less costs to sell or reporting results of operations (ASC 220-10-45-7) (SFAS
on the disposal of the assets or disposal 130.16).
group(s) constituting the discontinued Classifications within other comprehensive income
operations
Items included in other comprehensive income shall be
 Profit or loss classified based on their nature. For example, under
 Each component of other comprehensive income existing accounting standards, other comprehensive
classified by nature (excluding amounts in the income shall be classified separately into foreign currency
share of other comprehensive income of items, gains or losses associated with pension or other
associates and joint ventures accounted for using postretirement benefits, prior service costs or credits
the equity method) associated with pension or other postretirement benefits,
 Share of the other comprehensive income of transition assets or obligations associated with pension or
associates and joint ventures accounted for using other postretirement benefits, and unrealized gains and
the equity method losses on certain investments in debt and equity
securities. Additional classifications or additional items
 Total comprehensive income within current classifications may result from future
Reclassification adjustments accounting standards (ASC 220-10-45-13)
An entity may present reclassification adjustments (SFAS 130.17).
relating to components of other comprehensive income Reclassification adjustments
in the statement of comprehensive income or in the Adjustments shall be made to avoid double counting in
notes (IAS 1.94). comprehensive income items that are displayed as part of
Other comprehensive income – income tax net income for a period that also had been displayed as
An entity may present components of other part of other comprehensive income in that period or
comprehensive income either (a) net of related tax earlier periods (ASC 220-10-45-15) (SFAS 130.18).
effects, or (b) before related tax effects with one amount Other comprehensive income – income tax
shown for the aggregate amount of income tax relating Similar to IFRS (ASC 220-10-45-11) (SFAS 130.24).
to those components (IAS 1.91).
An entity shall disclose the following items in the All components of comprehensive income shall be
statement of comprehensive income as allocations for reported in the financial statements in the period in which
the period (IAS 1.83): they are recognized. A total amount for comprehensive
 Profit or loss for the period attributable to: income shall be displayed in the financial statement where
the components of other comprehensive income are

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− Non-controlling interests reported. In accordance with ASC 810-10-50-1A
(ARB 51.38(a), as amended by SFAS 160), if an entity
− Owners of the parent has an outstanding noncontrolling interest (minority
 Total comprehensive income for the period interest), amounts for both comprehensive income
attributable to: attributable to the parent and comprehensive income
attributable to the noncontrolling interest in a less-than-
− Non-controlling interests wholly-owned subsidiary are reported on the face of the
− Owners of the parent financial statement in which comprehensive income is
presented in addition to presenting consolidated
comprehensive income (ASC 220-10-45-5)
(SFAS 130.14).
An entity may present in a separate income statement Unlike IFRS, U.S. GAAP does not prescribe a standard
the line items in IAS 82(a)-(f) and the disclosures in format; the single-step format or multiple-step format is
IAS 1.83(a) (IAS 1.84). acceptable. SEC Regulation S-X, Rule 5-03 does require
specific line items to appear on the face of the income
statement, where applicable.
An entity shall not present any items of income or Unlike IFRS, U.S. GAAP defines extraordinary items as
expense as extraordinary items, in the statement of material items that are both unusual and infrequently
comprehensive income or the separate income occurring (ASC 225-20-45-2) (APB 30.20). Extraordinary
statement (if presented), or in the notes (IAS 1.87). items are rare.
When items of income or expense are material, an A material event or transaction that is unusual in nature or
entity shall disclose the amount and nature of those occurs infrequently but not both should be reported as a
items either in the statement of comprehensive income separate component of income from continuing operations
or in the notes (IAS 1.97). (ASC 225-20-45-16) (APB 30.26).
Additional line items, headings and subtotals are
presented where relevant to an understanding of
financial performance (IAS 1.85).
For financial instruments (see Section 7) and Under ASC 320 (SFAS 115) (see Section 7, “Financial
investment property (see Section 4.2), some unrealised instruments”), unrealized gains and losses on investments
gains from fair value adjustments are included in the in certain debt and equity securities classified as trading
income statement. are recognized as fair value adjustments through the
income statement. Further, since U.S. GAAP follows a
cost model for investment property (see Section 4.2,
“Investment property”), unrealized gains on investment
property are not recognized while losses on impairment of
long-term assets to be held and used (see Section 4.4,
“Impairment”) are recognized and included in the income
statement.
In IFRS, there are instances where gains or losses Similar to IFRS. See Section 7.1, “Recognition and
initially recognised in equity are reclassified to the measurement of financial assets” and Section 10.1,
income statement on subsequent realisation (e.g. “Foreign currency translation.” Amounts related to pension
available-for-sale investments, foreign exchange losses and other postretirement benefit plans that are initially
on net investment in subsidiaries, and hedged items). recognized in other comprehensive income are also
reclassified according to the recognition provisions of
ASC 715 (SFAS 87, 88, and 106).

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2.4 Statement of changes in equity
IFRS U.S. GAAP

Relevant guidance: IAS 1 Relevant guidance: ASC 810 (SFAS 160)
An entity shall present a statement of changes in equity An entity shall disclose for each reporting period either in
showing in the statement (IAS 1.106): the consolidated statement of changes in equity, if
 Total comprehensive income for the period, presented, or in the notes to consolidated financial
showing separately the total amounts attributable statements, a reconciliation at the beginning and the end
to owners of the parent and to non-controlling of the period of the carrying amount of total equity, equity
interests attributable to the parent, and equity attributable to the
noncontrolling interest. That reconciliation shall separately
 For each component of equity, the effects of disclose (see ASC 810-10-55-4G through 55-4L
retrospective application or retrospective (SFAS 160.A7) (ASC 810-10-50-1A) (SFAS 160.38c):
restatement recognised in accordance with IAS 8
 Net income
 For each component of equity, a reconciliation
between the carrying amount at the beginning and  Each component of other comprehensive income
the end of the period, separately disclosing  Transactions with owners acting in their capacity as
changes resulting from: owners, showing separately contributions from and
distributions to owners
− Profit or loss
− Each item of other comprehensive income
− Transactions with owners in their capacity as

owners, showing separately contributions by
and distributions to owners and changes in
ownership interests in subsidiaries that do not
result in a loss of control
An entity shall present, either in the statement of
changes in equity or in the notes, the amount of
dividends recognised as distributions to owners during
the period, and the amount per share (IAS 1.107).
2.5 Statement of cash flows
IFRS U.S. GAAP

Relevant guidance: IAS 7; IFRS 5 Relevant guidance: ASC 230 and 830 (SFAS 95,102,
and 104)
There are no exemptions under IFRS for providing a Unlike IFRS, U.S. GAAP provides an exemption for
statement of cash flows. providing a statement of cash flows as follows (ASC 230-
10-15-4) (SFAS 102.5-.7):
 Defined benefit pension plans and certain other
employee benefit plans
 Highly liquid investment companies that meet
specified criteria
Cash comprises cash on hand and demand deposits The statement of cash flows shows changes in cash and
(IAS 7.6). cash equivalents (i.e. short-term, highly liquid investments
Cash equivalents are short-term, highly liquid that are readily convertible to known amounts of cash and

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IFRS U.S. GAAP

investments that are readily convertible to known so near their maturity that they present insignificant risk of
amounts of cash and which are subject to an changes in value because of changes in interest rates.)
insignificant risk of changes in value (IAS 7.6). Generally, only investments with original maturities of
An investment normally qualifies as a cash equivalent three months or less are cash equivalents (ASC Master
only when it has a short maturity of, say, three months Glossary, “Cash Equivalents”) (SFAS 95.7-.8).
or less from the date of acquisition (IAS 7.7).
Bank borrowings are generally considered to be Unlike IFRS, bank overdrafts are included in liabilities and
financing activities. However, in some countries, bank excluded from cash equivalents. Changes in overdraft
overdrafts which are repayable on demand form an balances are financing activities.
integral part of an entity's cash management. In these
circumstances, bank overdrafts are included as a
component of cash and cash equivalents. A
characteristic of such banking arrangements is that the
bank balance often fluctuates from being positive to
overdrawn (IAS 7.8).
The statement of cash flows shall report cash flows Similar to IFRS (ASC 230-10-45-10) (SFAS 95.14).
during the period classified by the following (IAS 7.10):
 Operating activities
 Investing activities
 Financing activities
IAS 7.18 allows the cash flows from operating activities ASC 230 (SFAS 95) allows either the direct or indirect
to be disclosed by either the direct method (i.e. major method but in any case requires that the financial
classes of gross cash receipts and cash payments are statement presentation include a reconciliation of net cash
disclosed) or the indirect method (i.e. profit or loss is flow from operating activities to net income. If the indirect
adjusted for the effects of transactions of a non-cash method is used, interest paid (net of amounts capitalized)
nature, any deferrals or accruals of past or future and income taxes paid must be disclosed (ASC 230-10-
operating cash receipts or payments, and items of 45-28 through 45-32 and 50-2) (SFAS 95.28-.29).
income or expense associated with investing or
financing cash flows)
IAS 7.20 provides for two alternative presentations for
the indirect method.
Cash flows arising from the following operating, Receipts and payments should generally be shown gross.
investing or financing activities may be reported on a Certain items may be presented net because their
net basis (IAS 7.22): turnover is quick, the amounts are large, and the
 Cash receipts and payments on behalf of maturities are short. Items that qualify for net reporting are
customers when the cash flows reflect the activities cash flows pertaining to (a) investments (other than cash
of the customer rather than those of the entity equivalents), (b) loans receivable, and (c) debt, provided
that the original maturity of the asset or liability is three
 Cash receipts and payments for items in which the months or less (ASC 230-10-45-7 through 45-9)
turnover is quick, the amounts are large, and the (SFAS 95.11-.13).
maturities are short
Cash flows from interest and dividends received and Interest and dividends received and interest paid are
paid shall each be disclosed separately. Each shall be classified as operating activities. Dividends paid are
classified in a consistent manner from period to period classified as financing activities (ASC 230-10-45-14
as either operating, investing, or financing activities through 45-17) (SFAS 95.14-.23).

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IFRS U.S. GAAP

(IAS 7.31).
Interest paid and interest and dividends received are
usually classified as operating cash flow for a financial
institution (IAS 7.33).
Cash flows arising from taxes on income shall be Taxation cash flows are classified as operating activities
separately disclosed and shall be classified as cash (ASC 230-10-45-17) (SFAS 95.23).
flows from operating activities unless they can be
specifically identified with financing and investing
activities (IAS 7.35-.36).
IAS 7.39 requires the aggregate cash flows arising from Cash flows relating to the purchase or disposal of a
obtaining and losing control of subsidiaries or other business are classified as investing activities (ASC 230-
businesses to be presented separately and classified as 10-45-12 through 45-13) (SFAS 95.15-.17).
investing activities.
IFRS 5.33(c) requires disclosure of the amount of the Unlike IFRS, separate disclosure of cash flows related to
net cash flows attributable to the operating, investing discontinued operations is not required to be presented. If
and financing activities of discontinued operations. an entity chooses to separately report cash flows from
discontinued operations, then it should not aggregate
operating, investing, and financing cash flows from
discontinued operations into a single line item but should
display them separately (ASC 230-10-45-24) (SFAS 95.26
fn. 10).
An entity shall disclose the components of cash and Total cash and cash equivalents at the beginning and end
cash equivalents and shall present a reconciliation of of the period shown in the statement of cash flows must
the amounts in its statement of cash flows with the be the same as similarly titled line items or subtotals in the
equivalent items in the statement of financial position balance sheet (ASC 230-10-45-4) (SFAS 95.7).
(IAS 7.45).
Cash flows arising from transactions in a foreign Foreign currency cash flows are reported using the
currency shall be recorded in an entity’s functional exchange rates in effect at the time of the cash flows. A
currency by applying to the foreign currency amount the weighted average rate may be used if the result is
exchange rate between the functional currency and the substantially the same as that which would have been
foreign currency at the date of the cash flow (IAS 7.25). obtained using the actual rate (ASC 830-230-45-1)
The cash flows of a foreign subsidiary shall be (SFAS 95.25).
translated at the exchange rates between the functional
currency and the foreign currency at the dates of the
cash flows (IAS 7.26).
In accordance with IAS 21, use of an exchange rate
that approximates actual rate is permitted (IAS 7.27).
While unrealized gains and losses are not cash flows, The effect of exchange rate changes on foreign currency
the effect of exchange rate changes on cash and cash cash balances is reported as a separate part of the
equivalents held or due in a foreign currency is reported reconciliation of the change in cash and cash equivalents
in the statement of cash flows in order to reconcile cash during the period (ASC 830-230-45-1) (SFAS 95.25).
and cash equivalents at the beginning and end of the
period. This amount is presented separately from
operating, investing, and financing activities and
includes the differences, if any, had those cash flows
been reported at end of period exchange rates (IAS
7.28).

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2.6 Non-current assets held for sale and discontinued operations

Note: The project on discontinued operations is a joint project of the IASB and the FASB to establish a common
definition of discontinued operations and require common disclosures about components of an entity that have been
(or will be) disposed of. The Boards decided to address these issues separately from the financial statement
presentation project.
In September 2008, the IASB published Discontinued Operations (an exposure draft of proposed amendments to IFRS
5) (the 2008 ED). The FASB published a proposed FASB Staff Position FAS 144-d, Amending the Criteria for
Reporting Discontinued Operations. With these two documents, the Boards intended to achieve convergence in
reporting discontinued operations. The comment period for the 2008 ED ended on January 23, 2009.
In November 2009, the Boards decided to accelerate the portion of the financial presentation project to eliminate
differences between the IFRS and U.S. GAAP definitions of discontinued operations and related disclosures, and in
March 2010 they agreed on common requirements.
In May 2010, the Boards decided to align the project timetable with the main financial statement presentation project.
In July 2010, the staff of the IASB posted on its website a Staff Draft of an exposure draft that reflects the Board’s
cumulative tentative decisions on discontinued operations, concluding with its joint meeting with the FASB in January
2010. All of those tentative decisions have been reported in IASB Update.
The proposals included in the Staff Draft have been made publicly available only for information as a basis for outreach
activities. The IASB is not formally inviting comments on the staff draft; however, it welcomes input from interested
parties.
The Boards expect to publish an exposure draft for public comment in early 2011.
IFRS U.S. GAAP

Relevant guidance: IFRS 5; IFRIC 17 Relevant guidance: ASC 205, 230, 360, and 810 (SFAS
95 and 144)
Introduction
A component of an entity comprises operations and A component of an entity comprises operations and cash
cash flows that can be clearly distinguished, flows that can be clearly distinguished, operationally and
operationally and for financial reporting purposes, from for financial reporting purposes, from the rest of the entity.
the rest of the entity. In other words, a component of an A component of an entity may be a reportable segment or
entity will have been a cash-generating unit or a group an operating segment (as defined in SFAS 131); a
of cash-generating units while being held for use reporting unit (as defined in SFAS 142); a subsidiary; or
(IFRS 5.31). an asset group (all as defined in the ASC Master
A discontinued operation is a component of an entity Glossary) ( SFAS 144.4) (ASC Master Glossary,
that either has been disposed of, or is classified as held “Component of an Entity”) (SFAS 144.41).
for sale, and (IFRS 5.32): A long-lived asset that is a component of an entity is
 Represents a separate major line of business or reported in discontinued operations if it (ASC 205-20-45-
geographical area of operations 1) (SFAS 144.42):
 Is part of a single coordinated plan to dispose of a  Is classified as held for sale; or

separate major line of business or geographical  Has been disposed of
area of operations; or And both of the following conditions are met
 Is a subsidiary acquired exclusively with a view to  The operations and cash flows of the component
resale have been (or will be) eliminated from the ongoing
A cash-generating unit is the smallest identifiable group operations of the entity; and
of assets that generates cash inflows that are largely  The entity will not have any significant continuing

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IFRS U.S. GAAP

independent of the cash inflows from other assets or involvement in the operations of the component after
groups of assets (IFRS 5 Appendix A). the disposal transaction
A disposal group is a group of assets to be disposed of,
by sale or otherwise, together as a group in a single
transaction, and liabilities directly associated with those
assets that will be transferred in the transaction (IFRS 5
Appendix A).
Certain types of non-current assets are scoped out of
IFRS 5 where they are dealt with by other standards
(IFRS 5.5).
The classification, presentation and measurement
requirements of IFRS 5 applicable to a non-current
asset (or disposal group) that is classified as held for
sale apply also to a non-current asset (or disposal
group) that is classified as held for distribution to
owners acting in their capacity as owners (held for
distribution to owners) (IFRS 5.5A).
Held for sale
An entity shall classify a non-current asset (disposal An entity classifies a long lived asset (disposal group) as
group) as held for sale if its carrying amount will be held for sale when it satisfies certain criteria (see below)
recovered principally through a sale transaction rather that demonstrate that the entity is sufficiently committed to
than through continuing use (IFRS 5.6). a plan to sell (ASC 360-10-45-9 through 45-14)
(SFAS 144.B70-71).
For this to be the case the non-current asset (disposal A long-lived asset (disposal group) to be sold shall be
group) must be available for immediate sale in its classified as held for sale in the period in which all of the
present condition subject only to terms that are usual following criteria are met (ASC 360-10-45-9)
and customary for sales of such assets (disposal (SFAS 144.30):
groups) and its sale must be highly probable (IFRS 5.7).  Management, having the authority to approve the
For the sale to be highly probable (IFRS 5.8) action, commits to a plan to sell the asset (disposal
 The appropriate level of management must be group)
committed to a plan to sell the asset (disposal  The asset (disposal group) is available for immediate
group) sale in its present condition subject only to terms that
 An active programme to locate a buyer and are usual and customary for sales of such assets
complete the plan must have been initiated (disposal groups)
 The asset (disposal group) must be actively  An active program to locate a buyer and other actions
marketed for sale at a price that is reasonable in required to complete the plan to sell the asset
relation to its current fair value (disposal group) has been initiated
 The sale should be expected to qualify for  The sale of the asset (disposal group) is probable,
recognition as a completed sale within one year and transfer of the asset (disposal group) is expected
from the date of classification (the one year limit is to qualify for recognition as a completed sale within
extended if conditions in IFRS 5 Appendix B apply) one year except as permitted by ASC 360-10-45-11
(SFAS 144.31)
 Actions required to complete the plan should
indicate that it is unlikely that significant changes to  The asset (disposal group) is being actively marketed
the plan will be made or that it will be withdrawn for sale at a price reasonable in relation to its current
fair value
The probability of shareholders’ approval (if required in
the jurisdiction) should be considered as part of the  Actions required to complete the plan indicate it is
unlikely that significant changes to the plan will be

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IFRS U.S. GAAP

assessment of whether the sale is highly probable made or that it will be withdrawn
(IFRS 5.8). If at any time the criteria above are no longer met (except
An entity that is committed to a sale plan involving loss as permitted by ASC 360-10-45-11 (SFAS 144.31), a
of control of a subsidiary shall classify all the assets and long-lived asset (disposal group) classified as held for
liabilities of that subsidiary as held for sale when the sale shall be reclassified as held and used in accordance
criteria in IFRS 5.6-.8 are met, regardless of whether with ASC 360-10-35-44 (SFAS 144.38) (ASC 360-10-45-
the entity will retain a non-controlling interest in its 10) (SFAS 144.30).
former subsidiary after the sale (IFRS 5.8A).
Measurement
Measurement of non-current assets (disposal groups) Measurement of long-lived assets (disposal groups)
classified as held for sale classified as held for sale
An entity shall measure a non-current asset (disposal Similar to IFRS (ASC 360-10-35-38 through 35-42)
group) classified as held for sale at the lower of its (SFAS 144.34-.37).
carrying amount and fair value less costs to sell
(IFRS 5.15).
An entity shall measure a non-current asset (disposal
group) classified as held for distribution to owners at the
lower of its carrying amount and fair value less costs to
distribute (IFRS 5.15A).
Recognition of impairment losses and reversals
An impairment loss is recognised for any initial or
subsequent write-down of the asset (disposal group) to
fair value less costs to sell, to the extent that it has not
been recognised in accordance with IFRS 5.19 (IFRS
5.20).
A gain is recognised for any subsequent increase in fair
value less costs to sell of an asset, but not in excess of
the cumulative impairment loss that has been
recognised either in accordance with IFRS 5 or
previously in accordance with IAS 36 (IFRS 5.21).
A gain is recognised for any subsequent increase in fair
value less costs to sell of a disposal group (IFRS 5.22):
 To the extent that it has not been recognised in
accordance with IFRS 5.19
 Not in excess of the cumulative impairment loss
that has been recognised, either in accordance
with IFRS 5 or previously in accordance with IAS
36 on the non-current assets that are within the
scope of the measurement requirements of IFRS 5
An entity shall not depreciate (or amortise) a non-
current asset while it is classified as held for sale or
while it is part of a disposal group classified as held for
sale. Interest and other expenses attributable to the
liabilities of a disposal group classified as held for sale
shall continue to be recognised (IFRS 5.25).
Changes to a plan of sale Changes to a plan of sale

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IFRS U.S. GAAP

IFRS 5.26-.29 deal with situations where assets or Similar to IFRS (ASC 360-10-35-44 through 35-45 and
disposal groups previously classified as held for sale no 45-7) (SFAS 144.38-.40).
longer meet those criteria. The asset or disposal group
is no longer classified as held for sale and disclosure of
the circumstances surrounding the change is required
(IFRS 5.26 and .42).
After the change, the assets are remeasured at the
lower of their carrying amount prior to the classification
as held for sale, adjusted for any depreciation,
amortisation or revaluations, or their recoverable
amount at the date of the subsequent decision to sell
(IFRS 5.27).
Non-current assets that are to be abandoned Long-lived assets to be abandoned

An entity shall not classify as held for sale a non-current Similar to IFRS. Long-lived assets to be abandoned
asset (disposal group) that is to be abandoned. This is continue to be classified as long-lived assets to be held
because its carrying amount will be recovered and used (ASC 360-10-45-15, ASC 360-10-35-47 through
principally through continuing use. However, if the 35-48) (SFAS 144.27-.28).
disposal group to be abandoned meets the criteria in
IFRS 5.32(a)-(c), the entity shall present the results and
cash flows of the disposal group as discontinued
operations in accordance with IFRS 5.33-.34 at the date
on which it ceases to be used (IFRS 5.13).
Timing considerations
If the held for sale criteria in IFRS 5.7-.8 are met after Similar to IFRS except that for those situations where the
the reporting period, an entity shall not classify a non- criteria are met after the balance sheet date but before
current asset (disposal group) as held for sale in those issuance of the financial statements, ASC 360 (SFAS
financial statements when issued. However, when 144) requires disclosure of the carrying amounts of the
those criteria are met after the reporting period but major classes of assets and liabilities included as part of a
before the authorisation of the financial statements for disposal group and IFRS 5 does not (ASC 360-10-45-13)
issue, the entity shall disclose the information specified (SFAS 144.33). Furthermore, ASC 360 (SFAS 144)
in IFRS 5.41(a), (b), and (d) in the notes (IFRS 5.12). requires disclosure of the segment in which the asset is
presented and IFRS 5 does not (ASC 205-20-50-1)
(SFAS 144.47d).
Presentation and disclosure
The key disclosures required for discontinued When a component of an entity either has been disposed
operations are (IFRS 5.33): of or is classified as held for sale, the following is reported
 A single amount in the statement of comprehensive (net of income taxes (benefit)) separately on the face of
income comprising the total of: the income statement in discontinued operations for
current and prior periods (ASC 205-20-45-3)
− The post-tax profit or loss of discontinued (SFAS 144.43):
operations; and
 Results of operations of the component
− The post-tax gain or loss recognised on the  Gain or loss recognized as a result of measuring a
measurement to fair value less costs to sell or long-lived asset (disposal group) classified as held for
on the disposal of the assets or disposal sale at the lower of its carrying amount or fair value
group(s) constituting the discontinued less cost to sell
operation
A gain or loss on disposal may be disclosed either on the
 An analysis of the above single amount (in the face of the income statement or in the notes (ASC 205-

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IFRS U.S. GAAP

statement of comprehensive income or in the 20-45-3) (SFAS 144.43).
notes) into: Adjustments to amounts previously reported in
− The revenue, expenses and pre-tax profit or discontinued operations that are directly related to the
loss of discontinued operations disposal of a component of an entity in a prior period are
classified separately in discontinued operations in the
− The gain or loss recognised on the current period (ASC 205-20-45-4) (SFAS 144.44).
measurement to fair value less costs to sell or
on the disposal of the assets or disposal Unlike IFRS, the separate disclosure of cash flows related
group(s) constituting the discontinued to discontinued operations is not required to be presented.
operation; and However, if an entity chooses to separately report cash
flows from discontinued operations, then it should not
− The related income tax expense as required aggregate operating, investing, and financing cash flows
by IAS 12.81(h). If the analysis is shown in the from discontinued operations into a single line item but
statement of comprehensive income it shall be should display them separately (ASC 230-10-45-24)
presented in a section identified as relating to (SFAS 95.26 fn. 10).
discontinued operations.
Similar to IFRS, an entity shall disclose either in the notes
 Net cash flows attributable to the operating, or on the face of the consolidated income statement,
investing and financing activities of discontinued amounts attributable to the parent for the following, if
operations. These disclosures may be presented reported in the consolidated financial statements (see
either in the notes or in the financial statements. ASC 810-10-55-4J) (SFAS 160.A4) (ASC 810-10-50-
 The amount of income from continuing operations 1A(b)) (SFAS 160 38b):
and from discontinued operations attributable to  Income from continuing operations
owners of the parent. These disclosures may be
 Discontinued operations
presented either in the notes or in the statement of
comprehensive income.  Extraordinary items
Disclosure exemptions apply for disposal groups that Unlike IFRS, U.S. GAAP (SFAS 144) does not contain
are newly acquired subsidiaries that meet the criteria to similar disclosure exemptions for disposal groups that are
be classified as held for sale on acquisition (IFRS 5.33). newly acquired subsidiaries.
An entity shall not present any items of income or Unlike IFRS, discontinued operations are reported as a
expense as extraordinary items, in the statement of separate component of income before extraordinary items
comprehensive income or the separate income and the cumulative effect of accounting changes (ASC
statement (if presented), or in the notes (IAS 1.87). 205-20-45-3) (SFAS 144.43).
For prior periods presented in the financial statements Similar to IFRS except that separate disclosure of cash
an entity shall re-present the statement of flows related to discontinued operations is not required to
comprehensive income and cash flow disclosures that be presented (ASC 230-10-45-24) (SFAS 95.26).
are set out in IFRS 5.33 so that the disclosures relate to
all operations that have been discontinued by the end of
the reporting period for the latest period presented
(IFRS 5.34).
An entity shall not reclassify or re-present amounts
presented for non-current assets or for the assets and
liabilities of disposal groups classified as held for sale in
the statements of financial position for prior periods to
reflect the classification in the statement of financial
position for the latest period presented (IFRS 5.40).
Statement of financial position/balance sheet presentation
Where a non-current asset or a disposal group qualifies Similar to IFRS except that U.S. GAAP does not have a
as held for sale, the assets and liabilities should be similar disclosure exemption for a newly acquired

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IFRS U.S. GAAP

presented separately from other assets and liabilities subsidiary (ASC 205-20-45-10) (SFAS 144.46).
(both as separate single lines). The assets and liabilities
should not be offset in the statement of financial
position (IFRS 5.38).
The major classes of assets and liabilities classified as
held for sale shall be separately disclosed either in the
statement of financial position or in the notes (there is
an exemption from this additional disclosure in cases
where the disposal group is a newly acquired
subsidiary). An entity shall present separately any
cumulative income or expense recognised in other
comprehensive income relating to a non-current asset
(disposal group) classified as held for sale (IFRS 5.38-
.39).

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3. Accounting policies – general

3.1 Selection of accounting policies
IFRS U.S. GAAP

Relevant guidance: IAS 1, 8, and 10 Relevant guidance: ASC 105, 235, and 275 (SFAS
162; APB 22; FIN 39; SOP 94-6; EITF Topic D-43);
AICPA AU 341; SFAC 2 and 6
Introduction
An entity must disclose both of the following (IAS 1.117): An entity is required to disclose the accounting policies
 The measurement bases used to prepare the it uses to prepare its financial statements. These
financial statements disclosures should identify and describe the accounting
principles followed by the reporting entity and the
 Other accounting policies that are relevant to methods of applying those principles that materially
understanding the financial statements affect the determination of financial position, cash flows,
or results of operations (ASC 235-10-50-3)
(APB 22.12).
An entity whose financial statements comply with IFRS No equivalent requirement.

must make an explicit and unreserved statement of
compliance in the notes. Financial statements should not
be described as complying with IFRS unless they comply
in full with all requirements of each applicable IFRS (IAS
1.16).
An entity must disclose in the summary of significant SEC registrants are required to disclose critical
accounting policies or other notes the judgements that accounting policies in management’s discussion and
management has made in the process of applying the analysis of financial condition and results of operations;
entity’s accounting policies that have the most significant however, that information is outside of the financial
effect on amounts recognised in the financial statements statements. There is no similar requirement for non-
(IAS 1.122). SEC registrants.
An entity must disclose the assumptions it makes about An entity is required to disclose information about a
the future and other major sources of estimation material change in the amount of an estimate if it is at
uncertainty at the end of the reporting period that have a least reasonably possible that the change will occur in
significant risk of resulting in a material adjustment to the the near term (ASC 275-10-50-8 through 50-9) (SOP
carrying amounts of assets and liabilities within the next 94-6.13).
year (IAS 1.125).
Selection of accounting policies
If an IFRS standard specifically applies to a transaction, A description of all significant accounting policies
other event, or condition, an entity must select and apply should be included as an integral part of the financial
the accounting policy or policies specified in that standard statements when those financial statements purport to
to the transaction, other event, or condition. In a situation present fairly financial position, cash flows, and results
in which no specific IFRS requirement exists, of operations in accordance with U.S. GAAP (ASC 235-
management must use judgement to develop policies to 10-50-1) (APB 22.8).
ensure financial statements provide information that is
both relevant to decision-making needs of users and
reliable, i.e. gives a faithful representation; reflects
economic substance; and is neutral, prudent and

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IFRS U.S. GAAP

complete (IAS 8.7 and .10).
In the absence of a specific IFRS requirement, The characteristics of accounting information that make
management considers, in the following order: it a desirable commodity guide the selection of
 IFRS and Interpretations dealing with similar issues preferred accounting policies from among available
(IAS 8.11) alternatives. Those characteristics can be viewed as a
hierarchy of qualities with decision usefulness the most
 IASB framework definitions and recognition and important. The primary qualities that make accounting
measurement criteria (IAS 8.11) information useful are relevance and reliability
 Recent pronouncements of other standard-setters (SFAC 2.32-.33).
that use a similar conceptual framework, other In selecting accounting policies, accountants in the U.S.
accounting literature, and accepted industry practices generally follow the framework for selecting the
(but not so as to override the first two bullets above) principles used in the preparation of financial
(IAS 8.12) statements set forth in ASC 105 (SFAS 162).
Unlike IFRS, the Concepts Statements are non-
authoritative and there is no specific requirement to
consider them.
IFRS may be overridden only in extremely rare cases Unlike IFRS, U.S. GAAP does not permit an entity to
where compliance would be so misleading that it would depart from generally accepted accounting principles.
conflict with the objective of the financial statements set
out in the Framework and thus where departure is needed
to achieve fair presentation (IAS 1.19). In situations in
which compliance with IFRS would be misleading, but
overriding IFRS is prohibited by the relevant regulatory
framework, certain disclosures must be given (IAS 1.23).
Going concern
Going concern basis shall be used unless management Continuation of an entity as a going concern is
intends to liquidate or cease trading, or has no realistic assumed for financial reporting in the absence of
alternative but to do so (even if management did not significant information to the contrary (AICPA AU
determine this until after the reporting period) (IAS 1.25 341.01).
and IAS 10.14).
Note: In October 2008, the FASB issued an Exposure

Draft of a proposed SFAS, Going Concern that would
provide guidance on the preparation of financial
statements as a going concern. Similar to IFRS, the
proposed guidance would require management to
prepare financial statements on a going concern basis
unless management intends to liquidate or cease
operations, or has no realistic alternative but to do so.
The FASB reached certain tentative decisions based
upon discussions of comment letters received on the
2008 Exposure Draft. At the March 2010 meeting, the
FASB directed the staff to draft a proposed ASU for
vote by written ballot. The proposed ASU is expected to
be issued in the fourth quarter of 2010.

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3.2 Changes in accounting policy and correction of errors
IFRS U.S. GAAP

Relevant guidance: IAS 8 and 33 Relevant guidance: ASC 250, 260 (SFAS 128 and
154) SEC SAB Topic 11:M
Introduction
Change in accounting policy: Change in accounting principle:

 A change in accounting policy shall be made if (a) it is  Similar to IFRS, a change in accounting principle
required by a standard or interpretation, or (b) the shall be made only if (a) the change is required by
change will result in the financial statements a newly issued accounting pronouncement or (b)
providing reliable and more relevant information the entity can justify the use of an allowable
about transactions, events, and conditions (IAS 8.14) alternative accounting principle on the basis that it
is preferable (ASC 250-10-45-2) (SFAS 154.5)
 The initial application of a policy to revalue assets  Under U.S. GAAP, fixed assets and intangibles
under IAS 16 (fixed assets) or IAS 38 (intangibles) is shall not be revalued in a manner similar to that
a change of accounting policy. However, that change provided by IAS 16 or IAS 38
is accounted for under IAS 16 and IAS 38 and not
IAS 8 (IAS 8.17).
 Unless an individual standard specifies otherwise, a  Similar to IAS 8 (ASC 250-10-45-5 through 45-8)
change in accounting policy shall be applied (SFAS 154.6-.11). ASC 250-10-45-9 through 45-10
retrospectively (IAS 8.19 and IAS 8.22) except to the (SFAS 154.11) lists the conditions that must be met
extent that it is impracticable to determine either the before an entity can conclude that it is
period-specific or cumulative effects of the change, in impracticable to apply the effects of a change in
which case the policy is applied from the earliest date accounting principle retrospectively
practicable (IAS 8.23-.27). IAS 8.5 contains a
definition of impracticable and IAS 8.50-53 contains
further guidance.
 Unless an individual standard specifies otherwise, or  Similar to IAS 8, except that ASC 250 (SFAS 154)
the impracticability criteria apply, a change in specifically addresses the accounting for and
accounting policy shall be accounted for by adjusting disclosure of the indirect effects of a change in
the relevant opening equity balance and prior-period accounting principle (ASC 250-10-45-5 and 45-8)
comparative amounts (IAS 8.22) (SFAS 154.7 and 10)
 IAS 8.30 requires disclosure of standards issued but  SEC SAB Topic 11:M contains similar disclosure
not yet effective, together with their reasonably requirements for SEC registrants
estimable effect
Material errors shall be corrected in the same way as Correction of material errors in previously issued
accounting policy changes (IAS 8.42-.48), i.e. financial statements shall be reported as prior-period
retrospective restatement unless impracticability criteria adjustments by restating the prior-period financial
apply. statements (ASC 250-10-45-23) (SFAS 154.25). Unlike
IAS 8, the impracticability exception does not apply to
correction of material errors.
Changes in estimates shall be accounted for prospectively Similar to IAS 8 (ASC 250-10-45-17) (SFAS 154.19).
(IAS 8.36-.38).
Basic and diluted earnings per share of all periods Similar to IAS 33 (ASC 260-10-55-15 through 55-16)
presented must be adjusted for the effects of errors and (SFAS 128.57-.58).
adjustments resulting from changes in accounting policies
accounted for retrospectively (IAS 33.64).

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IFRS U.S. GAAP

When there is retrospective application or reclassification, Unlike IFRS, a statement of financial position at the
a third statement of financial position is required beginning of the earliest period is not required.
(IAS 1.39).

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4. Assets
4.1 Property, plant and equipment
IFRS U.S. GAAP

Relevant guidance: IAS 16, 23, and 36 Relevant guidance: ASC 360, 410, 835, 845, and 908
(ARB 43; APB 6 and 29; SFAS 34, 62, 143, and 144;
AICPA Audit and Accounting Guide (AAG), Audits of
Airlines); and SFAC 5; SEC SAB Topic 5:CC
Introduction
The objective of IAS 16 is to prescribe the accounting Unlike IFRS, U.S. GAAP includes more than one Topic
treatment for property, plant and equipment so that users that addresses property, plant and equipment.
of the financial statements can discern information about The objective is similar to the IFRS objective.
an entity’s investment in its property, plant and equipment
and the changes in such investment. The principal issues
in accounting for property, plant and equipment are the
recognition of the assets, the determination of their
carrying amounts and the depreciation charges and
impairment losses to be recognised in relation to them
(IAS 16.1).
Property, plant and equipment are tangible items that are Similar to IFRS.
(IAS 16.6):
 Held for use in the production or supply of goods or
services, for rental to others, or for administrative
purposes; and
 Expected to be used during more than one period
Fair value is the amount for which an asset could be Unlike IFRS, fair value is the price that would be
exchanged between knowledgeable, willing parties in an received to sell an asset or paid to transfer a liability in
arm’s length transaction (IAS 16.6). an orderly transaction between market participants at
the measurement date (ASC Master Glossary, “Fair
Value”) (SFAS 157.5).
Initial recognition
The cost of an item of property, plant and equipment shall Similar to IFRS.
be recognised as an asset if, and only if:
 It is probable that future economic benefits
associated with the item will flow to the entity; and
 The cost of the item can be measured reliably
(IAS 16.7)
IAS 16.16-.22 contain detailed rules on qualifying costs.
IAS 23 establishes criteria for the recognition of interest
as a component of the carrying amount of a self-
constructed item of property, plant and equipment
(IAS 16.22).
The cost of an item of property, plant and equipment is Cost is the amount of cash, or its equivalent, paid to
the cash price equivalent at the recognition date. If acquire an asset, commonly adjusted after acquisition

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IFRS U.S. GAAP

payment is deferred beyond normal credit terms, the for amortization or other allocations (SFAC 5.67a).
difference between the cash price equivalent and the total
payment is recognised as interest over the period of credit
unless such interest is capitalized in accordance with
IAS 23 (IAS 16.23).
IAS 16.16(c) requires the initial recognition to include the Upon recognition of a liability for an asset retirement
estimate of the costs of dismantling and site restoration. obligation under ASC 410-20 (SFAS 143), an entity
This applies when the entity has an obligation as a increases the carrying amount of the related long-lived
consequence of using the item for a purpose other than asset by the same amount as the liability.
production of inventory.
Asset exchanges
IAS 16.24-.26 deal with assets received in an exchange Exchanges of nonmonetary assets are generally
(and whether the new asset is recognised at its fair value recorded at fair value. However, if the exchange lacks
or the carrying amount of the asset given up – the commercial substance, fair value is not determinable, or
emphasis is on substance over form). it’s an exchange transaction to facilitate sales to
customers, the exchange is recorded using a carryover
basis (ASC 845-10-30-1 through 30-3) (APB 29.20).
Subsequent costs
IAS 16.13 requires that subsequent expenditure on Cost of routine maintenance is expensed as incurred.
components is added to cost (and the replaced element Major inspections and overhauls may be expensed as
derecognised). Day-to-day servicing costs are expensed incurred (direct expensing method) or capitalized and
(IAS 16.12). Costs of major periodic inspections should be amortized to the next major inspection or overhaul
capitalised (IAS 16.14) and the previous inspection cost is (built-in overhaul and deferral methods) (ASC 908-720-
derecognised. 25-3 and ASC 908-360-35-4 through 35-6) (AAG,
Audits of Airlines).
Revaluations
Revaluations are permitted (as an alternative to cost Unlike IFRS, revaluation is not permitted except for
model), but not required, but if revalued must be done on impairment (see Section 4.4, “Impairment”). Restoration
a class-by-class basis (IAS 16.29): of a previous impairment loss is prohibited.
 Revalue to fair value (usually market value) if fair Property, plant and equipment should not be written up
value can be measured reliably (IAS 16.31) by an entity to reflect appraisal, market or current
 Revaluations shall be sufficiently regular that the values which are above cost to the entity, except in
carrying amount does not differ materially from fair special cases such as quasi-reorganizations (ARB 43
value at the end of the reporting period (IAS 16.31 Chapter 9B.1; APB 6.17).
and .34)
 IAS 16.32 clarifies that property revaluation is usually
determined from market-based evidence by appraisal
that is normally undertaken by professionally qualified
valuers
If an item of property, plant and equipment is revalued,
the entire class of property, plant and equipment to which
that asset belongs shall be revalued (IAS 16.36).
If an asset’s carrying amount is increased as a result of a Revaluation not permitted except for impairment (see
revaluation, the increase shall be recognised in other Section 4.4, “Impairment”). Restoration of a previous
comprehensive income and accumulated in equity under impairment loss is prohibited.

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IFRS U.S. GAAP

the heading of revaluation surplus. However, the increase
shall be recognised in profit or loss to the extent that it
reverses a revaluation decrease of the same asset
previously recognised in profit or loss (IAS 16.39).
If an asset’s carrying amount is decreased as a result of a Revaluation not permitted except for impairment (see
revaluation, the decrease shall be recognised in profit or Section 4.4, “Impairment”). Restoration of a previous
loss. However, the decrease shall be recognised in other impairment loss is prohibited.
comprehensive income to the extent of any credit balance
existing in the revaluation surplus in respect of that asset.
The decrease recognised in other comprehensive income
reduces the amount accumulated in equity under the
heading of revaluation surplus (IAS 16.40).
The revaluation surplus included in equity in respect of an Revaluation not permitted except for impairment (see
item of property, plant and equipment may be transferred Section 4.4, “Impairment”). Restoration of a previous
directly to retained earnings when the asset is impairment loss is prohibited.
derecognised. This may involve transferring the whole of
the surplus when the asset is retired or disposed of.
However, some of the surplus may be transferred as the
asset is used by an entity. In such a case, the amount of
the surplus transferred would be the difference between
depreciation based on the revalued carrying amount of
the asset and depreciation based on the asset’s original
cost. Transfers from revaluation surplus to retained
earnings are not made through profit or loss (IAS 16.41).
Depreciation
Depreciation is recognised as long as the asset's residual Tangible fixed assets (less estimated salvage value)
value does not exceed its carrying amount in which case are depreciated over their expected useful lives. Land is
the depreciation charge is zero unless its residual value not depreciated.
subsequently decreases to an amount below the asset’s
carrying amount. (IAS 16.52-.54). Land is generally not
depreciated (IAS 16.58).
The residual value and the useful life of an asset shall be Initially, residual value is based on price levels in effect
reviewed at least at each financial year-end and, if when the asset is acquired. Such values are
expectations differ from previous estimates, the change(s) subsequently reviewed and revised to recognize
shall be accounted for as a change in an accounting changes in conditions other than inflation (SEC SAB
estimate in accordance with IAS 8 (IAS 16.51). Topic 5:CC).
Unlike IFRS, there is no requirement that residual
values and useful life be reviewed annually.
The asset management policy of the entity may involve ASC 360-10-35-4 (ARB 43, Ch. 9C.5) requires
the disposal of assets after a specified time or after depreciation over the expected useful life of the facility
consumption of a specified proportion of the future in such a way as to allocate it as equitably as possible
economic benefits embodied in the asset. Therefore, the to the periods during which services are obtained from
useful life of an asset may be shorter than its economic the use of the facility.
life. The estimation of the useful life of the asset is a
matter of judgement based on the experience of the entity
with similar assets (IAS 16.57).
Component depreciation is required whereby each part of Unlike IFRS, component depreciation is not required

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IFRS U.S. GAAP

an item of property, plant and equipment with a cost that but is allowed. Depreciation method must be systematic
is significant in relation to the total cost of the item shall be and rational (ASC 360-10-35-4) (ARB 43, Ch. 9C.5).
depreciated separately (IAS 16.43).
The carrying amounts of parts or components that are
replaced are derecognised (IAS16.70).
Depreciation ceases in accordance with IFRS 5 if asset Similar to IFRS (ASC 360-10-35-43) (SFAS 144.34).
qualifies as held for sale (see Section 2.6, “Non-current
assets held for sale and discontinued operations”).
Borrowing costs
IAS 23 applies to a qualifying asset which is an asset that Unlike IFRS, the definition of a qualifying asset does not
necessarily takes a substantial period of time to get ready include the term substantial (ASC 835-20-15-5 through
for its intended use or sale (IAS 23.5). 15-6) (SFAS 34.9-.10).
Financial assets, and inventories that are manufactured,
or otherwise produced, over a short period of time are not
qualifying assets. Assets that are ready for their intended
use or sale when acquired are not qualifying assets
(IAS 23.7).
Borrowing costs are interest and other costs that an entity Unlike IFRS, borrowing costs are generally limited to
incurs in connection with the borrowing of funds (IAS interest cost (ASC 835-20-05-1) (SFAS 34.1).
23.5). Borrowing costs may be interpreted more broadly
than interest costs (e.g. exchange differences arising from
foreign currency borrowings to the extent that they are
regarded as an adjustment to interest costs) (IAS 23.6(e)).
An entity shall capitalise borrowing costs that are directly Interest costs must be capitalized as part of the
attributable to the acquisition, construction or production historical cost of qualifying assets when those assets
of a qualifying asset as part of the cost of that asset. An require a period of time (e.g. a construction period) to
entity shall recognise other borrowing costs as an get them ready for their intended use (ASC 835-20-05-1
expense in the period in which it incurs them (IAS 23.8). and ASC 360-10-30-1) (SFAS 34.6).
When an entity borrows funds specifically for the purpose When an entity borrows funds specifically for the
of obtaining a qualifying asset IAS 23 requires an entity purpose of obtaining a qualifying asset:
(IAS 23.12 and BC23):  ASC 835-20-30-3 (SFAS 34) states that an entity
 To capitalise the actual borrowing costs incurred on may use the rate of that borrowing
that borrowing  ASC 835-20-30-10 (SFAS 34) does not generally
 To deduct any income earned on the temporary permit this deduction, unless particular tax-exempt
investment of actual borrowings from the amount of borrowings are involved
borrowing costs to be capitalised
When an entity borrows funds generally and uses them to ASC 835-20-30-4 (SFAS 34.14) requires an entity to
obtain a qualifying asset, IAS 23 permits some flexibility in use judgment in determining the capitalization rate to
determining the capitalisation rate, but requires an entity apply to the expenditures on the asset – an entity
to use all outstanding borrowings other than those made selects the borrowings that it considers appropriate to
specifically to obtain a qualifying asset (IAS 23.14 and meet the objective of capitalizing the interest costs
BC24). incurred that otherwise could have been avoided.
IAS 23 allows capitalisation once actual borrowing costs ASC 835 (SFAS 34) requires interest cost capitalization
have been incurred and activities in preparing the asset when activities to get asset ready for intended use are
for its intended use or sale are in progress (IAS 23.17- in progress, expenditures have been made, and interest

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.19). is being incurred (ASC 835-20-30-2) (SFAS 34.17).
In cases involving qualifying assets financed with the
proceeds of tax-exempt borrowings that are externally
restricted, the capitalization begins at the date of the
borrowing (ASC 835-20-25-8) (SFAS 34 fn 4b).
An entity must suspend capitalisation of borrowing costs An entity must suspend capitalization of borrowing
during extended periods in which it suspends active costs during extended delays in construction (ASC 835-
development of a qualifying asset (IAS 23.20). 20-25-4) (SFAS 34.17) and cease capitalization of
An entity shall cease capitalising borrowing costs when borrowing costs once the asset is ready for use (ASC
substantially all the activities necessary to prepare the 835-20-25-5) (SFAS 34.18).
qualifying asset for its intended use or sale are complete
(IAS 23.22).
When the carrying amount or the expected ultimate cost Accumulation of costs significantly in excess of the
of the qualifying asset exceeds its recoverable amount or amount originally expected for the acquisition or
net realisable value, the carrying amount is written down construction of a long-lived asset is an indicator that the
or written off in accordance with the requirements of other asset should be tested for impairment (ASC 360-10-35-
standards. In certain circumstances, the amount of the 21(d)) (SFAS 144.8d).
write down or write-off is written back in accordance with
those other standards (IAS 23.16).
No requirement for annual impairment reviews. IAS 36 No requirement for annual impairment reviews. The
contains rules on impairment and may require an ASC 360-10, Impairment or Disposal of Long-Lived
impairment review if an indication of impairment exists. Assets, subsections (SFAS 144) contain rules on
impairment and may require an impairment review if an
indication of impairment exists (ASC 360-10-35-21)
(SFAS 144.8).
4.2 Investment property
IFRS U.S. GAAP

Relevant guidance: IAS 40 and 16; IFRS 5 Relevant guidance: See Section 4.1, “Property, plant
and equipment” and ASC 360, 845, 970, 976 (SFAS 66,
67, and 144)
Introduction
Investment property is property (land or a building – or Unlike IFRS, there is no equivalent standard in U.S.
part of a building – or both) held (by the owner or by the GAAP. Property held for investment purposes is treated
lessee under a finance lease) to earn results or for capital the same as other property, plant and equipment (see
appreciation or both, rather than for (IAS 40.5): Section 4.1, “Property, plant and equipment”). Real
 Use in the production or supply of goods or services estate guidance is included in ASC 360-20, ASC 970,
or for administrative purposes; or and ASC 976 (SFAS 66 and 67).
 Sale in the ordinary course of business

Also, see IAS 40.6-.15, which supplements the basic
definition.
The following are examples of investment property (IAS No equivalent standard.

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40.8):
 Land held for long-term capital appreciation rather
than for short-term sale in the ordinary course of
business
 Land held for a currently undetermined future use (If
an entity has not determined that it will use the land
as owner-occupied property or for short-term sale in
the ordinary course of business, the land is regarded
as held for capital appreciation.)
 A building owned by the entity (or held by the entity
under a finance lease) and leased out under one or
more operating leases
 A building that is vacant but is held to be leased out
under one or more operating leases
 Property that is being constructed or developed for
future use as investment property
IAS 40 excludes owner-occupied property from being
investment property (IAS 40.7 and .9(c)). IAS 16 applies to
owner-occupied property.
A property interest that is held by a lessee under an Unlike IFRS, any property held under an operating
operating lease may be classified and accounted for as lease is not capitalized under U.S. GAAP. Rent is
investment property if, and only if, the property would expensed as incurred.
otherwise meet the definition of an investment property
and the lessee uses the fair value model set out in IAS
40.33-55 for the asset recognised (IAS 40.6).
This classification alternative is available on a property-by-
property basis. However, once this classification
alternative is selected for one such property interest held
under an operating lease, all property classified as
investment property shall be accounted for using the fair
value model. When this classification alternative is
selected, any interest so classified is included in the
disclosures required by IAS 40.74-78 (IAS 40.6).
Some properties comprise a portion that is held to earn No equivalent standard.

rentals or for capital appreciation and another portion that
is held for use in the production or supply of goods or
services or for administrative purposes. If these portions
could be sold separately (or leased out separately under a
finance lease), an entity accounts for the portions
separately. If the portions could not be sold separately, the
property is investment property only if an insignificant
portion is held for use in the production or supply of goods
or services or for administrative purposes (IAS 40.10).
IAS 40.11-.14 contains guidance where other services
provided to property – particularly relevant for situations
like hotel-owning company that subcontracts hotel
management elsewhere.

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In some cases, an entity owns property that is leased to, No equivalent standard.
and occupied by, its parent or another subsidiary. The
property does not qualify as investment property in the
consolidated financial statements, because the property is
owner-occupied from the perspective of the group.
However, from the perspective of the entity that owns it,
the property is investment property if it meets the definition
in IAS 40.5. Therefore, the lessor treats the property as
investment property in its individual financial statements
(IAS 40.15).
Measurement at recognition
An investment property shall be measured initially at its No equivalent standard.

cost. Transaction costs shall be included in the initial
measurement (IAS 40.20).
The initial cost of a property interest held under a lease
and classified as an investment property shall be as
prescribed for a finance lease by IAS 17.20, i.e. the asset
shall be recognised at the lower of the fair value of the
property and the present value of the minimum lease
payments. An equivalent amount shall be recognised as a
liability in accordance with that same paragraph
(IAS 40.25).
IAS 40.27-.29 contain guidance where the asset is Exchanges of nonmonetary assets are covered by
received in an exchange (similar to IAS 16). ASC 845 (APB Opinion 29).
Measurement after recognition
Except for IAS 40.32A and .34, IAS 40 permits two No equivalent standard. Investment property
recognition approaches. An entity shall choose as its measurement is similar to the IFRS cost model (but fair
accounting policy one of the following models and shall value disclosure is not required).
apply that policy to all of its investment property
(IAS 40.30):
 Fair value model, with annual remeasurement where
movements are recognised in profit or loss
(IAS 40.33-.55)
 Cost model, i.e. carry at cost less depreciation (under
IAS 16 principles). Investment property that meets the
criteria to be classified as held for sale (or are
included in a disposal group that is classified as held
for sale) shall be measured in accordance with
IFRS 5 (IAS 40.56).
Change from one model to the other is permitted only if it
results in more appropriate presentation. This is
considered highly unlikely in the case of moving from fair
value model to cost model (IAS 40.31).
Note that if the cost model is adopted, fair value
disclosures are still required (IAS 40.79(e)).

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Fair value model
Where the fair value model is adopted, a gain or loss Unlike IFRS, the fair value model is not permitted
arising from a change in the fair value of investment (except at impairment).
property shall be recognised in profit or loss for the period
in which it arises (IAS 40.35).
The fair value of investment property is the price at which Fair value model is not permitted (except at
the property could be exchanged between knowledgeable, impairment).
willing parties in an arm’s length transaction. Fair value
specifically excludes an estimated price inflated or
deflated by special terms or circumstances such as
atypical financing, sale and leaseback arrangements,
special considerations or concessions granted by anyone
associated with the sale (IAS 40.36).
The fair value of investment property shall reflect market
conditions at the end of the reporting period (IAS 40.38).
In addition, IAS 40.33-.52 provide guidance on
determining fair value.
An entity is encouraged, but not required, to determine the Fair value model is not permitted (except at
fair value of investment property on the basis of a impairment).
valuation by an independent valuer who holds a
recognised and relevant professional qualification and has
recent experience in the location and category of the
investment property being valued (IAS 40.32).
There may be an inability for an entity to determine fair Fair value model is not permitted (except at
value reliably. This arises when, and only when, impairment).
comparable market transactions are infrequent and
alternative reliable estimates of fair value (for example,
based on discounted cash flow projections) are not
available. If an entity determines that the fair value of an
investment property under construction is not reliably
determinable but expects the fair value of the property to
be reliably determinable when construction is complete, it
shall measure that investment property under construction
at cost until either its fair value becomes reliably
determinable or construction is completed (whichever is
earlier). If an entity determines that the fair value of an
investment property (other than an investment property
under construction) is not reliably determinable on a
continuing basis, the entity shall measure that investment
property using the cost model in IAS 16 (IAS 40.53).
Transfers
Transfers to, or from, investment property shall be made No equivalent standard.

when, and only when, there is a change in use, evidenced
by (IAS 40.57):
 Commencement of owner-occupation, for a transfer
from investment property

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 Commencement of development with a view to sale,
for a transfer from investment property to inventories
 End of owner-occupation, for a transfer from owner-
occupied property to investment property; or
 Commencement of an operating lease to another
party, for a transfer from inventories to investment
property
For a transfer from investment property carried at fair
value to owner-occupied property or inventories, the
property’s deemed cost for subsequent accounting in
accordance with IAS 16 or IAS 2 shall be its fair value at
the date of change in use (IAS 40.60).
If an owner-occupied property becomes an investment
property that will be carried at fair value, an entity shall
apply IAS 16 up to the date of change in use. The entity
shall treat any difference at that date between the carrying
amount of the property and its fair value in accordance
with the revaluation provisions of IAS 16 (IAS 40.61).
For a transfer from inventories to investment property that
will be carried at fair value, any difference between the fair
value of the property at that date and its previous carrying
amount shall be recognised in profit or loss (IAS 40.63).
When an entity completes the construction or
development of a self-constructed investment property
that will be carried at fair value, any difference between
the fair value of the property at that date and its previous
carrying amount shall be recognised in profit or loss
(IAS 40.65).
Disposals
An investment property shall be derecognised (eliminated No equivalent standard.

from the statement of financial position) on disposal or
when the investment property is permanently withdrawn
from use and no future economic benefits are expected
from its disposal (IAS 40.66).
The disposal of an investment property may be achieved
by sale or by entering into a finance lease (IAS 40.67).
Gains or losses arising from retirement or disposal of
investment property shall be determined as the difference
between the net disposal proceeds and the carrying
amount of the asset and shall be recognised in profit or
loss (unless IAS 17 requires otherwise on a sale and
leaseback) in the period of the retirement or disposal
(IAS 40.69).
Held for sale
See Section 2.6, “Non-current assets held for sale and Investment property held for sale is carried at fair value
discontinued operations.” IFRS 5 only applies where the less cost to sell pursuant to ASC 360-10, Impairment or

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cost model is used. Other investment properties are out of Disposal of Long-Lived Assets, subsections
the scope of IFRS 5 (IFRS 5.5(d)). (SFAS 144).
4.3 Intangible assets

Note: This section does not cover goodwill – see Section 8.4, “Business combinations”.
IFRS U.S. GAAP

Relevant guidance: IAS 38; IFRS 3; SIC-32 Relevant guidance: ASC 340, 350, 360, 720, 730, 805,
and 985 (SFAS 2, 86, 141R, and 142; FSP FAS 142-3;
SOP 93-7, 98-1, and 98-5; EITF 00-2 and 08-7)
Introduction
The carrying amount of acquired intangibles with a finite Similar to IFRS.

useful life is cost less accumulated amortisation and any
accumulated impairment losses.
The carrying amount of acquired intangibles with an Similar to IFRS.

indefinite useful life is cost less any accumulated
impairment losses.
Expenditures related to research are expensed as Expenditures related to research and development
incurred. Internally generated intangibles representing activities shall be expensed as incurred.
development shall be capitalised if certain conditions are
met.
Revaluation is permitted only in limited cases. Revaluation is not permitted.
If intangibles qualify as held for sale then IFRS 5 If intangibles qualify as held for sale then ASC 360-10,
measurement and presentation rules apply. Impairment or Disposal of Long-Lived Assets,
subsections (SFAS 144) on measurement and
presentation rules apply.
Definition and recognition
An intangible asset is defined as an identifiable non- Intangible assets are defined as assets (not including
monetary asset without physical substance (IAS 38.8). An financial assets) that lack physical substance (ASC
asset is identifiable if it either (IAS 38.12): Master Glossary, “Intangible Assets”) (SFAS 142
 Is separable – capable of being sold, transferred, Glossary).
licensed, rented, or exchanged
 Arises from contractual or other legal rights,
regardless of whether those rights are transferable or
separable
If an item meets the definition of an intangible asset, it An intangible asset that is acquired individually or with a
shall be recognised if: group of other assets (other than those acquired in a
 The cost of the asset can be measured reliably business combination) shall be recognized if it meets
(IAS 38.21) the asset-recognition criteria in SFAC 5. It does not
have to meet the contractual-legal criterion or the
 It is probable that future economic benefits will flow to separability criterion (ASC 350-30-25-4).
the entity (IAS 38.21) – this condition is always
considered met if the intangible asset is separately

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purchased or acquired in a business combination
(IAS 38.25 and .33)
The cost of separately acquired intangible assets (not as An intangible asset that is acquired individually or with a
part of a business combination) includes the following group of other assets (but not those acquired in a
(IAS 38.27): business combination) shall be measured based on the
 Purchase price guidance included in paragraphs 805-50-15-3 and 805-
50-30-1 through 30-4. The cost of a group of assets
 Directly attributable costs to get the asset ready for its acquired in a transaction (other than those acquired in a
intended use business combination) shall be allocated to the
individual assets based on their relative fair values and
shall not give rise to goodwill (ASC 805-50-30-3).
Research and development
Research costs shall be expensed as incurred Expenditures related to research and development
(IAS 38.54). activities shall be expensed as incurred (ASC 730-10-
Intangible assets arising from development shall be 25-1) (SFAS 2.12) with the exception of certain costs
capitalised if an entity can demonstrate all of the following: related to computer software (see below). Costs of
internally developing, maintaining, or restoring
 Technical feasibility of completing the intangible asset intangible assets (including goodwill) that are not
 Intention to complete the intangible and use or sell it specifically identifiable, that have indeterminate lives, or
 Ability to use or sell the intangible that are inherent in a continuing business and related to
an entity as a whole, shall be expensed when incurred
 How the intangible asset will generate probable future (ASC 350-20-25-3) (SFAS 142.10).
economic benefits
 Availability of adequate technical, financial, and other
resources to complete development and to use or sell
the intangible asset
 Ability to reliably measure the expenditure attributable
to the intangible asset
 The cost of an internally generated intangible asset is
the sum of all capitalisable costs incurred from the
date the recognition criteria in IAS 38.21, .22, and .57
are first met (IAS 38.65). Reinstatement of previously
expensed cost is not allowed (IAS 38.71).
 IAS 38.66-.67 provides examples of costs that are
and are not capitalisable – for instance, identified
inefficiencies, initial operating losses, and training
costs are all specifically excluded from capitalisation
 Internally generated brands, mastheads, publishing
titles, customer lists and items similar in substance
shall not be recognised as intangible assets
(IAS 38.63)
Acquisition in a business combination
IAS 38.33-.41 provides guidance for the initial Similar to IFRS, an intangible asset acquired in a
measurement and recognition of intangibles acquired in business combination shall be recognized at fair value
business combinations: separately from goodwill if it is separable or it arises
 An identifiable intangible asset acquired in a business from contractual or other legal rights, regardless of
combination shall be recognised at fair value. An whether those rights are transferable or separable (ASC

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intangible asset is identifiable if it meets either the 805-20-25-10 and ASC Master Glossary, “Identifiable”)
separability criterion or the contractual-legal criterion. (SFAS 141R.3k and A19-A22).
 An in-process research and development project of An acquired in-process research and development
the acquiree shall be recognised as an intangible project shall be recognized as an indefinite-lived
asset at its acquisition-date fair value if it meets the intangible asset at its acquisition-date fair value
definition of an asset and is identifiable (ASC 730-10-15-4) (SFAS 2.3A).
Revaluation
An entity can choose ongoing measurement using either Revaluation is not permitted.
the cost model or the revaluation model when there is an
active market (IAS 38.72).
If the revaluation model is selected, all intangibles in that
class shall be treated under the revaluation model unless
there is no active market for those assets, in which case
the cost model is used (IAS 38.72).
Amortisation
Intangible assets shall be amortised over their useful life Similar to IFRS, intangible assets shall be amortized
unless that life is determined to be indefinite (IAS 38.97). over their useful life unless that life is determined to be
Indefinite does not mean infinite (IAS 38.91). Intangible indefinite (ASC 350-30-35-6 through 35-7) (SFAS
assets subject to amortisation shall be reviewed for 142.12). Indefinite does not mean infinite (ASC 350-30-
impairment in accordance with IAS 36 (IAS 36.8-.17). 35-4) (SFAS 142.11). Intangible assets subject to
amortization shall be reviewed for impairment in
accordance with the ASC 360-10, “Impairment or
Disposal of Long-Lived Assets,” subsections
(SFAS 144) (ASC 350-30-35-14) (SFAS 142.15).
Intangible assets that are not yet available for use or that Intangible assets not subject to amortization shall be
have an indefinite useful life are not amortised. Instead, tested for impairment annually or sooner if events or
an entity shall assess whether there is an indication of circumstances indicate that the asset may be impaired
impairment at the end of each reporting period. If an (ASC 350-30-35-18 through 35-20) (SFAS 142.17).
indicator is evident, the entity shall estimate the
recoverable amount of the asset. Regardless of whether
there is an indicator of impairment, an entity shall annually
test for impairment those intangible assets that are not yet
available for use or that have an indefinite useful life
(IAS 36.9-.11).
Other matters
Computer software is an intangible asset subject to the Costs of developing computer software may be
guidance in IAS 38 unless it is an integral part of related capitalized as an intangible asset in certain specific
hardware in which case IAS 16 would apply (IAS 38.4). circumstances. Separate guidelines are provided for
internal-use software (ASC 350-40) (SOP 98-1) and
software to be sold, leased, or otherwise marketed
(ASC 985-20) (SFAS 86).
An expenditure on intangible items shall not be capitalised Similar to IFRS, except for certain advertising
unless it satisfies the criteria in IAS 38 or is recognised as expenditures. Under ASC 340-20 (SOP 93-7), direct-
part of the goodwill on a business acquisition (IAS 38.68). response advertising costs shall be capitalized if certain
Some expenditures may be incurred to provide a future criteria are met (ASC 340-20-25-4) (SOP 93-7.33). In
economic benefit, but an intangible asset or other asset is addition, advertising costs shall be expensed as

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not created or acquired that can be recognised (IAS incurred (similar to IFRS) or the first time the advertising
38.69). In these situations, the expenditure is recognised takes place (unlike IFRS) (ASC 720-35-25-1) (SOP 93-
as an expense when it is incurred. Examples of such 7.26).
expenditures include the following:
 Start-up activities unless the expenditure is included
in the cost of property, plant and equipment under
IAS 16
 Training activities
 Advertising and promotional activities
 Relocation or reorganisation activities
A web site developed for internal or external access is an Similar to IFRS, web site costs shall be capitalized as
internally generated intangible asset that is subject to the an intangible asset in certain specific circumstances.
guidance in IAS 38. SIC-32 provides interpretive guidance Generally, ASC 350-50 (EITF 00-2) discusses the
on the application of IAS 38 for web site development different stages in the development of a web site and
costs. For example, SIC-32 discusses the different stages the accounting for the costs incurred in those stages.
in the development of a web site and the accounting for For example, ASC 350-50 (EITF 00-2) refers to ASC
the costs incurred in those stages. 350-40 (SOP 98-1) for internal-use software and ASC
985-20 (SFAS 86) for software to be marketed
externally.
4.4 Impairment
IFRS U.S. GAAP

Relevant guidance: IAS 36 Relevant guidance: ASC 350, 360, and 820 (SFAS
142, 144, and 157)
Introduction
For goodwill, intangible assets that are not amortised, and Similar to IFRS except an intangible asset not yet
intangible assets not yet available for use, an impairment available for use shall be reviewed for impairment when
review shall be performed annually or more frequently if an indicator of impairment exists. There are some
indications of impairment exist (IAS 36.10). differences in the indicators of impairment. For
Note: If a cash generating unit includes goodwill, it is example, under IAS 36 a change in market interest
subject to annual impairment reviews (IAS 36.90). rates or other market rates of return is an indicator of
impairment (ASC 350-30-35-18 through 35-20 and 350-
20-35-28) (SFAS 142.17 and .26).
For other long-lived assets an impairment review shall be Similar to IFRS (ASC 360-10-35-21) (SFAS 144.8).
performed when an indication of impairment exists
(IAS 36.9).
The impairment test is a one-step process. If the In general, an impairment loss shall be recognized if the
recoverable amount is below the carrying amount, an carrying amount exceeds fair value. Fair value is
impairment loss shall be recognised (IAS 36.59). defined as the price that would be received to sell an
Recoverable amount is the higher of value in use and fair asset or paid to transfer a liability in an orderly
value less costs to sell. Value in use is future discounted transaction between market participants at the
cash flows from an asset or cash-generating unit measurement date (ASC Master Glossary, “Fair Value”)
(IAS 36.6). (SFAS 157.5). The impairment test for goodwill and

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long-lived assets other than indefinite-lived intangible
assets is a two-step process. The first step is used to
identify potential impairment. Consequently, an
impairment loss may be recognized earlier under IFRS
than U.S. GAAP.
Impairment review
Goodwill acquired in a business combination shall be Goodwill acquired in a business combination shall be
allocated to cash-generating units (CGU) pursuant to the assigned to one or more reporting units (ASC 350-20-
guidance in IAS 36.80-.85. Each unit or group of units that 35-41) (SFAS 142.34). A reporting unit is an operating
goodwill is allocated to shall represent the lowest level segment or one level below an operating segment (a
within the entity that goodwill is monitored for internal component) (ASC 350-20-35-34 through 35-36)
management purposes and shall not be larger than an (SFAS 142.30).
operating segment as defined by paragraph 5 of IFRS 8, Goodwill is tested for impairment at the reporting unit
Operating Segments, before aggregation. A CGU is the level using a two-step process (ASC 350-20-35-4
smallest identifiable group of assets generating cash flows through 35-19) (SFAS 142.18-.22). The first step of the
largely independent of cash inflows of other assets or impairment test compares the carrying amount of the
group of assets (IAS 36.6). reporting unit to its fair value. If the carrying amount
Goodwill is tested for impairment at the CGU level using a exceeds fair value, the second step is performed to
one-step approach. If the carrying amount of the unit measure the amount of impairment loss, if any. In the
exceeds the recoverable amount of the unit, an second step, the implied fair value of reporting unit
impairment loss shall be recognised and allocated as goodwill is compared to its carrying amount. If the
follows (IAS 36.104): carrying amount of goodwill exceeds the implied fair
 First, reduce the carrying amount of any goodwill value of that goodwill, an impairment shall be
allocated to the CGU recognized. The implied fair value of goodwill shall be
determined in the same manner as the amount of
 Then, reduce the carrying amount of the other assets goodwill recognized in a business combination (ASC
of the group on a pro rata basis 350-20-35-14 through 35-17) (SFAS 142.21).
Therefore, an entity shall assign the fair value of the
reporting unit (assumed purchase price) to all of the
identifiable assets and liabilities of the reporting unit
(assumed acquiree). The excess of the fair value of the
reporting unit over the amounts assigned to identifiable
assets and liabilities is the implied fair value of goodwill.
Intangible assets other than goodwill and other long-lived Intangible assets other than goodwill and other long-
assets shall be tested for impairment using a one-step lived assets are tested for impairment as follows:
approach. If the carrying amount of the asset exceeds its  Indefinite-lived intangible assets are tested for
recoverable amount, an impairment loss shall be impairment using a one-step process like IFRS. An
recognised. If it is not possible to estimate the recoverable impairment loss shall be recognized if the carrying
amount of an individual asset, an entity shall determine amount of the asset exceeds its fair value (ASC
the recoverable amount of the CGU to which it belongs. If 350-30-35-18) (SFAS 142.17).
the carrying amount of the unit exceeds the recoverable
amount of the unit, an impairment loss shall be  Intangible assets that are amortized and other
recognised and allocated following IAS 36.104. long-lived assets (a long-lived asset or asset
group) are tested for impairment using a two-step
process. If the carrying amount of the asset or
group is not recoverable and it is greater than its
fair value, an impairment loss shall be recognized.
The first step determines if the asset or group is
recoverable. If the carrying amount of the asset or

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group exceeds the sum of the undiscounted cash
flows expected from the use and eventual
disposition of the asset or group, it is not
recoverable. The second step measures the
impairment loss as the difference between the fair
value of the asset or group and its carrying amount
(ASC 360-10-35-17) (SFAS 144.7).
If an intangible asset with an indefinite useful life or an There is no similar requirement under U.S. GAAP.
intangible asset not yet available for use was initially
recognised during the current annual period or some or all
of goodwill allocated to a CGU was acquired in a business
combination during the current annual period, the
intangible asset and/or CGU shall be tested for
impairment before the end of the current annual period
(IAS 36.10(a) and .96).
Reversing an impairment loss
An impairment loss for assets other than goodwill shall be Reversals of impairment losses are not permitted (ASC
reversed provided certain conditions are met (IAS 36.109- 350-20-35-13, ASC 350-30-35-20, and ASC 360-10-35-
.125). 20) (SFAS 142.17 and 20 and SFAS 144.15).
4.5 Inventories
IFRS U.S. GAAP

Relevant guidance: IAS 2 and 23 Relevant guidance: ASC 330 and 835 (ARB 43; SFAS
34 and 151)
Introduction
The objective of IAS 2 is to prescribe the accounting Whenever the operation of a business includes the
treatment for inventories. A primary issue in the ownership of a stock of goods, it is necessary for
accounting for inventories is the amount of cost to be adequate financial accounting purposes that inventories
recognised as an asset and carried forward until the be properly compiled periodically and recorded in the
related revenues are recognised. IAS 2 provides guidance accounts. Such inventories are required both for the
on the determination of cost and its subsequent balance sheet and for the periodic measurement of
recognition as an expense, including any write-down to income (ASC 330-10-05-1 through 05-3) (ARB 43,
net realisable value. It also provides guidance on the cost Ch. 4.1).
formulas that are used to assign costs to inventories
(IAS 2.1).
Inventories are assets (IAS 2.6): The term inventory is used to designate the aggregate
 Held for sale in the ordinary course of business of those items of tangible personal property which are
(ASC Master Glossary, “Inventory”) (ARB 43, Ch. 4
 In the process of production for such sale Statement 1):
 In the form of materials or supplies to be consumed in  Held for sale in the ordinary course of business
the production process or in the rendering of services
 In process of production for such sale
IAS 2 applies to all inventories except (IAS 2.2)
 To be currently consumed in the production of
 Work in progress arising under construction goods or services to be available for sale
contracts, including directly related service contracts

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IFRS U.S. GAAP

(see IAS 11)
 Financial instruments (see IAS 32 and 39)
 Biological assets related to agricultural activity and
agricultural produce at point of harvest (see IAS 41)
Measurement of inventories
Inventories shall be measured at the lower of cost and net Unlike IFRS, inventories are measured at the lower of
realisable value (IAS 2.9). Net realisable value is selling cost or market (but with a ceiling of net realizable value
price less costs to complete and costs to sell (IAS 2.6). and a floor of net realizable value less normal profit
IAS 2 does not apply to the measurement of inventories margin) (ASC Master Glossary, “Market”) (ARB 43, Ch.
held by (IAS 2.BC7): 4 Statement 6).
 Producers of agricultural and forest products,

agricultural produce after harvest, and minerals and
mineral products, to the extent that they are
measured at net realisable value in accordance with
well-established practices in those industries
 Commodity broker-dealers who measure their
inventories at fair value less costs to sell
Cost of inventories
The cost of inventories shall comprise all costs of Costs include all costs incurred in the normal course of
purchase, costs of conversion, and other costs incurred in business in bringing the product or service to its present
bringing the inventories to their present location and location and condition (ASC 330-10-30-1) (ARB 43, Ch.
condition (IAS 2.10). 4 Statement 3).
Abnormal amounts of wasted materials, labour or other ASC 330 states that abnormal amounts of idle facility
production costs are excluded from the cost of inventories expense, freight, handling costs, and wasted materials
and recognised as expenses in the period which they are (spoilage) should be recognized as current period
incurred. (IAS 2.16). charges. In addition, the allocation of fixed production
The allocation of fixed production overheads to the costs overheads to the costs of conversion should be based
of conversion is based on the normal capacity of the on the normal capacity of the production facilities (ASC
production facilities (IAS 2.13). 330-10-30-3 and 30-7) (SFAS 151.1-.2).

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IFRS U.S. GAAP

Borrowing costs Interest costs
IAS 23 identifies limited circumstances where borrowing Interest costs are not capitalized for inventories that are
costs are included in the cost of inventories (IAS 2.17). routinely manufactured or otherwise produced in large
Depending on the circumstances, inventories may be quantities on a repetitive basis (ASC 835-20-15-6)
qualifying assets if it takes a substantial period of time to (SFAS 34.10).
get them ready for their intended use or sale (IAS 23.5
and .7).
An entity may purchase inventories on deferred
settlement terms. When the purchase arrangement
effectively contains a financing element, that element, for
example a difference between the purchase price for
normal credit terms and the amount paid, is recognised as
interest expense over the period of the financing
(IAS 2.18).
Cost formulas
The cost of inventories shall be assigned by using the The cost-flow assumption must be the one which, under
first-in, first-out (FIFO) or weighted average cost formula. the circumstances, most clearly reflects periodic
Specific identification may be used in certain situations. income. FIFO, LIFO, and weighted average are
The last-in, first-out (LIFO) method is not permitted (IAS permitted. Unlike IFRS, LIFO is a permitted costing
2.23-.27 and BC9-BC21). method. (ASC 330-10-30-9) (ARB 43, Ch. 4 Statement
4).
The U.S. income tax rules require that LIFO must be
used for book purposes if it is used for tax purposes.
An entity shall use the same cost formula for all Unlike IFRS, the same cost formula need not be applied
inventories having a similar nature and use to the entity. to all inventories having a similar nature and use ASC
For inventories with a different nature or use, different 330-10-30-13 through 30-14 (ARB 43, Ch. 4.7).
cost formulas may be justified (IAS 2.25).
Net realisable value
Inventories are usually written down to net realisable Unlike IFRS, a reversal of a write-down for an increase
value item by item. In some circumstances, however, it in market value is not permitted ASC 330-10-35-14
may be appropriate to group similar or related items (ARB 43, Ch 4, fn 2).
(IAS 2.29).
A new assessment is made of net realisable value in each
subsequent period. When the circumstances that
previously caused inventories to be written down below
cost no longer exist or when there is clear evidence of an
increase in net realisable value because of changed
economic circumstances, the amount of the write-down is
reversed (i.e. the reversal is limited to the amount of the
original write-down) so that the new carrying amount is
the lower of the cost and the revised net realisable value
(IAS 2.33).
Recognition as an expense
When inventories are sold, the carrying amount of those Unlike IFRS, a reversal of a write-down for an increase
inventories shall be recognised as an expense in the in market value is not permitted ASC 330-10-35-14
period in which the related revenue is recognised

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IFRS U.S. GAAP

(IAS 2.34). (ARB 43, Ch 4, fn 2).
The amount of any write-down of inventories to net
realisable value and all losses of inventories shall be
recognised as an expense in the period the write-down or
loss occurs. The amount of any reversal of any write-
down of inventories, arising from an increase in net
realisable value, shall be recognised as a reduction in the
amount of inventories recognised as an expense in the
period in which the reversal occurs (IAS 2.34).

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5. Liabilities
5.1 Leases
Note: The IASB and FASB recently issued proposed guidance on leases as part of their joint project to develop a
common leasing standard for IFRS and U.S. GAAP. The proposed guidance would establish a new lease accounting
model for both lessees and lessors that eliminates the concept of operating leases and would require entities to record
lease assets and lease liabilities on the balance sheet. In addition, an optional simplified accounting method would be
available for short-term leases, as defined. The new model would apply to virtually all existing leases within the scope
of the proposed guidance on the date of adoption.
The proposed guidance would apply to all leases other than leases of intangible or biological assets and leases to
explore for or use minerals, oil, natural gas, and other similar nonregenerative resources.
Lessees and lessors would apply the proposed guidance to contracts that contain both service and lease components
unless the service component is distinct, in which case they would, if possible, apply the proposed guidance, Revenue
from Contracts with Customers, to the service component.
An entity would not apply the proposed guidance to the following contracts, which represent a purchase or sale of an
underlying asset:
 A contract under which an entity transfers control of the underlying asset and all but a trivial amount of the risks
and benefits associated with that asset to another entity
 A lease after a lessee has exercised a purchase option contained in the existing lease contract
Under the proposed accounting model, a lessee would recognize on the lease commencement date a right-of-use
asset and a liability for its obligation to make lease payments.
The proposed lease accounting model provides two methods that apply to lessors: a performance obligation approach
and a derecognition approach. A lessor would determine the appropriate approach for reporting a particular lease
arrangement based on the extent to which the lessor retains significant risks or benefits associated with the underlying
asset. A lessor would not be permitted to change its approach after the inception of a lease.
Entities would be required to apply the new lease accounting model to all leases within the scope of the proposed
guidance that are outstanding on the date of initial application, using a simplified retrospective method described in the
proposed guidance.
IFRS U.S. GAAP

Relevant guidance: IAS 17 and 40; SIC-15 and 27; Relevant guidance: ASC 840 (SFAS 13, 28, 29, 66, and
IFRIC 4 98; FIN 19 and 45; FTB 88-1; FSP FAS 13-1; EITF 97-10,
01-8, and 01-12)
Introduction
A lease is an agreement in which the lessor conveys Similar to IFRS except that U.S. GAAP refers to a right to
the right to use an asset to the lessee for an agreed use property, plant, and equipment (ASC Master
period of time in return for payments (IAS 17.4). IFRIC Glossary, “Lease”) (SFAS 13.1). Therefore, IFRS covers a
4 provides that an arrangement is or contains a lease if broader range of leases.
based on the substance of the arrangement both of the
following exist (IFRIC 4.6):
 Fulfillment of the arrangement depends on the use
of a specific asset or assets
 The arrangement conveys a right to use the asset
A lease is classified as either an operating or a finance Similar to IFRS. Lease inception is the date of the lease

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IFRS U.S. GAAP

lease at the inception of the lease (IAS 17.13). The agreement or commitment, if earlier. The commitment
inception of the lease is the earlier of the lease must include the principal provisions and be signed by the
agreement date and the date the parties commit to the interested parties (ASC Master Glossary, “Lease
principal provisions of the lease (IAS 17.4). Inception”) (SFAS 13.5).
A finance lease is one that transfers substantially all the A capital lease (finance lease) is one that transfers
risks and rewards of ownership of an asset to the substantially all the benefits and risks of ownership of an
lessee. An operating lease does not (IAS 17.8). asset to the lessee, in accordance with specific criteria. All
other leases are operating leases (ASC 840-10-10-1 and
25-1) (SFAS 13.7 and .60).
Lease classification
IAS 17 lists factors normally indicating a finance lease, In general, the criteria in ASC 840 (SFAS 13) for a capital
including any of the following (IAS 17.10): (finance) lease are similar to the IFRS indicators;
 Transfer of ownership by end of lease term however, there are more detailed (bright line)
requirements under U.S. GAAP. A capital lease is one
 Lessee has option to purchase asset at a price that that meets one or more of the following criteria (ASC 840-
is expected to be sufficiently lower than fair value 10-25-1) (SFAS 13.7):
at date option becomes exercisable such that
option exercise is reasonably certain at inception  Lease transfers ownership of the property to the
lessee by the end of the lease term
 Lease is for major part of asset's life, even if title is
not transferred  Lease contains a bargain purchase option
 Leased assets are specialised such that only the  Lease term is equal to 75 percent or more of the
lessee can use them without major modification estimated economic life of the leased property. This
criterion does not apply if lease inception is within the
 Present value of minimum lease payments at last 25 percent of the property’s economic life.
inception amounts to at least substantially all of the
fair value of the leased asset. Similar to U.S.  Present value of the minimum lease payments at the
GAAP, executory costs to be paid by the lessor, beginning of the lease term equals or exceeds 90
including any profit thereon, are excluded from percent of the excess of the fair value of the leased
minimum lease payments (IAS 17.4). property to the lessor at the inception of the lease
over any related investment tax credit retained by the
lessor and expected to be realized by the lessor.
Minimum lease payments exclude the portion of the
payments representing executory costs to be paid by
the lessor, including any profit thereon. This criterion
does not apply if lease inception is within the last 25
percent of the property’s economic life.
IAS 17 also lists other potential indicators of a finance U.S. GAAP does not have additional indicators for capital
lease (individually or in combination) including (IAS lease treatment in ASC 840 (SFAS 13); however, some of
17.11): the concepts are reflected in minimum lease payments or
 Lessor's losses borne by lessee if lessee has the lease term.
option to cancel Unlike IFRS, ASC 840 (SFAS 13) requires that the lessor
 Gains or losses in fair value of residual accrue to meet the following additional criteria to classify a lease as
lessee a capital lease (direct financing or sales-type lease)
(ASC 840-10-25-42) (SFAS 13.8):
 Lessee has ability to continue lease for secondary
term at substantially below-market rent  Collectibility of the minimum lease payments is
reasonably predictable
 No important uncertainties surround the amount of
unreimbursable costs yet to be incurred by the lessor

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IFRS U.S. GAAP

under the lease
Accounting treatment
Operating leases (lessee/lessor): Operating leases (lessee/lessor):

 Lease rentals shall be expensed and lease  Similar to IFRS (ASC 840-20-25-1) (SFAS 13.15)
revenue shall be recognised on a straight-line basis  Similar to IFRS (ASC 840-20-25-6 and 25-7)
over lease term unless another systematic basis is (FTB 88-1.7)
representative of the time pattern of the user's
benefits (IAS 17.33 and .50)
 Incentives shall be recognised as a reduction of
rent expense (lessee) or rental income (lessor) on
a straight line basis over the lease term (SIC-15.3-
.5)
Finance leases (lessee): Capital leases (lessee):

 Initial recognition at fair value of the leased asset  Initial recognition at present value of minimum lease
or, if lower, present value of minimum lease payments or, if lower, fair value of leased property
payments (each determined at inception of lease) (ASC 840-30-30-1 through 30-4) (SFAS 13.10)
(IAS 17.20)  Incremental borrowing rate generally used to
 Rate implicit in lease is generally used to calculate calculate present value. However, if it is practicable to
present value. If not practicable to determine, learn rate implicit in lease and that rate is lower than
incremental borrowing rate is used (IAS 17.20) the incremental borrowing rate, the implicit rate must
 Capitalise assets held under finance leases – be used (ASC 840-10-25-31) (SFAS 13.7.d).
depreciate on same basis as for owned assets. If  Capitalize assets held under capital leases. If lease
no reasonable certainty that lessee will obtain contains a bargain purchase option or transfers
ownership, depreciate over shorter of lease term ownership to lessee, depreciate over useful life.
and useful life (IAS 17.27). Otherwise, depreciate over lease term (ASC 840-30-
 Minimum lease payments shall be allocated 35-1) (SFAS 13.11).
between finance costs and the reduction of the  Minimum lease payments shall be allocated between
outstanding liability. Finance costs shall be the reduction of the outstanding liability and interest
allocated to each period to produce a constant rate expense to produce a constant rate on outstanding
on outstanding obligation (IAS17.25). obligation (i.e. the interest method is used) (ASC 840-
 Lessee's initial direct costs (costs incurred in 30-35-6) (SFAS 13.12)
connection with specific leasing activities) are  Initial direct costs attributable to the lessor paid by the
added to the asset (IAS 17.24) lessee are added to minimum lease payments
including costs to enhance the credit of the lessor.
Costs for residual value insurance on behalf of the
lessor are considered executory costs and not added
to minimum lease payments (ASC 840-10-55-10)
(FIN 19). In practice initial direct costs of a lessee
generally are deferred and amortized on a straight
line basis over the lease term.
Finance leases (lessor): Capital leases (lessor):

 Recognise asset held under a finance lease as a  Recognize asset for net investment in lease (ASC
receivable in the statement of financial position in 840-30-30-8 through 30-10) (SFAS 13.17).
the amount of the net investment in the lease
− Sales-type lease: Net investment consists of
(IAS 17.36), which is the gross investment
gross investment less unearned income. Gross
discounted at the interest rate implicit in the lease
investment is minimum lease payments, net of

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IFRS U.S. GAAP

(IAS 17.4). Gross investment in the lease is the executory costs, plus unguaranteed residual
sum of the minimum lease payments and the value accruable to the benefit of the lessor.
unguaranteed residual value (IAS 17.4). Unearned income is the difference between the
 Finance income shall be recognised in a manner gross investment and the present value of the
that reflects a constant periodic rate of return on gross investment using the interest rate implicit
the lessors' net investment (IAS 17.39) in the lease.
 Initial direct costs (except manufacturer or dealer − Direct financing leases: Net investment consists
lessors) shall be included in initial measurement of of gross investment plus any unamortized initial
finance lease receivable (IAS 17.38) direct costs less unearned income. Gross
investment is minimum lease payments, net of
 Manufacturer or dealer lessors shall recognise
executory costs, plus unguaranteed residual
selling profit or loss in the period in accordance
value accruable to the benefit of the lessor. The
with the policy followed by the entity for outright
difference between the gross investment and the
sales. Costs incurred to negotiate and arrange a
cost or carrying amount of the leased property
lease shall be recognised as an expense when
shall be recorded by the lessor as unearned
selling profit is recognised (IAS 17.42).
income.
 Lessor's income under a direct financing lease is
calculated using a rate that will produce a constant
periodic rate of return on the net investment in the
lease (ASC 840-30-35-23) (SFAS 13.18).
 Initial direct costs are (1) capitalized for direct
financing leases or (2) expensed as a cost of sale for
sales-type leases (ASC 840-30-30-8 and 30-11)
(SFAS 13.17-.18).
 The manufacturer’s/dealer’s profit on sales-type
leases is the difference between (a) the present value
of the minimum lease payments and (b) the leased
asset’s cost or carrying amount plus any initial direct
costs less the present value of the unguaranteed
residual value. Special rules exist for sales-type
leases involving real estate (ASC 840-30-30-8
through 30-10) (SFAS 13.17).
Leases involving land and buildings: Leases involving land and buildings:
 The classification of the land and building elements  For capital leases in which the lease transfers
of a lease shall be assessed as a finance or ownership of the property to the lessee by the end of
operating lease separately in accordance with the the lease term or contains a bargain purchase option,
requirements of paragraphs 7-13 of IAS 17. An the lessee’s capitalized amount must be apportioned
important consideration in determining whether the between land and building based on their relative fair
land element is an operating or a finance lease is values at lease inception. Detailed guidance on the
that land normally has an indefinite economic life. lessor’s accounting is included in ASC 840-10-25-60
The land and building components of a lease may through 25-62 (SFAS 13.26.a).
be treated as a single unit for purposes of lease  For leases that do not meet the ownership transfer or
classification if the land element is not material bargain purchase option criteria noted above, the
(IAS 17.15A and .17). land and buildings are considered separately if the
 The minimum lease payments shall be allocated fair value of the land is more than 25 percent of the
between land and buildings in proportion to their value of the leased property at the inception of the
relative fair values. If the lease payments cannot be lease. Detailed guidance on the lessee and lessor
allocated reliably then the entire lease shall be accounting is included in ASC 840-10-25-38 and 25-
treated as a finance lease, unless it is clear that

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IFRS U.S. GAAP

both elements are operating leases (IAS 17.16). 63 through 25-68 (SFAS 13.26.b).
 If land and buildings are classified as investment  U.S. GAAP does not permit leases of land and
property in accordance with IAS 40 and carried buildings to be recorded at fair value
under fair value model, it is not necessary to split
the land and buildings. Long-term operating leases
of land may be accounted for as an investment
property in accordance with IAS 40 (IAS 17.19 and
40.25).
Sale and leaseback: Sale and leaseback

 For sale and finance leaseback transactions, gain  For sale and leaseback transactions, profit or loss is
shall be deferred and amortised over the lease generally deferred and amortized in proportion to (a)
term (IAS 17.59) the amortization of the leased asset, if a capital lease
 For sale and operating leaseback transactions or (b) the related gross rental charged to expense
(IAS 17.61): over the lease term, if an operating lease. However, if
the leaseback is minor as defined in ASC 840
− If sales price is at fair value, profit/loss shall be (SFAS 13), the full gain can be recognized
recognised immediately immediately (ASC 840-40-25-3) SFAS 13.33).
− If sales price is below fair value, profit/loss  If the leaseback is more than a minor part but less
shall be recognised immediately, except if a than substantially all of the use of the asset as
loss is compensated by future lease payments defined in ASC 840 (SFAS 13), a gain on sale of the
at below market price, then the loss shall be asset in excess of the present value of the minimum
deferred over period asset is expected to be lease payments (operating lease) or the recorded
used amount (capital lease) shall be recognized
immediately (ASC 840-40-25-3) (SFAS 13.33).
− If sales price is above fair value, the excess
shall be deferred and amortised over the  Unlike IFRS, special rules exist for sale-leaseback
period the asset is expected to be used transactions involving real estate (ASC 840-40, “Real
Estate” subsections) (SFAS 66 and 98).
Note: If fair value is below carrying amount,
immediately recognise a loss calculated as carrying
amount minus fair value (IAS 17.63).
Lease classification may differ for lessor and lessee, Lease classification may differ for lessor and lessee,
such as when a third party unrelated to the lessee depending upon whether criteria in ASC 840-10-25-1
guarantees residual value (IAS 17.9). (paragraphs 7 and 8 of SFAS 13) are met. Usually this
occurs because the lessor uses the implicit rate and the
lessee uses the incremental borrowing rate. However, this
situation is less frequent under IFRS because the lessee
is presumed to use the implicit rate.
5.2 Provisions, contingent liabilities, and contingent assets

Note 1: In June 2005, the IASB issued an exposure draft to replace IAS 37, Provisions, Contingent Liabilities and
Contingent Assets. The project was initiated to address inconsistencies with other IFRS, to achieve global
convergence of accounting standards, and to improve measurement of liabilities in IAS 37. The proposed amendments
would apply to liabilities such as the following:
 Liabilities arising from legal disputes
 Statutory asset decommissioning obligations

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 Other environmental obligations

 Liabilities arising from onerous contracts
The IASB has reviewed responses to the 2005 exposure draft and has reached decisions on most of the principles to
be included in the new standard. However, in response to comments received, the IASB has developed additional
guidance on the proposed measurement requirements which are included in an exposure draft issued in January 2010,
Measurement of Liabilities in IAS 37.
In February 2010, the IASB posted a working draft of the proposed new IFRS that includes the proposed measurement
guidance in the 2010 exposure draft as well as any other changes made to the 2005 exposure draft.
Note 2: In July 2010, the FASB issued a proposed ASU, Disclosure of Certain Loss Contingencies, to address
concerns that existing disclosures do not provide adequate and timely information to enable financial statement users
to assess the likelihood, timing, and magnitude of future cash outflows associated with loss contingencies. The
proposals would expand the disclosure requirements in ASC 450, Contingencies, as well as the scope of events
subject to those loss contingency disclosures. The comment period ends on September 20, 2010.
Under the proposed guidance, an entity would be required to disclose information about a contingency if there is at
least a reasonable possibility (more than remote) that a loss may have been incurred, regardless of whether the entity
has accrued for all or a portion of that loss.
Public entities would apply the disclosure requirements for fiscal years ending after December 15, 2010 and interim
and annual periods in subsequent fiscal years. Nonpublic entities would apply the disclosure requirements for the first
annual period beginning after December 15, 2010 and for interim periods of fiscal years after the first annual period.
IFRS U.S. GAAP

Relevant guidance: IAS 37; IFRIC 1 Relevant guidance: ASC 410, 420, and 450 (SFAC 5
and 6; SFAS 5, 143, and 146; FIN 14 and 47)
Introduction
A provision is defined as a liability of uncertain timing or Unlike IFRS, the guidance for provisions, contingent
amount (IAS 37.10). liabilities, and contingent assets is included in several
 Recognition: A provision shall be recognised when ASC topics and that guidance is not always consistent.
there is a present obligation (legal or constructive) ASC 450-20 (SFAS 5) on loss contingencies is similar to
as a result of a past event, transfer of economic IFRS; however, there are some differences.
benefits is probable, and a reliable estimate can be  Recognition: Under ASC 450-20 (SFAS 5), a loss
made. Probable means more likely than not contingency is recognized when it is probable that
(IAS 37.14 and .23). an asset has been impaired or a liability has been
 Measurement: A provision shall be measured at the incurred and the amount of the loss can be
best estimate of the amount required to settle the reasonably estimated. The ASC Master Glossary
present obligation at the end of the reporting period. (SFAS 5) defines probable as “the future event or
The best estimate is the amount that an entity would events are likely to occur,” a higher threshold than
rationally pay to settle the obligation or transfer it to more likely than not under IFRS.
a third party. Uncertainties about the amount to  Measurement: ASC 450-20 (SFAS 5) requires that
recognise shall be considered based on the the amount of the loss be reasonably estimated
circumstances. For example, (best estimate). However, when the reasonable
estimate of the loss is a range and some amount
− For a large population of items, a provision is
within the range appears at the time to be a better
estimated using an expected value method
estimate than any other amount within the range,
− Where there is a continuous range of possible that amount is accrued. If no amount within the
outcomes and each point in the range is as range is a better estimate than any other amount,
likely as any other, the mid-point of the range is the minimum amount in the range is accrued
used (ASC 450-20-30-1) (FIN 14.3).

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IFRS U.S. GAAP

− For a single item being measured, the best  Discounting: Accruals for loss contingencies
estimate may be the most likely outcome. provisions are not discounted unless the timing of
However, other possible outcomes should be the related cash flows is fixed or reliably
considered (IAS 37.36-.40) determinable
 Discounting: Where the effect of the time value of

money is material, the provision shall be discounted
at a pre-tax discount rate that reflects current
market assessments of the time value of money and
the risks specific to the liability (IAS 37.45-.47)
A contingent liability (asset) is a possible obligation Under ASC 450-20 (SFAS 5), disclosure is required for
(asset) that arises from past events (IAS 37.10). loss contingencies that are not recognized if it is
Contingent liabilities shall not be recognised; however, reasonably possible that a loss may have been incurred.
disclosures are required unless the possibility of any Gain contingencies are not reflected in financial
outflow is remote (IAS 37.27-.28 and .86). statements (ASC 450-30-25-1).
A contingent asset shall not be recognised (IAS 37.31).
Where an inflow of benefits is probable, a contingent
asset shall be disclosed (IAS 37.89).
Disclosures regarding provisions and contingent assets A similar exception does not exist under U.S. GAAP.
and liabilities may be omitted if they can be expected to
seriously prejudice the position of the entity in a dispute
with other parties on the subject matter of the related
asset or liability (IAS 37.92).
Asset retirement obligations – recognition and measurement
Provisions for the estimated cost of dismantling and A liability for an asset retirement obligation (ARO) shall
removing an asset and restoring a site shall be be recognized at fair value in the period in which it is
recognised and measured in accordance with the incurred if a reasonable estimate of fair value can be
provisions in IAS 37 as noted in the Introduction section made. If a reasonable estimate of the fair value of the
above. According to IAS 16, the cost of an item of liability cannot be made in the period the obligation is
property, plant, and equipment shall include the initial incurred, a liability shall be recognized when a
estimate of the costs of dismantling and removing an reasonable estimate of fair value can be made (ASC
asset and restoring the site on which it is located, the 410-20-25-4 through 25-13) (SFAS 143.3 and FIN 47.2-
obligation for which an entity incurs either when the .6).
entity acquires the item or as a consequence of using If the fair value of an ARO is estimated using the
the item (IFRIC 1.1). expected cash flow approach, the cash flows are initially
Provisions for the estimated cost of dismantling and discounted using the current credit-adjusted risk-free rate
removing an asset and restoring a site are initially (ASC 410-20-30-1) (SFAS 143.8). Unlike IFRS, the
discounted using the current risk-adjusted rate. In obligation is not adjusted to reflect the effect of a change
subsequent periods, the obligation shall be adjusted to in the current market-based discount rate in subsequent
reflect the effect of a change in the current market-based periods.
discount rate (IFRIC 1.3).
Asset retirement obligations – changes in measurement
If the cost model is used for the asset, changes in Like IFRS, changes in the liability for the ARO that are
measurement of decommissioning, restoration, or similar due to changes in the timing or amount of the original
liability as a result of (a) changes in the estimated timing estimated cash flows are added to or deducted from the
or amount of the outflow of resources embodying liability and the cost of the asset. Downward revisions in
economic benefits required to settle the obligation or (b) the amount of undiscounted cash flows are discounted

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IFRS U.S. GAAP

a change in the discount rate (other than through using the credit-adjusted risk-free rate used on initial
unwinding of discount rate) shall be added or deducted recognition. Upward revisions in the amount of
against the asset (subject to certain restrictions) undiscounted cash flows are discounted using the
(IFRIC 1.5). current credit-adjusted risk-free rate (ASC 410-20-35-8)
(SFAS 143.15).
Unwinding of discount shall be charged against profit Changes in the liability for the asset retirement obligation
and not capitalised as a borrowing cost (IFRIC 1.8). (ASC 410-20-35-3 through 35-6) (SFAS 143.14) that are
due to the passage of time must be treated as expense.
If the revaluation method is used for the asset, additional U.S. GAAP does not provide a similar revaluation model.
guidance is provided in IFRIC 1.6.
Restructuring costs
A provision for restructuring costs shall be recognised ASC 420 (SFAS 146) provides guidance on the
when the general recognition criteria for provisions in recognition and measurement for costs associated with
IAS 37.14 are met. One of those criteria is that an entity exit or disposal activities. In general, a liability for a cost
has a present obligation (legal or constructive) as a associated with an exit or disposal activity is recognized
result of a past event. A constructive obligation to when the definition of a liability is met. Therefore, unlike
restructure arises only when an entity (IAS 37.72): IFRS, an entity’s commitment to an exit or disposal plan
 Has a detailed formal plan for the restructuring; and is not by itself the requisite past transaction or event for
recognition of a liability (ASC 420-10-25-2)
 Has raised a valid expectation in those affected that (SFAS 146.4).
it will carry out the restructuring by starting to
implement that plan or announcing its main features
to those affected by it
Onerous contracts
IAS 37.10 defines an onerous contract as a contract in Unless specific U.S. GAAP applies, obligations for
which the unavoidable costs of meeting the obligations onerous contracts are not recognized.
under the contract exceed the expected economic
benefits. If an entity has an onerous contract, the
present obligation must be recognised and measured as
a provision (IAS 37.66).
5.3 Taxation
Note: In March 2009, the IASB issued an Exposure Draft, Income Taxes, to replace IAS 12. The Exposure Draft, if
finalized, would have removed most of the differences in the application of the asset and liability approach between
IFRS and U.S. GAAP. However, as a result of negative feedback from constituents, in March 2010, the IASB decided
that the scope of the project would be scaled back to address practice issues under IAS 12.
The scope of the project includes:
 Uncertain tax positions after deliberations on IAS 37
 Implementation of certain proposals in the Exposure Draft that received general support from respondents
 Deferred tax on remeasurement of investment property, property, plant and equipment or intangible assets – on
September 10, 2010, the IASB issued an Exposure Draft, Deferred Tax: Recovery of Underlying Assets, to amend
IAS 12. The amendment will provide an exception to the principle that the measurement of deferred tax liabilities
and deferred tax assets should reflect the tax consequences that would follow from the manner in which the entity

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expects to recover or settle the carrying amount of its assets and liabilities. The proposed amendment would
include a rebuttable presumption that an asset is recovered entirely through sale unless the entity has clear
evidence that recovery will occur in another manner. The presumption applies when investment properties,
property, plant and equipment or intangible assets are remeasured at fair value or revalued at fair value. The
amendments, if adopted, would supersede SIC 12, Income Taxes – Recovery of Revalued Non-Depreciable
Assets. The comment period ends November 9, 2010.
IFRS U.S. GAAP

Relevant guidance: IAS 12 Relevant guidance: ASC 740, 805-740 (SFAS 109; FIN
48; EITF Issue 98-11)
Introduction
The objective in accounting for income taxes is to The objective in accounting for income taxes is similar to
recognise the amount of taxes currently payable or IFRS.
refundable and deferred tax liabilities and assets.
Therefore, income tax expense is equal to the current
tax expense (or recovery) plus the change in deferred
taxes during the period, net of tax arising from a
business combination or recorded outside profit or loss.
Taxes for current and prior periods are, to the extent The approach to calculating current taxes is similar to
unpaid, recognised as a liability. If the amount already IFRS with some exceptions, such as the treatment of
paid exceeds the amount due for those periods, the taxes on the elimination of intercompany profits which is
excess is recognised as an asset. The benefit relating to discussed below.
a tax loss that can be carried back to recover current tax
of a previous period is also recognised as an asset
(IAS 12.12-.13).
In general, deferred taxes are recognised using an asset Although U.S. GAAP also follows an asset and liability
and liability approach which focuses on temporary approach to calculating deferred taxes, there are some
differences arising between the tax base of an asset or differences in the application of the approach from IFRS.
liability and its carrying amount in the statement of
financial position. Deferred taxes are recognised for the
future tax consequences of events that have been
recognised in an entity’s financial statements or tax
returns (IAS 12.IN2 and .15-.18).
Note: Certain sections of IAS 12 have been amended by
IFRS 3 (revised 2008), which is effective for business
combinations with an acquisition date on or after the
beginning of the first annual reporting period beginning
on or after 1 July 2009 with early application permitted.
Please refer to paragraphs 93 through 95 of IAS 12 for
information on effective dates for the amended sections
of IAS 12.
Deferred taxes are not recognised for the following Deferred taxes are not recognized for the following items:
items:
 The initial recognition of goodwill (IAS 12.15)  Goodwill for which amortization is not deductible for
tax purposes (ASC 740-10-25-3(d)) (SFAS 109.9d)
 The initial recognition of an asset or liability in a  Unlike IFRS, U.S. GAAP does not have a similar

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IFRS U.S. GAAP

transaction that is not a business combination and exception
at the time of the transaction neither accounting
profit nor taxable profit (tax loss) is affected (IAS
12.15 and .24)
 Taxable temporary differences associated with  An excess of the amount for financial reporting over
investments in subsidiaries, branches and the tax basis of an investment in a foreign subsidiary
associates, and interests in joint ventures in which or a foreign corporate joint venture as defined in
(IAS 12.39): ASC 323 (APB Opinion 18) that is essentially
permanent in duration, unless it becomes apparent
− The parent, investor, or venturer is able to
that those temporary differences will reverse in the
control the timing of the reversal of the
foreseeable future (ASC 740-30-25-18 through 25-
temporary difference; and
19) (SFAS 109.31). Unlike IFRS, this exception does
− It is probable that the temporary difference will not apply to domestic subsidiaries and corporate
not reverse in the foreseeable future joint ventures and investments in equity investees.
Deferred taxes shall be recognised for temporary  Unlike IFRS, U.S. GAAP prohibits recognition of
differences that arise when nonmonetary assets and deferred taxes for differences related to assets and
liabilities are measured in their functional currency but liabilities that are remeasured from the local
have a tax base determined in a different currency currency into the functional currency using historical
(IAS 12.41) exchange rates and that result from changes in
exchange rates or indexing for tax purposes
(ASC 740-10-25-3(f)) (SFAS 109.9f)
Recognition and measurement
Current tax liabilities and assets shall be measured at Unlike IFRS, U.S. GAAP uses a two-step process to
amounts expected to be paid to (recovered from) the recognize and measure the financial statement effects of
taxation authorities based on tax rates (and tax laws) a tax position. An enterprise initially recognizes the
that have been enacted or substantially enacted by the financial statement effects of a tax position when it is
end of the reporting period (IAS 12.46). more likely than not (likelihood of more than 50 percent),
Deferred tax assets and liabilities shall reflect the tax based on the technical merits, that the position will be
consequences that would follow from the manner in sustained on examination (ASC 740-10-25-6) (FIN 48.6).
which the entity expects, at the end of the reporting A tax position that meets the more likely than not
period, to recover or settle the carrying amount of its threshold is then initially and subsequently measured as
assets and liabilities (IAS 12.51). Deferred tax assets the largest amount that is greater than 50 percent likely
and liabilities shall be measured at the tax rates that are of being realized on settlement with a taxing authority
expected to apply when the asset is realised or the (ASC 740-10-30-7) (FIN 48.8). This guidance applies to
liability is settled, based on tax rates (and tax laws) that all entities including tax-exempt not-for-profit entities that
have been enacted or substantively enacted by the end are taxed in a manner similar to pass-through entities
of the reporting period (IAS 12.47). such as real estate investment trusts and registered
investment companies (ASC 718-10-15-2AA).
IFRS does not have recognition and measurement
provisions similar to FIN 48. The measurement of current and deferred tax assets and
liabilities is based on enacted tax law (ASC 740-10-30-
2). Deferred tax assets and liabilities are measured using
the enacted tax rate(s) expected to apply to taxable
income in the periods in which the deferred tax liability or
asset is expected to be settled or realized (ASC 740-10-
30-8) (SFAS 109.18). Unlike IFRS, tax rates that have
been substantially enacted by the balance sheet date
shall not be used.
In general, deferred tax assets shall be recognised to the Unlike IFRS, deferred tax assets are recognized in full

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IFRS U.S. GAAP

extent that it is probable (in general, more likely than not) and reduced by a valuation allowance if it is more likely
that taxable profit will be available against which than not (a likelihood of more than 50 percent) that some
deductible temporary differences and unused tax losses portion or all of the deferred tax assets will not be
and unused tax credits carried forward can be utilised. At realized (ASC 740-10-30-5(e)) (SFAS 109.17e).
the end of each reporting period the deferred tax assets
shall be reviewed and the carrying amount reduced to
the extent that it is no longer probable that sufficient
taxable profit will be available to allow the benefit of all or
part of that deferred tax asset to be utilised. Any such
reduction shall be reversed to the extent that it becomes
probable that sufficient taxable profit will be available
(IAS 12.24, .34, and .56).
Deferred taxes on elimination of intragroup profits shall Unlike IFRS, deferred taxes are not recognized on
be calculated with reference to the tax rate of the buyer elimination of intercompany profits (ASC 740-10-25-3(e))
(the company that holds the inventory) at the end of the (SFAS 109.9e). Taxes paid by the seller on
reporting period. Taxes paid by the seller are recorded intercompany profits shall be recorded as an asset and
as a current tax expense. recognized on the sale to a third party.
Current and deferred tax shall be recognised outside Similar to IFRS, the tax effects of certain items occurring
profit or loss if the tax relates to items that are during the year are charged or credited directly to other
recognised, in the same or a different period, in other comprehensive income or to related components of
comprehensive income, or directly to equity shareholders’ equity (ASC 740-20-45-11) (SFAS
(IAS 12.61A). 109.36). However, certain subsequent changes in
deferred tax assets and liabilities (such as those related
to changes in tax rates and tax laws) shall be recognized
in income regardless of whether the deferred tax was
initially recorded in income, equity, or a business
combination (ASC 740-10-45-15) (SFAS 109.27).
Deferred tax assets and liabilities shall not be discounted Similar to IFRS, deferred tax assets and liabilities shall
(IAS 12.53). not be discounted ASC 740-10-30-8) (SFAS 109.130).
Intraperiod tax allocation
Subsequent changes in deferred tax assets and Similar to IFRS, except that certain subsequent changes
liabilities shall be recognised in profit or loss except to in deferred tax assets and liabilities (such as those
the extent that they relate to items previously recognised related to changes in tax rates and tax laws) shall be
outside profit or loss (IAS 12.60). recognized in income regardless of whether the deferred
tax was initially recorded in income, equity, or a business
combination (ASC 740-10-45-15) (SFAS 109.27-.28).
Business combinations
At the acquisition date, a deferred tax liability or asset (to At the acquisition date, a deferred tax liability or asset
the extent it meets the recognition criteria discussed shall be recognized for an acquired entity’s temporary
above) shall be recognised for an acquired entity’s differences (with certain exceptions) or operating loss or
temporary differences (with certain exceptions) or tax credit carryforwards. If necessary, a valuation
income tax loss carryforwards. If not recognised at the allowance for an acquired entity’s deferred tax asset
acquisition date, an entity shall recognise acquired shall also be recognized. A change in the valuation
deferred tax benefits that it realises after the business allowance shall be recognized as follows:
combination as follows (IAS 12.68):
 In goodwill if the change occurs (1) during the  In goodwill if the change occurs (1) during the
measurement period and (2) as a result of new measurement period and (2) as a result of new

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IFRS U.S. GAAP

information about facts and circumstances that information about facts and circumstances that
existed as of the acquisition date. If goodwill is existed as of the acquisition date. If goodwill is
reduced to zero, any remaining deferred tax benefits reduced to zero, any additional decrease in the
shall be recognised in profit or loss. valuation allowance shall be recognized as a gain on
 All other deferred tax benefits realised shall be a bargain purchase.
recognised in profit or loss (or outside of profit or  All other changes shall be adjustments to income tax
loss if required by IAS 12) expense or contributed capital, as appropriate, and
shall not be recognized as adjustments to the
acquisition-date accounting for the business
combination (ASC 805-740-25-3 and 45-2) (SFAS
109.30-.30A)
A change in the acquirer’s deferred tax asset as a result A change in the acquirer’s valuation allowance on its
of a business combination shall not be accounted for as previously existing deferred tax asset as a result of a
part of the business combination and therefore, shall not business combination shall not be accounted for as part
be accounted for as an adjustment to goodwill of the business combination and therefore, shall not be
(IAS 12.67). accounted for as an adjustment to goodwill. Such change
shall be recognized as an income tax benefit or credited
directly to contributed capital (ASC 805-740-30-3)
(SFAS 109.266).
Share-based payment
Deferred taxes shall be recorded for the difference Deferred tax assets shall be based on the amount of
between the amount of the tax deduction (or future tax compensation cost recorded. Unlike IFRS, the deferred
deduction) and cumulative remuneration expense tax adjustment for current share price shall be recorded
related to share-based payment awards. Deferred tax on settlement (ASC 718-740-25-2 through 25-3)
assets shall be adjusted each period to the amount of (SFAS 109.36).
tax deduction that the entity would receive if the award
was tax deductible as of the reporting date based on the
current market price of the shares (IAS 12.68B).
Deferred tax assets and liabilities shall be offset if the All current deferred tax assets and liabilities shall be
entity has a legally enforceable right to offset current tax offset and presented as a single amount and all
assets against current tax liabilities and the deferred tax noncurrent deferred tax assets and liabilities shall be
assets and tax liabilities relate to income taxes levied by offset and presented as a single amount for a particular
the same taxing authority on either tax paying component of an entity and within a particular
 The same taxable entity; or jurisdiction (ASC 740-10-45-6) (SFAS 109.42).
 Different taxable entities that intend either to settle

current tax assets and liabilities on a net basis, or to
realise the asset and settle the liability
simultaneously (IAS 12.74-.76)
Deferred tax assets and liabilities are presented as Unlike IFRS, in a classified balance sheet deferred tax
separate line items in the statement of financial position. assets and liabilities shall be presented as separate line
If a classified statement of financial position is used, items and classified as current or noncurrent based on
deferred tax assets and liabilities shall be classified as the classification of the related asset or liability for
noncurrent (IAS 12.IN11). financial reporting. A deferred tax asset or liability not
related to an asset or liability for financial reporting
purposes shall be classified according to the expected
reversal date of the temporary difference.

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IFRS U.S. GAAP

The valuation allowance for a given tax jurisdiction shall
be allocated between current and noncurrent deferred
tax assets for that jurisdiction on a pro rata basis
(ASC 740-10-45-4 through 45-10) (SFAS 109.41).
All entities must disclose an explanation of the Public companies must disclose a reconciliation using
relationship between tax expense and accounting profit percentages or dollar amounts of the reported amount of
using either or both of the following formats income tax expense attributable to continuing operations
(IAS 12.81c): for the year to that amount of income tax expense that
 A numerical reconciliation between tax expense would result from applying domestic federal statutory tax
(income) and the product of accounting profit rates to pretax income from continuing operations.
multiplied by the applicable tax rate(s) including Nonpublic enterprises must disclose the nature of
disclosure of the basis on which the applicable tax significant reconciling items but may omit a numerical
rate is computed reconciliation (ASC 740-10-50-12 through 50-14)
 A numerical reconciliation between the average (SFAS 109.47).
effective tax rate and the applicable tax rate,
including disclosure of the basis on which the
applicable tax rate is computed

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6. Income and expenditure

6.1 Revenue - general
Note: In June 2010, the IASB and FASB issued proposed guidance, Revenue from Contracts with Customers, as part
of a joint project to develop a common revenue recognition standard for IFRS and U.S. GAAP. The proposed guidance
would supersede the guidance in IAS 18, Revenue, and IAS 11, Construction Contracts, and most existing guidance in
ASC 605, Revenue Recognition. The proposed guidance would establish principles that entities would apply to provide
financial statement users with useful information about the amount, timing, and uncertainty of revenue and cash flows
resulting from contracts with customers.
The proposed guidance would apply to most contracts with customers to provide goods or services. It would not apply
to certain contracts that are within the scope of other generally accepted accounting standards, such as lease
contracts, insurance contracts, contractual rights or obligations covered in guidance for financial instruments, and
nonmonetary exchanges between entities in the same line of business to facilitate sales to third party customers.
The core principle of the proposed guidance would require an entity to recognize revenue in a manner that depicts the
transfer of control of goods or services to customers in an amount that reflects the consideration the entity receives or
expects to receive for those goods or services. To apply this principle, an entity would apply the following steps:
 Identify the contract with a customer
 Distinguish the separate performance obligations in the contract
 Determine the transaction price
 Allocate the transaction price to each separate performance obligation
 Recognize revenue as the entity satisfies each performance obligation
IFRS U.S. GAAP

Relevant guidance: IAS 18; IFRIC 13 and 15; SIC-31 Relevant guidance: ASC 605, 845, and 985-605 (SFAC
5 and 6; SFAS 48; APB 29; EITF 99-17, 99-19, and 00-
21; SOP 81-1 and 97-2) SEC SAB Topic 13
Introduction
The term revenue encompasses the gross inflow of SFAC 6 defines revenues as inflows or other
economic benefits during the period arising in the course enhancements of assets of an entity or settlements of its
of ordinary activities when those inflows result in liabilities (or a combination of both) from delivering or
increases in equity, other than increases relating to producing goods, rendering services, or other activities
contributions from equity participants (IAS 18.7). that constitute the entity's ongoing major or central
operations (SFAC 6.78).
IAS 18 is a general standard on revenue recognition, it Revenue recognition guidance is included in ASC 605
applies to revenue from (IAS 18.1): and other topics in the Codification, as well as SEC
 The sale of goods guidance, such as SAB Topic 13 that address specific
revenue recognition issues. For example, ASC 985-605
 The rendering of services includes guidance for software revenue recognition and
 The use by others of enterprise assets yielding ASC 605-970, 972, 974, 976, and 978 includes guidance
interest, royalties, and dividends for real estate.
The standard does not deal with revenue from leases,
dividends from investments accounted for under the
equity method, insurance contracts, changes in the fair
value of financial instruments under IAS 39, changes in
the value of other current assets, extraction of mineral

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IFRS U.S. GAAP

ores, or agriculture (IAS 18.-.6). Revenue from services
directly related to construction contracts is addressed in
IAS 11 rather than IAS 18 (IAS 18.4).
An agreement for the construction of real estate may be
within the scope of IAS 11 or 18. The determination is a
matter of judgement that depends on the terms of the
agreement and the specific facts and circumstances of
the arrangement. IFRIC 15 provides guidance to assess
whether an agreement is within the scope of IAS 11 or
18 and when revenue from the construction of real
estate shall be recognised.
IFRIC 18, Transfers of Assets from Customers, applies
to the accounting for transfers of property, plant, and
equipment by entities that receive such transfers from
their customers. It addresses the recognition and
measurement of the transferred item. If the transferred
item meets the definition of an asset, an asset would be
recognised and revenue would be recognised in
accordance with IAS 18.
Revenue shall be measured at the fair value of the According to SFAC 5.83, revenues and gains are
consideration received or receivable (IAS 18.9). generally measured by the exchange values of the assets
(goods or services) or liabilities involved. In many cases,
the specific literature that applies to a particular revenue
transaction includes measurement guidance.
Although IAS 18 does not have specific criteria to ASC 605-25 addresses how to determine whether an
separate identifiable components of a single transaction, arrangement involving multiple deliverables contains more
in certain situations separation is required in order to than one unit of accounting and how to measure and
reflect the substance of the transaction (IAS 18.13). IAS allocate arrangement consideration to the separate units
18 does not provide guidance on allocating of accounting. Other ASC topics may also address
consideration received to the elements of the multiple-element arrangements. ASC 605-25-15-3 and
arrangement. 15-3A address the interaction of ASC 605-25 with other
Codification topics. If ASC 605-25 applies, the delivered
item(s) are considered a separate unit of accounting if
(ASC 605-25-25-5) (EITF 00-21 par. 9):
 The delivered item(s) has value to the customer on a
standalone basis
 There is objective and reliable evidence of the fair
value of the undelivered item(s)
 If the arrangement includes a general right of return
relative to the delivered item, delivery or performance
of the undelivered item(s) is considered probable and
substantially in the control of the vendor
Unlike IFRS, ASC 605-25 (EITF 00-21) includes specific
guidance on allocating arrangement consideration to the
elements in the arrangement.
Note 1: In October 2009, the FASB issued Accounting
Standards Update (ASU) 2009-13, Multiple-Deliverable
Revenue Arrangements, which amends the guidance in

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IFRS U.S. GAAP

ASC 605-25 as follows:
 Modifies criteria used to separate elements in a
multiple-element arrangement (eliminates the
requirement of objective and reliable evidence of the
fair value of the undelivered item(s))
 Replaces the term “fair value” with “selling price”
 Introduces the concept of “best estimate of the selling
price” for determining the selling price of a deliverable
 Establishes a hierarchy of evidence for determining
selling price of a deliverable
 Requires the use of the relative selling price method
and prohibits the use of the residual method to
allocate arrangement consideration among units of
accounting
 Expands the disclosure requirements for all entities
with multiple-element arrangements within the scope
of ASC 605-25
The amended guidance is effective prospectively for
revenue arrangements entered into or materially modified
in fiscal years beginning on or after June 15, 2010. Early
adoption is permitted.
Note 2: In October 2009, the FASB issued ASU 2009-14,
Certain Revenue Arrangements That Include Software
Elements, which amends the scope of ASC 985-605 to
exclude certain tangible products and related deliverables
from the scope of that guidance. The excluded products
and related deliverables must be evaluated for separation,
measurement, and allocation under the guidance of
ASC 605-25.
The amended guidance is effective prospectively for
revenue arrangements entered into or materially modified
in fiscal years beginning on or after June 15, 2010. Early
adoption is permitted.
Note 3: In April 2010, the FASB issued ASU 2010-17,
Milestone Method of Revenue Recognition: a consensus
of the FASB Emerging Issues Task Force, to address
accounting for arrangements in which a vendor satisfies
its performance obligations over time, with all or a portion
of the consideration contingent on future events, referred
to as milestones. The scope of the new guidance is
limited to milestones in arrangements that involve
research or development activities, such as the
successful completion of a drug study phase.
The new guidance allows a vendor to adopt an
accounting policy to recognize all of the arrangement
consideration that is contingent on the achievement of a
substantive milestone in the period the milestone is
achieved. Although the milestone method is not the only

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IFRS U.S. GAAP

acceptable revenue attribution model for milestone
consideration, other methods that result in the recognition
of all of the milestone consideration in the period the
milestone is achieved are precluded.
The guidance on the milestone method is effective on a
prospective basis for milestones achieved in fiscal years,
and interim periods within those years, beginning on or
after June 15, 2010.Early adoption is permitted.
Where two or more transactions are linked in such a According to ASC 605-25-25-3 (EITF 00-21 and other
way that the commercial effect cannot be understood revenue literature), separate contracts entered into at or
without reference to the series of transactions as a near the same time with the same entity or related parties
whole, the recognition criteria shall be applied to all are presumed to have been negotiated as a package and
transactions together (IAS 18.13). should be evaluated to determine if, in substance, they
represent a single arrangement.
In an agency relationship, the amounts collected on The concept for recording revenues gross as a principal
behalf of the principal are not revenue of the agent. or net as an agent is similar to IFRS. Entities must
Instead revenue is the amount of commission (IAS consider the indicators of gross and net reporting in
18.8). The Appendix to IAS 18 states that an entity is ASC 605-45 (EITF 99-19) in determining whether to
acting as a principal if it has exposure to the significant recognize revenue at the full amount billed to a customer
risks and rewards associated with the sale of goods or or the net amount retained.
services. It includes a list of features that indicate an
entity is acting as a principal in a transaction. These
features are similar to some of those included in
ASC 605.45 (EITF 99-19).
Sale of goods
Revenue from the sale of goods shall be recognised ASC 605-10-25-1 (SFAC 5) and SEC SAB Topic 13
when all of the following conditions have been met outline the general principles of revenue recognition for
(IAS 18.14): the sale of goods and other items. Under ASC 605-10-25-
 The significant risks and rewards of ownership of 1 (SFAC 5.83), revenue is recognized when it is earned
the goods have been transferred to the buyer and realized or realizable. According to SAB Topic 13,
revenue generally is earned and realized or realizable
 The seller retains neither continuing managerial when all of the following criteria are met:
involvement to the degree normally associated with
ownership nor effective control of the goods sold  Persuasive evidence of an arrangement exists
 The amount of revenue can be measured reliably  Collectibility is reasonably assured
 It is probable that economic benefits associated  Delivery has occurred or services have been
with the transaction will flow to the seller rendered
 The costs incurred or to be incurred can be  The seller’s price to the buyer is fixed or determinable
measured reliably
Services
Revenue from services is recognised by reference to the U.S. GAAP does not specifically address accounting for
stage of completion at the end of the reporting period service revenue. However, SFAC 5 and SEC SAB
when the outcome can be measured reliably. The Topic 13 refer to revenue from both goods and services.
outcome can be measured reliably when all of the Consequently, the aforementioned general revenue
following conditions are met (IAS 18.20): recognition principles for the sale of goods also apply to
 The amount of revenue can be measured reliably services. Three common methods that are used to
recognize service revenue are:

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IFRS U.S. GAAP

 It is probable that economic benefits will flow to the  Specific performance method – used when service
entity revenue is earned by the performance of a single act
 The stage of completion can be measured reliably  Proportional performance method – used when
 The costs incurred for the transaction and the costs service revenue is earned by the performance of
to complete the transaction can be measured more than one act
reliably  Completed performance method – used when service
When the outcome of the transaction involving the revenue is earned by the performance of more than
rendering of services cannot be reliably estimated then one similar or dissimilar acts but the final act is so
revenue shall be recognised only to the extent of the critical to the entire transaction that revenue cannot
expenses recognised that are recoverable (IAS 18.26). be considered earned until the final act is performed.
Unlike IFRS, the percentage-of-completion (stage of
completion) method shall not be applied to service
contracts that are outside the scope of ASC 605-35
(SOP 81-1).
Restrictions on recognition of revenues
If the seller retains significant risks of ownership, In general, there are similar restrictions on the recognition
revenue is not recognised, such as when (IAS 18.16) of revenue under U.S. GAAP. However, ASC 605-15
 There is an obligation for unsatisfactory (SFAS 48) includes specific guidance on the recognition
performance beyond normal warranty provisions of revenue when the right of return exists. According to
ASC 605-15-25-1 (SFAS 48.6), revenue from a sales
 Sale is contingent on the buyer selling the goods transaction in which the buyer has the right of return is
 Goods are shipped subject to installation that is recognized at the time of sale only if:
significant to the contract and not complete  The seller's price to the buyer is substantially fixed or
 The buyer has the right to rescind and the seller is determinable at the date of sale
uncertain about the probability of return  The buyer has paid the seller, or the buyer is
Where a seller retains only an insignificant risk of obligated to pay the seller and the obligation is not
ownership, such as a retail sale where a refund is contingent on resale of the product
offered to the customer, revenue is recognised at the  The buyer's obligation to the seller would not be
time of sale provided the seller can reliably estimate changed in the event of theft or physical destruction
future returns and recognises a liability for returns based or damage of the product
on previous experience and other relevant factors
(IAS 18.17).  The buyer acquiring the product for resale has
economic substance apart from that provided by the
seller
 The seller does not have significant obligations for
future performance to directly bring about resale of
the product by the buyer
 The amount of future returns can be reasonably
estimated
Bill-and-hold transactions
Revenue shall be recognised for a bill-and-hold sale SEC SAB Topic 13 sets forth a significant number of
when the buyer requests that delivery be delayed but restrictive conditions that must be met in order to
takes title and accepts billing provided the following recognize revenue on a bill-and-hold sale. The criteria in
conditions are met (IAS 18 App 1): SAB Topic 13 are more stringent than those in IAS 18.
 It is probable that delivery will be made Consequently, situations in which revenue is recognized
on bill and hold transactions are rare.
 The item is on hand, identified, and ready for

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IFRS U.S. GAAP

delivery to the buyer at the time the sale is
recognised
 The buyer specifically acknowledges the deferred
delivery instructions
 The usual payment terms apply
Barter transactions
According to IAS 18.12, an exchange of goods or According to U.S. GAAP, an exchange of nonmonetary
services that qualifies for revenue recognition is assets that qualifies for revenue recognition is generally
measured at the fair value of the goods or services measured at fair value of the goods or services given up.
received. If the fair value of the goods or services However, the fair value of the goods or services received
received cannot be measured reliably, revenue is can be used if it is more clearly evident (ASC 845-10-30-
measured at the fair value of the goods or services 1) (APB 29.18).
given up.
SIC 31 provides guidance on the measurement of Similar to IFRS (ASC 605-20-25) (EITF 99-17).
revenues from barter transactions involving advertising.
According to SIC-31, revenue cannot be measured
reliably at the fair value of advertising services received
in a barter transaction involving advertising. A seller can
reliably measure the fair value of advertising services
supplied in a barter transaction only by reference to non-
barter transactions that (SIC-31.5):
 Involve advertising similar to the advertising in the
barter transaction
 Occur frequently
 Represent a predominant number of transactions
and amount when compared to all transactions to
provide advertising that is similar to the advertising
in the barter transaction
 Involve cash and/or another form of consideration
(e.g. marketable securities, non-monetary assets,
and other services) that has a reliably measurable
fair value; and
 Do not involve the same counterparty as in the
barter transaction
Customer loyalty programs
Award credits shall be accounted for as a separately There is no specific guidance that addresses customer
identifiable component of a sales transaction. The fair loyalty programs in U.S. GAAP. The facts and
value of the consideration received shall be allocated circumstances of the program should be considered to
between the award credits and the other components of determine the appropriate accounting. Although customer
the sale (IFRIC 13.5). The consideration allocated to the loyalty programs are not in the scope of ASC 605-25
award credits shall be measured by reference to their (EITF 00-21), some companies apply that guidance by
fair value (IFRIC 13.6). analogy and allocate revenue to the award credits. Others
Note: Improvements to IFRSs issued in May 2010 may follow an incremental cost approach in which the
amends the Appendix to IFRIC 13 to clarify the fair value cost associated with the award credit is accrued.
of award credits. The amendment is effective for annual
periods beginning on or after 1 January 2011.

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IFRS U.S. GAAP

The consideration allocated to the award credits shall be
recognised as follows:
 If the entity supplies the award, revenue shall be
recognised when the credits are redeemed and the
entity fulfills its obligations to supply awards
(IFRIC 13.7)
 If a third party supplies the award, the entity shall
evaluate whether it is collecting the award credits as
the principal or agent in the transaction
− If the entity is acting as an agent in the

transaction, revenue shall be measured at the
net amount and recognised when the third
party becomes obliged to supply the awards
and entitled to receive consideration
− If the entity is acting as the principal in the

transaction, revenue shall be measured gross
and recognised when it fulfills its obligations for
the awards (IFRIC 13.8)
6.1a Revenue - long-term contracts/construction contracts
IFRS U.S. GAAP

Relevant guidance: IAS 11; IFRIC 15 Relevant guidance: ASC 605-35 (ARB 45; SOP 81-1)
Introduction
IAS 11 applies to the accounting for fixed-price and cost- As noted in Section 6.1 above, revenue recognition
plus construction contracts for a single asset (such as a guidance is included in ASC 605 and other topics in the
building, bridge, ship, or tunnel) or combination of related Codification, as well as SEC guidance. For example,
assets (such as the construction of refineries and other ASC 605-970, 972, 974, 976, and 978 includes
complex pieces of plant or equipment) in the financial guidance for real estate.
statements of contractors (IAS 11.1-.6). ASC 605-35 (SOP 81-1) applies to accounting for
A construction contract is defined as “a contract performance contracts where a customer provides
specifically negotiated for the construction of an asset or specifications for the construction of a facility,
a combination of assets that are closely interrelated or production of goods, or provision of services. Guidance
interdependent in terms of their design, technology and is not limited to construction-type contracts (ASC 605-
function or their ultimate purpose or use.” (IAS 11.3) 35-15-2 through 15-6) (SOP 81-1.11-.15).
According to IAS 11: According to ASC 605-35 (SOP 81-1):
 Percentage-of-completion shall be used if the  Percentage-of-completion is the preferred method
outcome of the contract can be estimated reliably. in situations in which reasonably dependable
Revenue and costs shall be recognised as contract estimates can be made (ASC 605-35-25-56 and
activity progresses (by reference to the stage of 25-57) (SOP 81-1.23). Revenue is recognized as
completion) (IAS 11.22). If the outcome of a contract contract activity progresses. In a situation in which
cannot be estimated reliably, contract revenue shall a precise estimate is not practical and the contract
be recognised to the extent of recoverable contract is not expected to result in a loss, the percentage-
of completion method based on a zero profit margin

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IFRS U.S. GAAP

costs (IAS 11.32). is recommended until results can be estimated
 Unlike U.S. GAAP, the completed-contract is not more precisely.
permitted.  If reasonable estimates cannot be made, the
 Probable losses shall be recognised as an expense completed-contract method is used (ASC 605-35-
immediately (IAS 11.36) 25-94) (SOP 81-1.32)
 Probable losses are recognized as an expense
immediately under either the percentage-of-
completion method or the completed-contract
method (ASC 605-35-25-46 and 25-47) (SOP 81-
1.85)
IAS 11 is restricted to construction contracts only (and Except for services in connection with construction
services directly related to the construction of assets (IAS contracts, long-term service contracts are excluded
11.3 and .5)). Non-construction services are covered by from the scope of ASC 605-35 (SOP 81-1 and ARB 45)
IAS 18. An agreement for the construction of real estate (ASC 605-35-15-2, 15-3, and 15-6) (SOP 81-1.11 and
may be within the scope of IAS 11 or 18. The ARB 45.1).
determination is a matter of judgement that depends on
the terms of the agreement and the specific facts and
circumstances of the arrangement. IFRIC 15 provides
guidance to assess whether an agreement is within the
scope of IAS 11 or 18 and when revenue from the
construction of real estate shall be recognised.
IAS 11 applies to each construction contract separately. ASC 605-35 (SOP 81-1) permits, but does not require,
However, in some situations IAS 11 is applied to separate the combining and segmenting of contracts provided
components of a single contract or to a group of contracts certain criteria are met (ASC 605-35-25-5 through 25-
together. 14) (SOP 81-1.35-.42). IFRS requires combining and
Contracts shall be combined when they are negotiated as segmenting contracts when certain criteria are met.
a single package, they are closely interrelated and they
are performed concurrently or in a continuous sequence
(IAS 11.9).
Contracts shall be segmented when separate proposals
have been submitted for each asset, each part was
subject to separate negotiation and the contractor and
customer have been able to accept or reject that part of
the contract relating to each asset, and costs and
revenues can be separately identified (IAS 11.8).
Recognition guidance
IAS 11.22 provides that when the outcome of a The ability to produce reasonably reliable estimates is
construction contract can be estimated reliably, contract essential for the use of the percentage-of-completion
revenue and contract costs shall be recognised by method. In a situation in which a precise estimate is not
reference to the stage of completion of the contract at the practical and the contract is not expected to result in a
end of the reporting period. IAS 11.23 and .24 list the loss, the percentage-of-completion method based on a
conditions that must be met for the outcome of a fixed zero profit margin is recommended until results can be
price or cost plus contract, respectively, to be reliably estimated more precisely (ASC 605-35-25-56 and 25-
measured. An expected loss on a contract should be 67) (SOP 81-1.24-.25). If reasonable estimates cannot
recognised as an expense immediately (IAS 11.22 and be made, the completed contract method is used
.36). (ASC 605-35-25-61 and 25-94) (SOP 81-1.32).
If the outcome of a contract cannot be estimated reliably,

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IFRS U.S. GAAP

contract revenue and contract costs shall be recognised
as follows (IAS 11.32):
 Revenue shall be recognised only to the extent of
contract costs incurred that it is probable will be
recoverable
 Contract costs shall be recognised as an expense in
the period incurred
According to IAS 11.33, during the early stages of a
contract it is possible that the outcome of the contract
cannot be estimated reliably; however, it may be probable
that the entity will recover contract costs. In this situation,
contract revenue shall be recognised only to the extent of
costs incurred that are expected to be recoverable.
An expected loss on a contract should be recognised as
an expense immediately (IAS 11.32 and .36).
Contract revenue includes (IAS 11.11): Similar to IFRS, contract revenues include the basic
 Initial amount of revenue agreed in the contract contract amount and other contract variations and
claims if certain criteria are met. For example:
 Contract variations and claims to extent that they are
probable of resulting in revenue and capable of being  Contract revenue and costs should be adjusted to
reliably measured. reflect change orders when their scope and price
have been approved by the customer and
The amount of claims that can be included in contract contractor. Costs of unpriced change orders may
revenues is subject to a high level of uncertainty. be deferred if it is probable that aggregate contract
Therefore, IAS 11.14 provides that claims are costs, including costs related to the change orders,
included in contract revenue only when both of the will be recovered from contract revenues
following conditions are met: (ASC 605-35-25-25 through 25-28) (SOP 81-1.61-
− Customer negotiations have reached an .63).
advanced stage such that it is probable that the  Generally, recognition of additional contract
customer will accept the claim revenue resulting from claims is appropriate only if
− The probable amount acceptable to the it is probable that the claim will result in additional
customer can be measurable reliably revenue and the amount can be reliably estimated,
which generally requires specific criteria to be met
(ASC 605-35-25-30 through 25-31) (SOP 81-1.65-
.67)
6.2 Employee benefits

Note: In March 2008, the IASB issued a Discussion Paper, Preliminary Views on Amendments to IAS 19 Employee
Benefits. This Discussion Paper was the first step in a comprehensive project on the accounting for post-employment
benefits. The input received on the discussion paper was considered by the IASB in developing its Exposure Draft,
Defined Benefit Plans: Proposed amendments to IAS 19, in April 2010. The Exposure Draft includes proposed
amendments on the recognition, presentation and disclosure of defined benefit plans. The purpose of the proposed
amendment is to address certain perceived deficiencies in IAS 19, including those related to:
 The timing of recognition of gains and losses. The proposed amendment would require an entity to recognize
gains and losses from changes to an entity’s estimate of a defined benefit obligation or changes in the fair value of
its plan assets immediately.

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 The option to select different methods for recognizing gains and losses. The Exposure Draft proposes improving
the visibility of gains and losses from defined benefit plans by proposing that an entity present service cost in profit
or loss, a financial cost as part of finance costs in profit or loss and remeasurement in other comprehensive
income.
 Disclosure requirements which require a significant amount of information to be disclosed but do not provide
information regarding the risks involved in relation to an entity’s defined contribution plans. The proposed
disclosure requirements would provide information related to the characteristics of the entity’s defined benefit
plans, the amounts recognised in the entity’s financial statements, the risk involved in the entity’s defined benefit
plans and any participation by the entity in multi-employer plans.
IFRS U.S. GAAP

Relevant guidance: IAS 19; IFRIC 14 Relevant guidance: ASC 420, 450, 710, 712, and 715
(APB 12; SFAS 5, 43, 87, 88, 106, 112, 146, and 158)
Introduction
IAS 19 applies to employee benefits provided through Unlike IFRS, the accounting for employee benefits is
(IAS 19.3): covered in several Codification topics. Some of the more
 Formal plans or agreements between an entity and significant areas are listed below:
individual employees, groups of employees, or their  General – ASC 710
representatives
− Compensated absences
 Legislative requirements or industry arrangements
that require entities to contribute to national, state, − Deferred compensation arrangements
industry, or other multiemployer plans − Lump-sum payments under union contracts
 Informal practices that create a constructive  Retirement benefits – ASC 715
obligation
− Defined benefit plans – general
Employee benefits include (IAS 19.4):
− Defined benefit plans – pension
 Short-term monetary employee benefits, such as
wages, social security contributions, paid annual − Defined benefit plans – other postretirement
leave, paid sick leave, and profit sharing
− Defined contribution plans
 Short-term nonmonetary benefits, such as medical
care, housing, and cars − Multiemployer plans
 Postemployment benefits, such as pensions, other  Nonretirement postemployment benefits – ASC 712
retirement benefits, postemployment medical care − Termination benefits
 Long-term profit sharing, bonuses, and deferred − Other postemployment benefits
compensation
Note: Share-based payments are covered by ASC 718
 Other long-term employee benefits, such as long- (SFAS 123R). See Section 6.3, “Share-based payments.”
service leave or sabbatical leave and long-term
disability benefits
 Termination benefits
Note: Share-based payments are addressed in IFRS 2.
See Section 6.3, “Share-based payments.”
Short-term benefits
In general, at the time an employee has rendered With a few exceptions, such as ASC 710 on deferred
service to an entity during an accounting period, the compensation contracts (APB 12) and compensated
entity shall recognise a liability for the undiscounted absences (SFAS 43), and ASC 712 (SFAS 112) on
amount of the short-term benefits expected to be paid in postemployment preretirement benefits, U.S. GAAP does

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IFRS U.S. GAAP

exchange for that service (IAS 19.10). not specifically address short-term benefits. However,
similar to IFRS the accrual basis of accounting shall be
used to account for short-term benefits.
Compensated absences (IAS 19.11-.16) Compensated absences

 Accumulating – those that are carried forward and Employers shall accrue a liability for employees’
can be used in future periods. An accrual shall be compensation for future absences if all of the following
recognised when the employee renders service. conditions are met (ASC 710-10-25-1) (SFAS 43.6):
The accrual shall be measured at the amount of the  The employer's obligation relating to employees'
additional payments that are expected to arise from rights to receive compensation for future absences is
the benefit that accumulates. attributable to employees' services already rendered
 Non-accumulating – those that do not carry  The obligation relates to rights that vest or
forward. A liability shall be recognised when the accumulate
absences occur.
 Payment of the compensation is probable
 The amount can be reasonably estimated
An employer is not required to accrue a liability for
nonvesting accumulating rights to receive sick pay
benefits (ASC 710-10-25-6 and 25-7) (SFAS 43.7).
Bonus and profit-sharing Bonus and profit-sharing

The expected cost shall be recognised when, and only A bonus that is not formula-based shall be accrued if it is
when (IAS 19.17): probable that it will be paid. A bonus based on attaining a
 There is a present legal or constructive obligation to specific goal over a period of time shall be accrued based
make payments as a result of past events, and on the results achieved to date.
 A reliable estimate of the obligation can be made

A present obligation exists, when and only when, an
entity has no realistic option but to make the payments.
Postemployment benefits under IFRS include pre- and Postemployment preretirement benefits
post-retirement benefits. Employers shall accrue a liability for postemployment
preretirement benefits if all of the conditions in ASC 710-
10-25-1 (SFAS 43.6) (listed above) are met.
Postemployment preretirement benefits that do not meet
the conditions in ASC 710-10-25-1 (SFAS 43.6) shall be
accounted for under ASC 450 (SFAS 5) (ASC 712-10-25-
4 and 25-5) (SFAS 112.6). Therefore, if it is probable that
a liability for the benefit has been incurred at the balance
sheet date and the amount can be reasonably estimated a
liability shall be recognized (ASC 450-20-25-2)
(SFAS 5.8).
Post-employment benefits – defined contribution plans
Defined contribution plans are plans in which the entity’s A defined contribution plan is defined as “a plan that
legal or constructive obligation is limited to the amount provides an individual account for each participant and
that it agrees to contribute to the fund. Actuarial risk and provides benefits that are based on all of the following: (a)
investment risk are borne by the employee not the entity amounts contributed to the participant’s account by the
(IAS 19.25). employer or employee, (b) investment experience, (c) any
forfeitures allocated to the account, less any
administrative expenses charged to the plan.” Actuarial

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IFRS U.S. GAAP

risk and investment risk are borne by the employee, not
the entity (ASC Master Glossary).
Recognition and measurement Recognition and measurement

An entity shall recognise a contribution payable when an If a plan's defined contributions to an individual's account
employee has rendered service to the entity during a are to be made for periods in which that individual renders
period in exchange for that service. If contributions do services, the net pension cost for a period shall be the
not fall due within 12 months after the end of the period contribution required in that period. If contributions are
in which the services have been rendered, the amount required in periods after an individual retires or
of the contributions shall be discounted using the rate terminates, the estimated cost shall be accrued during the
for high quality corporate bonds. If there is no deep employee's service period (ASC Master Glossary,
market in such bonds, the market yields on government “Defined Contribution Postretirement Plan,” and ASC 715-
bonds shall be used. The currency and term of the 70-35-1) (SFAS 87.64).
corporate bonds should be consistent with the current
and estimated term of the post employment benefit
obligation. (IAS 19.44-.45 and .78).
Post-employment benefits – defined benefit plans
Defined benefit plans are plans in which the entity’s A defined benefit pension plan is a pension plan that
obligation is to provide agreed benefits to current and defines an amount of pension benefit to be provided,
former employees. Actuarial risk and investment risk usually as a function of one or more factors such as age,
are, in substance, the responsibility of the entity years of service, or compensation. Actuarial risk and
(IAS 19.27). investment risk are the responsibility of the entity (ASC
Master Glossary, “Defined Benefit Pension Plan”)
(SFAS 87.11). The discussion below focuses primarily on
defined benefit pension plans. ASC 715-60 includes
guidance for defined benefit plans – other postretirement.
Recognition and measurement – statement of financial Recognition and measurement – balance sheet
position An entity shall recognize the funded status of a defined
The amount recognised as a defined benefit liability benefit plan in its balance sheet (ASC 715-30-25-1 and
shall be the net total of the following (IAS 19.54): ASC 715-60-25-1) (SFAS 158.4). The funded status is the
 The present value of the defined benefit obligation difference between the fair value of plan assets and the
at the end of the reporting period benefit obligation. For a defined benefit pension plan the
benefit obligation is the projected benefit obligation. For
 Plus any actuarial gains (less any actuarial losses) an other postretirement defined benefit plan, the benefit
not yet recognised obligation is the accumulated postretirement benefit
 Less any past service cost not yet recognised obligation. Unlike IFRS, there is no limitation on the
 Less the fair value of plan assets at the end of the amount of the defined benefit asset that shall be
reporting period recognized.
The net total of the items listed above may result in a

negative amount (an asset). IAS 19.58-.60 and IFRIC
14 provide guidance on the limitation on the amount of
the defined benefit asset that shall be recognised.
Note: In November 2009, IFRIC 14 was amended to
remove an unintended consequence as a result of the
treatment of prepayments in some situations when there
is a minimum funding requirement. The amendments
apply when an entity is subject to minimum funding
requirements and makes an early payment of

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IFRS U.S. GAAP

contributions for that amount. The entity is permitted to
treat that payment as an asset. The amendments are
effective for annual periods beginning on or after
1 January 2011. Early application is permitted.
Recognition and measurement – profit or loss Recognition and measurement – income statement
An entity shall recognise the net total of the following Net periodic pension cost includes (ASC 715-30-35-4)
amounts in profit or loss, except to the extent another (SFAS 87.20):
IFRS requires or permits including it as part of the cost  Service cost
of an asset (IAS 19.61):
 Interest cost
 Current service costs
 Actual return on plan assets, if any (effectively it is
 Interest cost the expected return, see gain or loss below)
 Past service costs  Amortization of any prior service cost or credit
 Expected return on any plan assets and included in accumulated other comprehensive
reimbursement rights income
 Actuarial gains and losses (to the extent recognised  Gain or loss (including the effects of changes in
in profit or loss) assumptions and the difference between the actual
 Effect of any settlement or curtailment and expected return on plan assets) to the extent
recognized
 Effect of the limit specified in IAS 19.58(b)
 Amortization of any net transition asset or obligation
The expected return on plan assets shall be applied to remaining in accumulated other comprehensive
the fair value of plan assets (IAS 19.106). income
 Any recognized settlement or curtailment gains or
losses
The expected long-term rate of return shall be applied to
either fair value or a calculated value that recognizes
changes in fair value in a systematic and rational manner
over not more than five years (ASC Master Glossary,
“Market-Related Value of Plan Assets”) (SFAS 87.30).
Actuarial valuation method Actuarial valuation method

An entity shall use the projected unit credit method to Unlike IFRS, the actuarial method used depends on the
determine the present value of defined benefit type of plan, such as a final-pay plan or a flat-benefit plan.
obligations (IAS 19.64) using a discount rate determined Some methods that are used include the projected unit
by reference to market yields on high quality corporate credit, unit credit with service prorate, and the unit credit
bonds. If there is no deep market in such bonds, the methods (ASC 715-30-35-36 through 35-39) (SFAS
market yields on government bonds shall be used 87.40). The assumed discount rate shall reflect the rate at
(IAS 19.78). IAS 19 encourages, but does not mandate, which pension benefits could be effectively settled. An
the involvement of a qualified actuary (IAS 19.57). employer may look to rates implicit in annuity contracts or
rates of return on high-quality fixed-income investments in
estimating the assumed discount rates. In some
situations, the assumed discount rates may need to
incorporate reinvestment rates available in the future.
Those rates shall be extrapolated from the existing yield
curve at the measurement date. Consequently, the
discount rate used under U.S. GAAP may be lower than
the rate used under IFRS (ASC 715-30-35-43)
(SFAS 87.44).

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IFRS U.S. GAAP

Asset valuation Asset valuation
Plan assets shall be measured at fair value and when Plan assets shall be measured at fair value (ASC 715-30-
no market price is available fair value shall be estimated 35-50) (SFAS 87.49). However, the definition of fair value
(e.g. by discounting expected future cash flows) differs under U.S. GAAP.
(IAS 19.102).
Measurement dates Measurement dates

An entity shall determine the present value of defined Unlike IFRS, the measurement of plan assets and benefit
benefit obligations and the fair value of plan assets with obligations shall be as of the date of the employer’s fiscal
sufficient regularity such that amounts recognised do year-end balance sheet unless the plan is sponsored by a
not differ materially from the amounts that would be consolidated subsidiary or equity method investee with a
determined at the end of the reporting period different fiscal period. In those situations, the subsidiary’s
(IAS 19.56). plan assets and benefit obligations shall be measured as
of the date used to consolidate the subsidiary’s balance
sheet and the investee’s plan assets and benefit
obligations shall be measured as of the date used to apply
the equity method (ASC 715-30-35-62 through 35-63)
(SFAS 87.52).
Actuarial gains and losses Actuarial gains and losses

 Amortisation – an entity shall recognise a portion of  Amortization – amortization of a net gain or loss
its actuarial gains and losses, subject to the included in accumulated other comprehensive
limitation in IAS 19.58A, as income or expense if income (excluding asset gains and losses not yet
the net cumulative unrecognised gain or loss at the reflected in market-related value) shall be included as
previous year end exceeds the greater of (a) 10% a component of net pension cost for a year if, as of
of the present value of the defined benefit obligation the beginning of the year, that net gain or loss
at that date (before deducting plan assets) or (b) exceeds 10 percent of the greater of the projected
10% of the fair value of any plan assets at that date benefit obligation (accumulated postretirement benefit
(the “10% corridor”). The excess must be obligation for an other postretirement defined benefit
recognised in the income statement over the plan) or the market-related value of plan assets. If
expected average remaining working lives of amortization is required, the minimum amortization
participating employees (IAS 19.92-.93). shall be that excess divided by the average remaining
 Recognise as incurred – an entity may adopt a service period of active employees expected to
policy of recognising actuarial gains and losses in receive benefits under the plan. If all or almost all of a
the period incurred. An entity is permitted to plan’s participants are inactive, the average
recognise actuarial gains and losses outside the remaining life expectancy of the inactive participants
income statement provided it does so for all shall be used instead of the average remaining
actuarial gains and losses and for all of its defined service period (ASC 715-30-35-24) (SFAS 87.32).
benefit plans (IAS 19.93A). Actuarial gains and Actuarial gains and losses not recognized in income
losses recognised outside the income statement shall be recognized in other comprehensive income
shall be recognised in other comprehensive income when they occur (ASC 715-30-35-21) (SFAS 87.29).
(IAS 19.93B).  Recognize as incurred – an entity may adopt a policy
of recognizing actuarial gains and losses in the period
incurred. However, unlike IFRS actuarial gains and
losses shall be recognized in the income statement
and not in other comprehensive income (ASC 715-
30-35-25) (SFAS 87.33).
Past service costs and negative past service costs Past (prior) service costs and credits
An entity shall recognise past service costs (negative Unlike IFRS, past service costs shall be recognized in
past service costs) as an expense (benefit) on a other comprehensive income in the period incurred and

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IFRS U.S. GAAP

straight-line basis over the average period until the then shall be amortized as a net periodic pension cost
benefits become vested. If benefits are already vested, over the future service period of active employees.
an entity shall recognise past service cost immediately However, if all or almost all of the plan participants are
(IAS 19.96). inactive, past service cost shall be amortized over the
remaining life expectancy of those participants. A prior
service credit shall be used first to reduce any remaining
prior service cost included in accumulated other
comprehensive income. Any remaining prior service credit
shall be amortized as a component of net periodic
pension cost (ASC 715-30-35-10 through 35-11 and 35-
17) (SFAS 87.25 and .28).
Curtailments and settlements Curtailments and settlements

Plan curtailment or settlement gains or losses shall be  Curtailment – the prior service cost or credit included
recognised when the curtailment or settlement occurs. in accumulated other comprehensive income
Plan curtailment or settlement gains or losses include associated with years of service no longer expected
the following (IAS 19.109): to be rendered as the result of a curtailment is a loss
 Any resulting changes in the present value of the or gain. In addition, the projected benefit obligation
defined benefit obligation may be decreased (a gain) or increased (a loss) by a
curtailment. To the extent that a loss exceeds any net
 Any resulting change in the fair value of plan assets gain included in accumulated other comprehensive
 Any related actuarial gains and losses and past income (or the entire loss, if a net loss exists), it is a
service cost that had not been previously curtailment loss. A curtailment loss shall be
recognised recognized when the curtailment is probable of
occurring and the effects can be reasonably
estimated. To the extent that a gain exceeds any net
loss included in accumulated other comprehensive
income (or the entire gain, if a net gain exists), it is a
curtailment gain. A curtailment gain shall be
recognized when the related employees terminate or
the plan suspension or amendment is adopted. Any
transition asset remaining in accumulated other
comprehensive income from initial application of ASC
715 (SFAS 87) is treated as a net gain and is
combined with the net gain or loss arising thereafter
(ASC 715-30-35-92 through 35-94) (SFAS 88.12-
.14). Unlike IFRS, actuarial gains and losses are not
recognized in a curtailment.
 Settlement – settlement gains or losses shall be
recognized when the settlement occurs (ASC 715-30-
35-79) (SFAS 88.9). The amount of the settlement
gain or loss is the net gain or loss remaining in
accumulated other comprehensive income plus any
transition asset remaining in accumulated other
comprehensive income from initial application of ASC
715 (SFAS 87) (ASC 715-30-35-79) (SFAS 88.9).
Presentation
Classification of pension assets and liabilities Classification of pension assets and liabilities
IAS 19 does not specify whether an entity should If a classified balance sheet is presented, an employer
distinguish current and non-current portions of assets shall classify the liability for an underfunded plan as a

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IFRS U.S. GAAP

and liabilities arising from post-employment benefits current liability, a noncurrent liability, or a combination of
(IAS 19.118). However, some entities make that both. The current portion (determined on a plan-by-plan
distinction. basis) is the amount by which the actuarial present value
of benefits included in the benefit obligation payable in the
next 12 months exceeds the fair value of plan assets. The
asset for an overfunded plan shall be classified as a
noncurrent asset (ASC 715-20-45-3) (SFAS 87.36).
Income statement Income statement
There is no requirement to aggregate all the Components of pension cost are included in one amount
components of pension cost as a single item on the on the income statement.
income statement (IAS 19.119).
Post-employment benefits – multi-employer and group plans
Multi-employer plans Multi-employer plans

An entity shall classify a multi-employer plan as a Multi-employer plans shall be accounted for in a manner
defined benefit plan or a defined contribution plan based similar to a defined contribution plan by the individual
on the terms of the plan. For a defined benefit plan, an companies (ASC 715-80-35-1) (SFAS 87.68). Some plans
entity shall account for its proportionate share of the in which two or more unrelated employers contribute are
defined benefit obligation, plan assets, and costs in a not multi-employer plans. In substance, they are
manner similar to other defined benefit plans (IAS aggregations of single-employer plans that allow
19.29). If information is not available to apply defined participating employers to pool their assets for investment
benefit accounting, an entity shall account for the plan purposes and to reduce administrative costs. ASC 715-
as if it were a defined contribution plan and provide the 30-35-70 (SFAS 87.71) discusses these plans.
disclosures listed in IAS 19.30.
Group plans Group plans

Defined benefit plans that share risks among various Group plans are not specifically addressed in U.S. GAAP.
entities under common control are not multi-employer Group plans are accounted for as multi-employer or
plans. An entity participating in such a plan (group plan) multiple employer plans depending on the individual facts
shall obtain information about the plan as a whole. If a and circumstances. In such circumstances related party
group defined benefit plan has a contractual disclosures are appropriate. See Section 10.6, “Related
arrangement or stated policy that allocates the net party disclosures.”
defined benefit cost determined by IAS 19 to the
participating entities, then each entity recognises the
cost thus charged. If there is no such agreement or
policy, each entity recognises a cost equal to its
contribution payable for the period, except for the entity
that is legally the sponsoring employer for the plan. This
entity shall recognise the net defined benefit cost in its
financial statements (IAS 19.34 and 34A).
Other long-term employee benefits
Other long-term benefits are benefits other than U.S. GAAP addresses some, but not all, other long-term
termination or post-employment benefits that do not fall benefits as defined in IAS 19. An employer shall
due within one year of the end of the period in which the recognize a liability for future benefits in accordance with
employee renders the relevant services (IAS 19.7). IAS ASC 715-60 (SFAS 106) if, in substance, the benefits
19 applies a simplified method of the accounting for constitute a postretirement plan. If the benefits are, in
post-employment benefits to other long-term benefits. substance, individual deferred compensation contracts,
The main difference is that actuarial gains and losses ASC 715-10 (APB 12) applies. In general, the accounting
and past service costs are recognised immediately for other long-term benefits is similar to that described

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(IAS 19.127). above for short-term benefits.
 Recognition and measurement – statement of Unlike IFRS, U.S. GAAP does not include a comparable
financial position: an entity shall recognise a liability simplified version of the accounting for long-term benefits.
for the present value of the defined benefit
obligation less the fair value of plan assets at the
end of a reporting period (IAS 19.128)
 Recognition and measurement – profit or loss: an
entity shall recognise the net total of the following
amounts in profit or loss (IAS 19.129):
− Current service costs
− Interest cost
− Past service costs, which shall be recognised
immediately
− Expected return on any plan assets and

reimbursement rights
− Actuarial gains and losses, which shall be

recognised immediately
− Effect of any settlement or curtailment
Termination benefits
Termination benefits are employee benefits payable Under U.S. GAAP there are different types of termination
because the employer has decided to terminate the benefits.
employee’s employment prior to the normal retirement  Special termination benefits: A liability for these
date or because an employee has accepted voluntary benefits shall be recognized when the employees
redundancy in exchange for those benefits (IAS 19.7). accept the offer and the amount can be reasonably
An entity shall recognise a liability and an expense only estimated (ASC 712-10-25-1) (SFAS 88.15).
when the enterprise is demonstrably committed to either
terminate employment or provide termination benefits as  Contractual termination benefits: A liability shall be
a result of an offer made to encourage voluntary recognized when it is probable that employees will be
redundancy (IAS 19.133). An entity is demonstrably entitled to benefits and the amount can be reasonably
committed when, and only when, there is a detailed estimated (ASC 712-10-25-2) (SFAS 88.15).
formal plan for the termination and there is no realistic  One-time termination benefits: A liability shall be
possibility of withdrawal (IAS 19.134). recognized when the plan of termination is
If benefits are due more than twelve months after the communicated to employees and certain criteria are
reporting date, they shall be discounted using market met. However, if employees must render services
yield on high quality corporate bonds (or government beyond a minimum retention period the liability shall
bonds if no such relevant bond rate is available) be recognized ratably over the future service period
(IAS 19.139). (ASC 420-10-25-4 through 25-9) (SFAS 146.8-.11).
In an offer for voluntary redundancy, benefits shall be  Benefits, other than special or contractual termination
based on the number of employees expected to accept benefits, that are provided to former or inactive
the offer (IAS 19.140). employees that meet the conditions in ASC 710-10-
25-1 (paragraph 6 of SFAS 43) (see the section on
Note: In June 2005, the IASB issued an Exposure Draft, short-term benefits above) shall be accounted for in
Amendments to IAS 37, Provisions, Contingent accordance with ASC 710-10. Such benefits that do
Liabilities and Contingent Assets, and IAS 19, Employee not meet those conditions shall be recognized when it
Benefits that addresses termination benefits, among is probable that a liability for the benefit has been
other items. In October 2009, the IASB decided to incurred and the amount can be reasonably

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IFRS U.S. GAAP

finalise the amendments to IAS 19 separate from the estimated (ASC 712-10-25-5) (SFAS 112.6).
IAS 37 amendment. The IASB plans to finalize the
planned changes to the accounting for termination
benefits with the proposed amendments to IAS 19, as
proposed in the Exposure Draft, Defined Benefit Plans:
Proposed amendments to IAS 19.
6.3 Share-based payments
IFRS U.S. GAAP

Relevant guidance: IFRS 2; IFRIC 18 Relevant guidance: ASC 718 (SFAS 123R) (for
employees) and ASC 505-50 (EITF 96-18) (for
nonemployees)
Introduction
IFRS 2 specifies the financial reporting by an entity that ASC 718 and ASC 505-50 (SFAS 123R) apply to share-
enters into share-based payment transactions. The based payment transactions in which an entity acquires
scope of IFRS 2 includes all share-based payment goods or services by issuing equity instruments or by
transactions including (IFRS 2 IN4 and 2.2 ): incurring liabilities that either are (a) settled in an amount
 Equity-settled share-based payment transactions – based, at least in part, on the price of the entity’s shares
the entity receives goods or services as or other equity instruments of the entity or (b) require or
consideration for its equity instruments may require settlement by issuing the entity’s shares or
other equity instruments (ASC 718-10-15-3 and ASC 505-
 Cash-settled share-based payment transactions – 50-15-2) (SFAS 123R.4).
the entity acquires goods or services by incurring
liabilities that are based on the price of the entity’s Equity or liability classification of a share-based award
shares or other equity instruments under U.S. GAAP could differ from IFRS which could
result in significant differences in accounting for these
 Equity-settled or cash-settled transactions – the awards under ASC 718 and IFRS 2. ASC 718-10-25-6
entity receives or acquires goods or services and through 25-19 provides guidance on whether share-based
the entity or the supplier has a choice of whether payment awards shall be classified as liabilities (SFAS
the entity settles the transaction in cash or by 123R.28-.35).
issuing equity instruments
All employee share purchase plans are considered Unlike IFRS, an employee share purchase plan that
compensatory arrangements and are within the scope satisfies certain explicit criteria is not considered
of IFRS 2. compensatory (ASC 718-50-25-1) (SFAS 123R.12).
Share based payment transactions may be settled by Share based payments awarded to an employee on
another group entity (or a shareholder of any group behalf on an entity, by a related party or other holder of an
entity) on behalf of the entity receiving or acquiring the economic interest in the entity as compensation for
goods or services. The guidance noted above also services provided to the entity are share based payment
applies to an entity that transactions and thus accounted for as such unless the
 Receives goods or services when another entity in transfer is clearly for a purpose other than compensation
the same group (or shareholder of any group entity) for services to the entity. In essence, the economic
has the obligation to settle the share based interest holder makes a capital contribution to the entity,
payment transaction, or who makes a share based payment to its employee in
exchange for services rendered (ASC 718-10-15-4)
 Has an obligation to settle a share based payment (SFAS 123R.11).
transaction when another entity in the same group

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receives the goods or services
unless the transaction is clearly for a purpose other than
payment for goods or services supplied to the entity
receiving them (IFRS 2.3A).
Recognition
In general, an entity shall recognise an expense for the Similar to IFRS (ASC 718-10-25-2 through 25-4)
goods or services received or acquired and an increase (SFAS 123R.5 -.6).
in equity for an equity-settled transaction or an increase
in a liability for a cash-settled transaction (IFRS 2.7 and
2.8).
Equity-settled transactions with employees Equity-settled transactions with employees

The entity shall recognise an expense when the The measured compensation cost for share-based awards
services are received (IFRS 2.14-.15). Vesting to employees shall be recognized as those employee
conditions, other than market conditions, affect the services are received. The corresponding credit is an
timing of expense recognition (service or performance- increase in equity (ASC 718-10-35-2) (SFAS 123R.5).
based) and the number of equity instruments included in Similar to IFRS, vesting conditions, other than market
the measurement of the transaction amount conditions, affect the timing of expense recognition
(forfeitures). Market conditions shall be taken into (service or performance-based) and the number of equity
account when estimating the fair value of the equity instruments included in the measurement of the
instruments (IFRS 2.19-.21). transaction amount (forfeitures). Market conditions shall
be taken into account when estimating the fair value of the
equity instruments (ASC 718-10-25-20 and 25-21, ASC
718-10-30-14 and 30-25 through 30-27, and ASC 718-10-
35-2 through 35-7) (SFAS 123R.39-.49).
U.S. GAAP permits an entity to make an accounting policy
decision to use a straight-line or accelerated attribution
method for awards that have graded service requirements
regardless of the method used to value the award (ASC
718-10-35-8) (SFAS 123R.42). Unlike U.S. GAAP, IFRS
does not permit the use of a straight-line attribution
method.
Cash-settled transactions with employees Liability-classified transactions with employees

The entity shall recognise an expense for the services Similar to IFRS, the entity shall recognize an expense for
received as the employees render service (IFRS 2.32). the services received as the employees render service.
Equity-settled transactions with nonemployees Equity-settled transactions with nonemployees

The entity shall recognise an expense when the entity Similar to IFRS, generally, the entity shall recognize an
obtains the goods or as the services are received expense when the entity obtains the goods or as the
(IFRS 2.13). services are received (ASC 505-50-25-6) (SFAS 123R.5).
Cash-settled transactions with nonemployees Liability-classified transactions with employees

The entity shall recognise an expense when the entity Similar to IFRS, the entity shall recognize an expense
obtains the goods or as the services are received. when the entity obtains the goods or as the services are
received.
Measurement
Equity-settled transactions with employees (IFRS 2.10- Equity-settled transactions with employees:
.12):

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IFRS U.S. GAAP

 Fair value – the fair value of services received from  Fair value – similar to IFRS, the fair value of services
employees and others providing similar services received from employees shall be determined based
shall be measured by reference to the fair value of on an estimate of the fair value of the share-based
the equity instruments granted at the grant date instruments that will be issued rather than on a direct
because it is not possible to reliably estimate the measure of the fair value of the employee services
fair value of those services. The fair value of equity the entity will receive in exchange for the share-based
instruments granted shall be based on market instruments (ASC 718-10-30-2) (SFAS 123R.7)
prices if available. If market prices are not
available, a valuation technique shall be used to
estimate fair value (IFRS 2.16-.17). The fair value
of equity awards shall not be remeasured in
subsequent periods.
 Grant date – the grant date is the date on which the  Grant date – similar to IFRS, the grant date is the
fair value of the employee awards is measured. It is date on which the fair value of the employee awards
the date on which the entity and the employee have is measured. Unlike IFRS, it is the date the entity and
a shared understanding of the terms and conditions the employee have a shared understanding of the
of the arrangement (Appendix A) terms and conditions of the arrangement and the
employee is affected by subsequent changes in the
share price (ASC Master Glossary, “Grant Date”)
(SFAS 123R Appendix E: Glossary).
 Intrinsic value – in rare cases in which the fair value  Intrinsic value – similar to IFRS, in rare cases in
of equity instruments cannot be reliably determined which the fair value of equity instruments cannot be
at the measurement date, the intrinsic value shall reliably determined at the measurement date, the
be used with subsequent remeasurement, at the intrinsic value shall be used with subsequent
end of each reporting period, until final settlement remeasurement until final settlement (ASC 718-10-
(IFRS 2.24) 30-4 and 718-10-30-21 and 30-22) (SFAS 123R.1
and .24-.25)
 Calculated value – unlike IFRS, nonpublic companies
may measure awards based on a calculated value
(using historical volatility of an industry index) if the
company is unable to reasonably estimate its
expected volatility (ASC 718-10-30-4 and 30-20)
(SFAS 123R.23)
Cash-settled transactions with employees Liability-classified transactions with employees

Goods or services acquired shall be measured at the Share-based payment awards classified as liabilities shall
fair value of the liability. Until the liability is settled, the be accounted for under ASC 718’s (SFAS 123R)
fair value shall be remeasured at the end of each measurement and recognition provisions for liabilities,
reporting period (IFRS 2.30-.33). which require variable accounting until the award is settled
or expires unexercised (ASC 718-30-35-1) (SFAS
123R.36-.38). ASC 718-10-25-6 through 25-19 provides
guidance on whether share-based payment awards shall
be classified as liabilities.
Unlike IFRS, U.S. GAAP permits nonpublic entities to
make an accounting policy election to use intrinsic value
for liability classified awards (ASC 718-30-30-2)
(SFAS 123R.1).
Equity-settled transactions with nonemployees: Equity-settled transactions with nonemployees:

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IFRS U.S. GAAP

 Fair value – goods or services received shall be  Fair value – unlike IFRS, the transaction shall be
measured at the fair value of the goods or services measured based on the fair value of the goods or
received. There is a rebuttable presumption that the services received or the fair value of the equity
fair value of the goods or services received can be instruments issued, whichever is more reliably
estimated reliably. If fair value of the goods or measurable (ASC 505-50-30-6) (SFAS 123R.7).
services received cannot be estimated reliably, Under IFRS, there is a presumption that goods or
then their fair value shall be measured by reference services received can be reliably measured.
to the fair value of the equity instruments granted
(IFRS 2.13).
 Measurement date – the date the goods or services  Measurement date – unlike IFRS, the measurement
are received (Appendix A) date for awards to nonemployees is generally the
earlier of the date at which the counterparty’s
performance is complete or the date at which a
commitment for performance by the counterparty to
earn the equity instruments is reached (ASC 505-50-
30-11 through 30-14) (EITF 96-18 Issue 1)
Cash-settled transactions with nonemployees Liability-classified transactions with nonemployees

Fair value – goods or services acquired shall be Similar to IFRS, goods or services acquired shall be
measured at the fair value of the liability. Until the measured at the fair value of the liability. Until the liability
liability is settled, the fair value shall be remeasured at is settled, the fair value shall be remeasured at the end of
the end of each reporting period (IFRS 2.30). each reporting period.
Modifications
If an equity instrument is modified, an entity shall Similar to IFRS, an entity shall determine the fair value of
recognise the remaining original grant date fair value of the modified award on the modification date and compare
the equity instrument unless the original service or that to the fair value of the original award determined
performance conditions are not satisfied plus any immediately before the modification occurs. If the fair
increase in fair value as a result of the modification over value of the modified award exceeds the fair value of the
the remaining vesting period. original award immediately before its terms are modified,
If an equity-settled instrument is cancelled or settled the excess is additional compensation cost. Total
and new equity instrument is not granted as a compensation cost is generally the sum of the grant-date
replacement instrument fair value of the award plus the additional compensation
cost resulting from the modification. The cost shall be
 Recognise immediately the remaining grant date recognized prospectively over the remaining requisite
fair value service period or, if the modified award is fully vested, the
 Recognise any payment to employees as the incremental compensation cost shall be recognized on the
repurchase of an equity interest to the extent of the modification date (ASC 718-20-35-3) (SFAS 123R.51).
fair value of the equity instrument. An amount in U.S. GAAP differs from IFRS in a situation in which a
excess of fair value is expensed. modification causes an award that was considered
 If the share-based payment arrangement included improbable of vesting to become probable of vesting.
liability components Under U.S. GAAP, compensation cost would be based on
the updated fair value measurement at the modification
− Remeasure the fair value of the liability at the date. Under IFRS, the original fair value of the award
date of cancellation or settlement would be used for measurement purposes. The only
− Treat any payment made to settle the liability change would be in the number of options expected to
component as an extinguishment of the liability vest (ASC 718-20-55-116 through 55-117 and 55-120
(IFRS 2.26-29) through 55-121) (SFAS 123R B190-193).
If an equity-settled instrument is cancelled or settled If an award is cancelled for no consideration and it is not

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IFRS U.S. GAAP

and a new equity instrument is granted as a accompanied by a concurrent grant of (or offer to grant) a
replacement instrument, account for the replacement in replacement award, it shall be accounted for as a
the same way as a modification of the original grant of repurchase for no consideration. Any unrecognized
equity instrument (IFRS 2.28(c)). compensation cost shall be recognized on the cancellation
date. Cancellation of an award, accompanied by a
concurrent grant of (or offer to grant) a replacement
award, shall be accounted for as a modification of the
cancelled award (ASC 718-20-35-8 through 35-9)
(SFAS 123R.56-.57).
Settlement accounting applies when an entity repurchases
a share-based award. In general, if an entity settles an
award by repurchasing it for cash or other consideration or
by incurring a liability, any excess of the repurchase price
over the fair value of the repurchased instrument shall be
recognized as additional compensation cost (ASC 718-20-
35-7) (SFAS 123R.55).
Non-vesting conditions
Non-vesting conditions are all conditions other than Unlike IFRS, an award that includes a non-vesting
service and performance. The impact of the non-vesting condition shall be classified as a liability award. The
condition shall be taken into account when estimating impact of a non-vesting condition shall be taken into
the fair value of equity instruments granted (IFRS account when estimating the fair value of equity
2.21A). An entity shall recognise the goods or services instruments granted similar to IFRS (ASC 718-10-25-13)
received from the counterparty over the vesting period (SFAS 123R.33).
for grants of equity instruments with non-vesting
conditions. If the non-vesting condition is not met and
neither the counterparty nor the entity can choose
whether the condition is met, the entity continues to
recognise expense over the remainder of the vesting
period. However, if either the entity or counterparty can
choose whether a non-vesting condition is met, failure
to meet that non-vesting condition is to be treated as a
cancellation (IFRS 2.28A and 2 IG15A). The
cancellation is accounted for as an acceleration of
vesting. The amount that would otherwise have been
recognised for services received over the remainder of
the vesting period is expensed (IFRS 2 IG24).
Payroll taxes and share-based awards
Payroll tax expense shall be recognised over the same Unlike IFRS, payroll tax expense shall be recognized as
period as the share-based payment expense. an expense on the date triggering the measurement and
payment of the tax (generally, the exercise date for
options and vesting date for stock grants) (ASC 718-10-
25-22) (EITF 00-16).

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7. Financial instruments
Note: On November 12, 2009, the IASB issued IFRS 9, Financial Instruments (IFRS 9). IFRS 9 addresses the
classification and measurement of financial assets. Entities are required to apply IFRS 9 for annual periods beginning
on or after 1 January 2013. Earlier application is permitted.
7.1 Recognition and measurement of financial assets

Note: The IASB and the FASB have numerous projects with respect to financial instruments. In November 2009 the
IASB issued ED/2009/12, Financial Instruments: Amortised Cost and Impairment, which would replace the current
requirements with an expected loss model. In May 2010 the IASB issued ED/2010/4, Fair Value Option for Financial
Liabilities, which retains the existing requirements for classification and measurement of financial liabilities, except for
the effects of changes in own credit risk, which would be transferred to other comprehensive income.
In May 2010 the FASB issued proposed Accounting Standards Update (ASU), Accounting for Financial Instruments
and Revisions to the Accounting for Derivative Instruments and Hedging Activities. The ASU proposes a
comprehensive approach to financial instruments accounting, including classification, measurement, impairment, and
hedge accounting.
See the IASB and FASB websites for additional information on the current status of their financial instruments projects.
IFRS U.S. GAAP

Relevant guidance: IAS 32 and 39 Relevant guidance: ASC 310, 320, 815, 825, and 860
(SOP 01-6; SFAS 91,107, 114, 115, 133, 140, 155, 159,
and 166; FSP FAS 115-2)
Introduction
IAS 39 addresses recognition and measurement of A financial instrument is defined as cash, evidence of an
financial instruments, including financial assets. ownership interest in an entity, or a contract that both
Financial assets comprise (IAS 32.11): (ASC Master Glossary, “Financial Instrument”)
 Cash (SFAS 107.3):
 Rights to receive cash or another financial asset  Imposes on one entity a contractual obligation (1) to
(i.e. receivables and loans made to others) deliver cash or another financial instrument to a
second entity or (2) to exchange other financial
 A contract to exchange financial instruments on instruments on potentially unfavorable terms with the
potentially favourable terms second entity
 Equity instruments in another entity  Conveys to that second entity a contractual right (1)
 A non-derivative contract to receive a variable to receive cash or another financial instrument from
number of the entity's own equity instruments the first entity or (2) to exchange other financial
 A certain type of complex derivative as specified in instruments on potentially favorable terms with the
IAS 32 in respect of an entity's own equity first entity
instruments
IAS 39 has highly detailed requirements concerning Similar to IFRS. Derivatives and hedging arrangements
derivatives, complex instruments (such as embedded are covered by ASC 815 (SFAS 133) (see Section 7.3,
derivatives) and hedging arrangements. Derivatives “Recognition and measurement of derivatives” and
such as interest swaps, forward contracts, and currency Section 7.4, “Hedge accounting”).
options are carried at fair value.

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IFRS U.S. GAAP
Categorisation of financial assets
Divide financial assets into the following categories No explicit categorization scheme for financial assets.
(IAS 39.9): They could be categorized as follows:
 Financial assets at fair value through profit or loss  Derivative financial instruments (see Section 7.3,
(see below for further details) “Recognition and measurement of derivatives”)
 Loans and receivables (see below for further  Hybrid financial instruments that would be required to
details) be separated into a host and derivative component
 Held to maturity – defined narrowly with strict under ASC 815-15-25-1 (SFAS 133.12) which the
conditions; covers only assets with fixed or entity has irrevocably elected to measure at fair value
determinable payments and fixed maturity that the (ASC 815-15-25-4) (SFAS 155.4)
enterprise has the positive intent and ability to hold  Eligible financial assets that the entity elects to
to maturity, other than loans and receivables measure at fair value – fair value option (ASC 825-
originated by the enterprise 10-15-4) (SFAS 159.7 and .8)
 Available-for-sale financial assets – all financial  Loans and receivables (see below for further details)
assets not falling under another category (any  Debt and equity securities within the scope of
financial asset other than one that is held for trading ASC 320 (SFAS 115):
may be designated into this category on initial
recognition) − Trading (see below for further details)
− Held-to-maturity – defined narrowly with strict

conditions and covers only those debt securities
that the enterprise has the positive intent and
ability to hold to maturity
− Available-for-sale – debt and equity securities

not classified as trading or held-to-maturity
securities
An entity may not use the held to maturity category for The length of the taint period under U.S. GAAP is not
two annual reporting periods (taint period) when it sells defined. The SEC uses a two year time frame.
more than an insignificant amount of assets, with limited
exceptions (IAS 39.9).
Financial assets at fair value through profit or loss Financial assets at fair value through earnings include:
include (IAS 39.9):  Derivative financial instruments (see Section 7.2,
 Assets held for trading – includes all derivatives “Presentation, recognition, and measurement of
(see Section 7.2, “Presentation, recognition, and financial liabilities and equity” and Section 7.3,
measurement of financial liabilities and equity” and “Recognition and measurement of derivatives”)
Section 7.3, “Recognition and measurement of  Trading securities – securities that are bought and
derivatives”) as well as other instruments acquired held principally for the purpose of selling them in the
for the purpose of generating profit from short-term near term but may include securities held for a longer
fluctuations in price or dealer's margin period (ASC 320-10-25-1) (SFAS 115.12a)
 Financial assets designated irrevocably into this  Hybrid financial instruments that would be required to
category on initial recognition if they fall into one of be separated into a host and derivative component
the categories below. Note that the fair value option under ASC 815-15-25-1 (SFAS 133.12) which the
may not be applied to unquoted equity investments entity has irrevocably elected to measure at fair value
whose fair value cannot be measured reliably. (ASC 815-15-25-4) (SFAS 155.4)
− The contract contains one or more embedded  Eligible financial assets that the entity elects to
derivatives (IAS 39.11A) measure at fair value – fair value option (ASC 825-
10-15-4) (SFAS 159.7 and .8)

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− The designation results in more relevant
financial information because it eliminates an
accounting mismatch or a group of financial
assets, financial liabilities, or both are managed
and evaluated on a fair value basis
Transfers into or from the fair value through profit or loss Transfers into or from the trading category should be rare
category are now similar to U.S. GAAP (IAS 39.50-.54). (ASC 320-10-35-12) (SFAS 115.15).
Loans and receivables are non-derivative financial A loan is a contractual right to receive money on demand
assets with fixed or determinable payments that are not or on fixed or determinable dates that is recognized as an
quoted in an active market, other than (IAS 39.9): asset in the creditor’s balance sheet (ASC Master
 Held-for-trading assets Glossary, “Loan”) (SFAS 114.4).
 Those designated on initial recognition as at fair Loans are not considered debt securities and hence may
value through profit or loss or as available-for-sale. not be categorized in the trading, available-for-sale, or
An entity may reclassify out of fair value through held-to-maturity categories provided by ASC 320
profit or loss if certain criteria are met (see above). (SFAS 115).
 Those where the holder may not recover

substantially all of its investment (other than due to
credit deterioration), which are classified as
available-for-sale
Measurement on initial recognition
When a financial asset is recognised initially, an entity Financial assets are recognized initially at fair value. This
measures it at its fair value plus, in the case of a may lead to the recognition of premiums and discounts on
financial asset or financial liability not at fair value loans and debt securities acquired.
through profit or loss, transaction costs that are directly Except for certain costs associated with certain lending
attributable to the acquisition of the financial asset activities and loan purchases, transaction costs that are
(IAS 39.43). directly attributable to the purchase of a financial asset
are expensed as incurred (ASC 310-20-25-2 through 25-
3) (SFAS 91.5-.7).
Subsequent measurement
Subsequent treatment (IAS 39.46): Subsequent treatment:

 Remeasure financial assets at fair value through  Remeasure financial assets at fair value through
profit or loss at fair value with gains and losses earnings at fair value with gains and losses going to
going to the income statement the income statement (derivatives see ASC 815-10-
35-1 (SFAS 133.17); hybrid financial instruments see
ASC 815-15-25-4 (SFAS 155.4); trading securities
see ASC 320-10-35-1 (SFAS 115.13))
 Carry held-to-maturity financial assets and loans  Carry held-to-maturity securities, loans held for
and receivables at amortized cost (no similar investment, and trade receivables at amortized cost.
special rules as under U.S. GAAP for deterioration Special rules apply for certain acquired loans with
in credit quality) deterioration in credit quality (ASC 320-10-25-3, ASC
310-10-35-41 through 35-42 and ASC 825-10-35-2
through 35-3, and ASC 310-30-35) (SFAS 115.7 and
SOP 01-6.8 and SOP 03-3).
 Remeasure available-for-sale financial assets to fair  Remeasure available-for-sale securities to fair value.

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IFRS U.S. GAAP

value and take gains or losses through equity Unrealized gains and losses are included (net of tax)
(comprehensive income) until point of sale (when in shareholder’s equity in other comprehensive
recycled to income statement) income. All or a portion of the unrealized holding gain
and loss of an available-for-sale security that is
designated as being hedged in a fair value hedge is
recognized in earnings during the period of the
hedge. Realized gains and losses are reported in
earnings (ASC 320-10-35-1) (SFAS 115.13-.14).
 Investments in equity instruments that do not have
quoted prices in active markets and whose fair
value cannot be reliably measured shall be
measured at cost
Derecognition
IAS 39 addresses derecognition specifically in relation to A transfer of an entire financial asset, a group of entire
financial instruments. Assets are derecognised when the financial assets, or a participating interest in an entire
enterprise loses control of the contractual rights that financial asset in which the transferor surrenders control
comprise the financial assets. IAS 39's derecognition over those financial assets shall be accounted for as a
principles operate via a five-step process, which focuses sale if and only if all of the following conditions are met
on the transfer of risks and rewards as follows (there is (ASC 860-10-40-4 through 40-5) (SFAS 140.9):
no isolation in bankruptcy test) (IAS 39.15-37):  Transferred assets have been isolated from the
 Financial assets are derecognised when an entity transferor – put presumptively beyond the reach of
transfers substantially all the risks and rewards of the transferor and its creditors, even in bankruptcy or
ownership other receivership
 Financial assets are not derecognised when an  Transferee has the right to pledge or exchange the
entity retains substantially all the risks and rewards assets (or beneficial interests) received, without any
of ownership constraints
 If the entity neither transfers nor retains  Transferor does not maintain effective control over
substantially all the risks and rewards of ownership the transferred asset
it shall determine whether it has retained control
 If it has not retained control, derecognise the
financial assets and recognise as separate assets
or liabilities any rights or obligations created or
retained
 If it has retained control, partially continue to
recognise the asset to the extent of its continuing
involvement
Impairment
If there is objective evidence that a financial asset is For available-for-sale and held-to-maturity securities, if an
impaired, its recoverable amount must be determined entity determines that a decline in fair value below the
and any impairment loss recognised in the income amortized cost basis is other than temporary:
statement. Where such evidence exists, impairment  The cost basis of the individual security is written
reviews are relevant to assets carried at amortised cost down to fair value and the write-down is included in
or assets categorised as available-for-sale (although earnings (i) for all equity securities and (ii) for debt
carried at fair value, the gains or losses are included in securities for which the entity determines that it
equity) (IAS 39.58-.70). intends to sell the debt security or the entity
determines that it is more likely than not will be
required to sell the debt security before recovery of its

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IFRS U.S. GAAP

amortized cost basis (ASC 320-10-35-30 through 35-
33I) (SFAS 115.16 and FSP FAS 115-2).
 If the entity does not intend to sell the debt security,
or it is not more likely than not that it will be required
to sell the debt security before recovery of its
amortized cost basis, then it must separate the
impairment into two components and recognize any
impairment related to credit loss in earnings while the
other component must be recognized in other
comprehensive income, net of tax (ASC 320-10-35-
34C through 35-34D) (FSP FAS 115-2).
A loan is impaired when, based on current information
and events, it is probable that a creditor will be unable to
collect all amounts due according to the contractual terms
of the loan agreement (ASC 310-10-35-16) (SFAS 114.8).
Reversal of impairment losses on receivables, loans, Reductions of valuation allowances related to receivables
and held-to-maturity and available-for-sale debt and loans are recognized in the income statement.
securities is required provided certain criteria are met. Reversals of impairment losses on held-to-maturity and
The reversal is recognised in the income statement available-for-sale debt securities are prohibited.
(IAS 39.65 and .70).
Reversal of impairment losses on available-for-sale Similar to IFRS.

equity securities is prohibited (IAS 39.69).
7.2 Presentation, recognition, and measurement of financial liabilities and equity
IFRS U.S. GAAP

Relevant guidance: IAS 32 and 39 Relevant guidance: ASC 480, 210, 405, 470, 505, 815,
835, and 845 (APB 6, 14, 21, and 26; ARB 43; SFAS
107, 123R, 140, 150, 155, and 159; FIN 39; FSP APB 14-
1; EITF 98-5, 00-27 and Topic D-43; FTB 85-6)
Classification as financial liabilities and equity
Any financial instrument that requires the issuer to A financial instrument, other than an outstanding share,
deliver cash or another financial asset or to exchange that embodies an obligation to repurchase the issuer’s
instruments on potentially unfavourable terms is classed equity shares, or is indexed to such an obligation, and
as a financial liability. An instrument with these requires or may require the issuer to settle the obligation
characteristics is classed as a liability regardless of its by transferring assets is classified as a liability (ASC 480-
legal nature (e.g. preference shares with a commitment 10-25-8) (SFAS 150.11).
to pay dividends or redeemable shares would normally A financial instrument that embodies an unconditional
be classed as liabilities). Certain financial instruments obligation, or a financial instrument other than an
are treated as equity instruments if the instrument is outstanding share that embodies a conditional obligation,
only puttable by the holder for a pro rata share of the net that the issuer must or may settle by issuing a variable
assets of the entity or only on liquidation of the entity number of its equity shares is classified as a liability if, at
(IAS 32.15-.25). inception, the monetary value of the obligation is based
When a derivative financial instrument gives one party a solely or predominantly on one of the following (ASC 480-
choice over how it is settled (e.g. the issuer or the holder 10-25-14) (SFAS 150.12):

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can choose settlement net in cash or by exchanging  A fixed monetary amount
shares for cash), it is a financial asset or a financial
 Variations in something other than the fair value of
liability unless all of the settlement alternatives would
the issuer’s equity
result in it being an equity instrument (IAS 32.26).
 Variations inversely related to changes in the fair
value of the issuer’s equity shares
Redeemable preference shares are generally accounted A mandatorily redeemable financial instrument is
for as liabilities where they provide for mandatory classified as a liability unless the redemption is required
redemption for a fixed or determinable amount or give to occur only upon the liquidation or termination of the
the holder the right to require the issuer to redeem reporting entity (ASC 480-10-25-4) (SFAS 150.9).
(IAS 32.18).
Under IAS 39, financial liabilities are divided into two Under U.S. GAAP financial liabilities may be categorized
main categories: as follows:
 At fair value through profit or loss, which includes:  At fair value through earnings, which includes:
− Held-for-trading financial liabilities (including all − Derivatives classified as liabilities (see Section
derivative financial liabilities) 7.3, “Recognition and measurement of
derivatives”)
− Financial liabilities designated irrevocably into
this category on initial recognition (IAS 39.9) − Financial liabilities that are hybrid financial
 Other financial liabilities (at amortised cost) instruments that would be required to be
bifurcated into a host and derivative component
(ASC 815-15-25-1) (SFAS 133.12) which the
entity has irrevocably elected to measure at fair
value (ASC 815-15-25-4) (SFAS 155.4)
− Financial liabilities within the scope of ASC 480

(SFAS 150) that are not covered by the
guidance in ASC 480-10-35-3 (SFAS 150.22)
− Eligible financial liabilities that the entity elects to

measure at fair value under the fair value option
(ASC 825-10-15-4) (SFAS 159.7 and .8)
 Forward contracts that require physical settlement by
repurchase of a fixed number of the issuer’s equity
shares in exchange for cash and mandatorily
redeemable financial instruments (ASC 480-10-35-3)
(SFAS 150.22)
 Liabilities carried at amortized cost
Split accounting is applied to compound instruments Generally, convertible debt with a nondetachable
(such as convertible debt) that contain both a liability conversion feature is accounted for completely as debt.
and an equity element. For convertible debt, the debt However, when convertible debt is issued at a substantial
element is accounted for as a liability and the option to premium, the premium is treated as paid-in capital. In
convert to equity is treated as an equity instrument (as addition, when a nondetachable conversion feature is in
long as option embedded is for a fixed number of the money at the commitment date, the embedded
shares) (IAS 32.28-32). beneficial conversion feature is recognized and
measured by allocating a portion of the proceeds equal to
the intrinsic value of that feature to additional paid-in
capital (ASC 470-20-25) (APB 14.12 and .18 and EITF
98-5 and 00-27). Also, the issuer must account
separately for the liability and equity components of

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IFRS U.S. GAAP

convertible debt instruments that have stated terms
permitting settlement on conversion either wholly or
partially in cash or other assets in a manner similar to
IFRS (ASC 470-20-25) (FSP APB 14-1). When the
nondetachable conversion feature meets the definitions
of a derivative (ASC 815-10-15-83 through 15-96, 15-99)
(SFAS 133.6-9) and does not qualify for any exceptions
(ASC 815-10-15-13 through 15-82) (SFAS 133.10-11) the
embedded conversion feature is treated as a derivative
liability (or asset) (see Section 7.3, “Recognition and
measurement of derivatives”).
Offsetting
A financial asset is offset against a financial liability Offsetting of financial assets and financial liabilities is
when and only when an enterprise (IAS 32.42): permitted only when (ASC 210-20-45-1 and 45-8 through
 Has a legally enforceable right to set off the 45-9) (FIN 39.5-.6 and EITF Topic D-43):
recognised amounts, and  The parties owe each other determinable amounts
 Intends either to settle on a net basis or realise the  There is a right and intention to set-off
asset and settle the liability simultaneously  The right of set-off is enforceable by law
Initial measurement
Financial liabilities and equity instruments are recorded Liabilities and equity instruments are recorded initially at
initially at fair value (which is normally its initial the fair value of the property, goods, services, or other
transaction price unless fair value is evidenced by consideration received or at the fair value of the financial
comparison to other observable current market instrument issued, whichever is the more clearly
transactions) (IAS 39.43). determinable (ASC 835-30-25-10, ASC 505-50-30-6, and
Initial recognition for liabilities carried at amortised cost ASC 718-10-30-2) (APB 21.12 and SFAS 123R.7).
is net of transaction costs (defined as incremental costs) Debt issue costs are reported in the balance sheet as
(IAS 39.43). deferred charges (ASC 835-30-45-3) (APB 21.16).
Finance costs and distributions
Finance costs on financial liabilities are calculated using Similar to IFRS.

the effective interest method (i.e. at a constant rate of
charge on the outstanding liability) (IAS 39.47).
Interest, gains and losses relating to financial Similar to IFRS.

instruments or component parts classed as liabilities are
reported in the income statement (IAS 32.35).
Distributions to holders of a financial instrument classed Similar to IFRS.

as an equity instrument are debited directly to equity A distribution of nonmonetary assets to equity holders in
(IAS 32.35). a spin-off or other form of reorganization should be based
For distributions of assets other than cash as dividends on the recorded amount of the nonmonetary assets
to owners, IFRIC 17 requires that an entity measure a distributed (ASC 845-10-30-10) (APB 29.23).
liability to distribute non-cash assets as a dividend to its A non-pro-rata split-off of a business segment is
owners at the fair value of the assets to be distributed accounted for at fair value. Other non-reciprocal transfers
and to recognise in profit or loss any difference between of nonmonetary assts to owners should be accounted for
the carrying amount of the assets distributed and the at fair value if fair value is objectively measureable and
carrying amount of the dividend payable. would be clearly realizable to the distributing entity in an
outright sale at or near the time of the distribution

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IFRS U.S. GAAP

(ASC 845-10-30-10) (APB 29.23).
Subsequent measurement
Except for liabilities at fair value through profit or loss, The following liabilities are subsequently accounted for at
financial liabilities are carried at amortised cost fair value through earnings:
(IAS 39.47).  Derivatives classified as liabilities (see Section 7.3,
Liabilities at fair value through profit or loss are “Recognition and measurement of derivatives”)
measured at fair value with gains or losses recognised  Financial liabilities that are hybrid financial
in income statement (IAS 39.47). instruments that would be required to be bifurcated
into a host and derivative component (ASC 815-15-
25-1) (SFAS 133.12) which the entity has irrevocably
elected to measure at fair value (ASC 815-15-25-4)
(SFAS 155.4)
 Financial liabilities within the scope of ASC 480
(SFAS 150) that are not covered by the guidance in
ASC 480-10-35-3 (SFAS 150.22)
Forward contracts that require physical settlement by
repurchase of a fixed number of the issuer’s equity
shares in exchange for cash and mandatorily redeemable
financial instruments are subsequently measured in one
of the following two ways (ASC 480-10-35-3) (SFAS
150.22):
 If both the amount to be paid and the settlement date
are fixed, at the present value of the amount to be
paid at settlement, accruing interest cost using the
rate implicit at inception
 If either the amount to be paid or the settlement date
varies based on specified conditions, at the amount
of cash that would be paid under the conditions
specified in the contract if settlement occurred at the
reporting date, recognizing the resulting change in
that amount from the previous reporting date as
interest cost
Any amounts paid or to be paid to holders of those
contracts in excess of the initial measurement amount
are reflected in interest cost (ASC 480-10-45-3)
(SFAS 150.22).
All other liabilities are subsequently carried at amortized
cost.
Derecognition and settlement
The difference between carrying amount and the Similar to IFRS (ASC 470-50-40-2) (APB 26.20).
amount paid in settlement is recognised in the income
statement (IAS 39.41).
Liabilities are derecognised when the obligation therein A debtor derecognizes a liability if and only if it has been
is extinguished. IFRS contain detailed requirements on extinguished. A liability has been extinguished if either of
liability derecognition (IAS 39.39-42). the following conditions is met (ASC 405-20-40-1)
(SFAS 140.16):

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IFRS U.S. GAAP

 The debtor pays the creditor and is relieved of its
obligation for the liability. Paying the creditor includes
delivery of cash, other financial assets, goods, or
services or reacquisition by the debtor of its
outstanding debt securities whether the securities
are canceled or held as so-called treasury bonds.
 The debtor is legally released from being the primary
obligor under the liability, either judicially or by the
creditor.
Treasury shares
Under IAS 32, treasury shares are presented in the Similar to IFRS (ASC 505-30-45-1) (APB 6.12 and ARB
statement of financial position as a deduction from 43, Ch. 1B). However, any price paid in excess of the
equity. Acquisition of treasury shares is presented as a amount accounted for as the cost of treasury shares
change in equity. No gain or loss is recognised in the should be attributed to the other elements of the
income statement on the sale, issuance, or cancellation transaction and accounted for according to their
of treasury shares. Consideration received is presented substance (ASC 505-30-30-2 through 30-4) (FTB 85-6.3).
as a change in equity (IAS 32.33).
7.3 Recognition and measurement of derivatives
IFRS U.S. GAAP

Relevant guidance: IAS 39 Relevant guidance: ASC 815 (SFAS 133 and 155;
FASB’s Derivatives Implementation Group
implementation guidance)
Characteristics of derivatives
One characteristic of a derivative under IAS 39 is that it Under U.S. GAAP, one of the characteristics of a
is settled at a future date (IAS 39.9). Given the added derivative is that (ASC 815-10-15-83) (SFAS 133.6):
U.S. GAAP net settlement requirement not found in IAS  Its terms require or permit net settlement
39, certain financial instruments may meet the definition
of a derivative under IAS 39 but not under U.S. GAAP.  It can readily be settled net by a means outside the
contract, or
 It provides for delivery of an asset that puts the
recipient in a position not substantially different from
net settlement
Under IAS 39 the characteristics of a derivative do not U.S. GAAP requires that the derivative contract be based
include notional amounts (IAS 39.9). Given the added on one or more notional amounts (ASC 815-10-15-83)
U.S. GAAP notional amounts requirement not found in (SFAS 133.6).
IAS 39, certain financial instruments may meet the
definition of a derivative under IAS 39 but not under U.S.
GAAP.
Basic accounting requirements
All derivatives are classified as held-for-trading financial Derivative instruments that are not designated as
instruments, and may be either assets or liabilities hedging instruments are carried at fair value.
(IAS 39.9).

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IFRS U.S. GAAP

All derivative instruments are recognised initially at fair Similar to IFRS (ASC 815-10-30-1, 35-1 and 35-2)
value. All changes in fair value are recognised in the (SFAS 133.17-.18).
income statement (with limited exceptions under hedge
accounting provisions). (See Section 7.1, “Recognition
and measurement of financial assets” and Section 7.2,
“Presentation, recognition, and measurement of
financial liabilities and equity” for more on accounting for
financial assets and liabilities at fair value through profit
or loss.)
Embedded derivatives
An embedded derivative is a component of a hybrid Similar to IFRS (ASC 815-15-05-1 and ASC Master
instrument that includes both a derivative and a host Glossary “Embedded Derivative”) (SFAS 133.12).
contract, with the effect that some of the cash flows of
the combined instrument vary in a similar way to a
stand-alone derivative (IAS 39.10).
An embedded derivative is separated from the host Similar to IFRS (ASC 815-15-25-1) (SFAS 133.12-.16).
contract and accounted for as a derivative under IAS 39
when (IAS 39.11):
 Its economic characteristics are not closely related
to those of the host contract
 A separate instrument with the same terms would
be a derivative, and
 The hybrid instrument is not measured at fair value
with changes reported in net profit or loss
If an embedded derivative cannot be separately
measured, the entire contract should be treated as held
for trading (IAS 39.12).
Instruments containing embedded derivatives may be Financial liabilities that are hybrid financial instruments
designated irrevocably on initial recognition as being at that would be required to be bifurcated into a host and
fair value through profit or loss, with limited exceptions derivative component (ASC 815-15-25-1) (SFAS 133.12)
(IAS 39.11A). that the entity has irrevocably elected to measure at fair
value are accounted for at fair value through earnings
(ASC 815-15-25-4) (SFAS 155.4).
IAS 39 and SFAS 133 apply the criteria for determining The guidance and examples in ASC 815 (SFAS 133)
whether a financial instrument contains an embedded should be considered in determining whether embedded
derivative differently. Appendix A of IAS 39 contains derivatives need to be separated and carried at fair value
authoritative application guidance and examples that through profit or loss.
should be considered in determining whether embedded
derivatives need to be separated and carried at fair
value through profit or loss.

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7.4 Hedge accounting
IFRS U.S. GAAP

Relevant guidance: IAS 39 Relevant guidance: ASC 815 (SFAS 133 and the
Derivatives Implementation Group implementation
guidance; SFAS 52 for hedge of a net investment in a
foreign entity)
IAS 39 sets out extensive requirements on hedge Similar to IFRS (ASC 815-20) (SFAS 133.17-.42).
accounting. Hedge accounting is purely optional but is
only available to entities that have applied all of the
requirements (IAS 39.71-102).
Three types of hedge relationships exist (IAS 39.86): Similar to IFRS (ASC 815-20-05-1 and ASC Master
 Fair value hedge – a hedge of exposure to changes Glossary “Fair Value Hedge” and “Cash Flow Hedge”)
in value of a recognised asset or liability or (SFAS 133.17-.42 and 52.20a).
unrecognized firm commitment (including portions
thereof)
 Cash flow hedge – a hedge of exposure to
variability in cash flows associated with a
recognised asset or liability or a forecasted
transaction
 Hedge of a net investment in a foreign operation
IAS 39 hedge accounting is applied only if extensive Similar to IFRS (ASC 815-20-25) (see implementation
conditions are met. These include requirements for guidance at SFAS 133.62-.103). However, U.S. GAAP
(IAS 39.88): permits a shortcut method under which an entity is
 Formal documentation, which must be in place at allowed to assume no ineffectiveness in a hedging
the inception of the hedge, setting out the hedging relationship of interest rate risk involving a recognized
relationship and the enterprise's risk management interest-bearing asset or liability and an interest rate swap
strategy (or a compound hedging instrument composed of an
interest rate swap and a mirror-image call or put option) if
 The hedge itself to be highly effective and its certain conditions are met (ASC 815-20-25-102 through
effectiveness is capable of reliable measurement 25-117) (SFAS 133.68).
Where the conditions for hedge accounting are met: Similar to IFRS:
 For a fair value hedge, the hedged item is  For a fair value hedge – see ASC 815-25-35-1
remeasured with any gain or loss being included in through 35-4) (SFAS 133.22)
the income statement (to offset the effect on the  For a cash flow hedge – see ASC 815-30-35-3
income statement of the hedge instrument's change through 35-4) (SFAS 133.30)
in fair value being carried in the income statement).
The hedge instrument is similarly remeasured (IAS  For a hedge of a net investment in a foreign
39.89-94). enterprise, the accounting for the hedging instrument
should be consistent with the accounting for
 For a cash flow hedge, the portion of the gain or translation adjustments (ASC 815-35-35-1)
loss on the hedging instrument that is an effective (SFAS 52.20a and .128-.130)
hedge is recognised directly in equity and the
ineffective portion is normally recognised in the
income statement. The gain or loss in equity is then
recycled to the income statement when the hedged
item is recognised in the income statement
(IAS 39.95-101).
 For a hedge of a net investment in a foreign

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IFRS U.S. GAAP

enterprise, the accounting is the same as for cash
flow hedges (IAS 39.102)

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8. Group accounts
8.1 Basic requirements for group accounts
IFRS U.S. GAAP

Relevant guidance: IAS 27; IFRS 5 Relevant guidance: ASC 810-10 (ARB 51; SFAS 94,
144,160, and 167; FIN 46R; EITF 85-12, 96-16, and 06-
9); SEC Regulation S-X, Rule 5-04
Introduction
A parent shall present consolidated financial statements A parent shall consolidate all entities in which it has a
that include all of its subsidiaries. However, a parent controlling financial interest unless control does not rest
need not present consolidated financial statements if all with the majority owner (for example, if the subsidiary is in
of the conditions listed below are met (IAS 27.9-10): legal reorganization or in bankruptcy) (ASC 810-10-15-8
 The parent is a wholly-owned subsidiary or is a and 15-10) (ARB 51.2-.3). The existence of certain rights
partially-owned subsidiary of another entity and its of a minority shareholder may also overcome the
other owners, including those not otherwise entitled presumption of consolidation by the majority voting
to vote, have been informed about and do not object interest (ASC 810-10-15-10 and ASC 810-10-25-2
to the parent not presenting consolidated financial through 25-14) (EITF 96-16).
statements Under U.S. GAAP, there is a presumption that
 The parent's debt or equity is not traded in a public consolidated financial statements are more meaningful
market than separate financial statements. Therefore, the
election to present only separate financial statements if
 The parent is not in the process of filing its financial certain conditions apply is not permitted under U.S.
statements with a regulatory body for the purpose of GAAP. However, U.S. GAAP does provide limited
issuing any class of instruments in a public market exemptions from consolidation in certain specialized
 The ultimate or intermediate parent of the parent industries.
produces consolidated financial statements that
comply with IFRS
A subsidiary is defined as “an entity, including an
unincorporated entity such as a partnership that is
controlled by another entity (known as the parent)” (IAS
27.4). A subsidiary shall not be excluded from
consolidation because the investor is a venture capital
organisation, mutual fund, unit trust, or similar entity
(IAS 27.16).
Note: The IASB and the FASB are working on a joint
project to provide comprehensive guidance for
consolidation of all entities. In connection with this
project, the IASB issued an Exposure Draft,
Consolidated Financial Statements, in December 2008
that would improve the definition of control and related
application guidance so that a control model can be
applied to all entities.
The IASB and the FASB are also working on a joint
project to provide guidance for assessing whether an
entity is an investment company and how to measure
those investments.

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IFRS U.S. GAAP

Control is defined as “the power to govern the financial U.S. GAAP focuses on a controlling financial interest as
and operating policies so as to obtain economic benefits opposed to the concept of control under IFRS. The usual
from its activities” (IAS 27.4). It is presumed to exist condition for a controlling financial interest is ownership of
when the parent owns, directly or indirectly through a majority voting interest – ownership by one entity,
subsidiaries, more than half the voting power of an entity directly or indirectly, of more than fifty percent of the
unless, in exceptional circumstances, it can be outstanding voting shares of another entity (voting
demonstrated that such ownership does not constitute interest model) (ASC 810-10-15-8 and 15-10) (ARB 51.2).
control. However, control can also exist where the parent Unlike IFRS, potential voting rights are not considered.
owns half or less of the voting power when there is: A majority ownership in some entities does not convey a
 Power over more than half of the voting rights controlling financial interest. For such entities, called
through an agreement with other investors variable interest entities (VIEs), the guidance in ASC 810-
 Power to govern the financial and operating policies 10, “Variable Interest Entities” subsections shall be
under statute or an agreement applied to determine if a reporting entity’s variable
interests give it a controlling financial interest in the VIE.
 Power to appoint or remove the majority of board
members or equivalent governing body A reporting entity that holds a direct or indirect (explicit or
implicit) variable interest in a legal entity must determine
 Power to cast the majority of votes at board whether the guidance in the “Variable Interest Entities”
meetings or equivalent governing body (IAS 27.13) subsections of ASC 810-10 applies to that legal entity
The existence and effect of potential voting rights that before considering other consolidation guidance.
are currently exercisable or convertible are considered in However, the recognition and measurement provisions in
assessing an entity's power to govern another entity. ASC 810-10 are indefinitely deferred for certain
Management intent or financial ability to exercise or investment funds (ASC 810-10-65-2). Please refer to
convert is not considered (IAS 27.14-15). Section 8.3, “Special purpose entities/variable interest
entities” for a discussion of special purpose entities and
variable interest entities. IFRS address special purpose
entities (SPEs) but not variable interest entities which is a
broader concept than SPEs. Therefore, differences could
occur.
U.S. GAAP also provides that a general partner in a
limited partnership is presumed to control the limited
partnership regardless of the general partner’s ownership
interest. That presumption can be overcome if the limited
partners have certain rights (ASC 810-20-25) (EITF 04-5).
Consolidation procedures
The financial statements of the parent and its Similar to IFRS, the financial statements of the parent and
subsidiaries shall be combined by adding together like its subsidiaries shall be combined by adding together like
items of assets, liabilities, equity, income and expense items of assets, liabilities, equity, income and expense.
using uniform accounting policies for similar transactions Although not specifically required in U.S. GAAP, uniform
and other events in similar circumstances (IAS 27.18 accounting policies should generally be used for similar
and .24). transactions and other events in similar circumstances.
However, in certain limited situations specialized industry
accounting principles that are appropriate at a subsidiary
level should be retained in consolidation (ASC 810-10-25-
15) (EITF 85-12).
The parent’s investment in each subsidiary and its Similar to IFRS, intercompany investments, balances,
portion of equity of each subsidiary shall be eliminated. and transactions shall be eliminated (ASC 810-10-45-1)
Intragroup balances, transactions, income and expenses (ARB 51.6 and .9).
shall also be eliminated in full (IAS 27.18 and .20).

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IFRS U.S. GAAP

Noncontrolling interests shall be presented in the Similar to IFRS (ASC 810-10-45-18 through 45-21)
consolidated statement of financial position within equity (ARB 51.28-.31). See Section 8.2, “Noncontrolling
apart from the parent’s equity. Profit and loss and each interests.”
component of other comprehensive income shall be
attributed to the parent and the noncontrolling interests
even if the noncontrolling interests have a deficit balance
(IAS 27.27 and .28). See Section 8.2, “Noncontrolling
interests.”
Reporting date of subsidiaries
Parent and subsidiary financial statements used for A parent and a subsidiary may have different fiscal
consolidation shall be as of the same reporting date. If periods. As long as the difference is not more than about
the reporting period of the parent is different from a three months, it is acceptable to use the subsidiary’s
subsidiary, the subsidiary shall prepare additional financial statements for its fiscal year. However, unlike
financial statements as of the same date of the parent if IFRS, adjustments shall not be made for the effects of
practicable. If not practicable, adjustments shall be made significant transactions or events that occur between the
for the effects of significant transactions or events that date of a subsidiary’s financial statements used to
occur between the date of a subsidiary’s financial prepare consolidated financial statements and the date of
statements used to prepare consolidated financial the parent’s financial statements. Instead, the effect of
statements and the date of the parent’s financial intervening events that materially affect the financial
statements. In any case, the difference between statements must be disclosed (ASC 810-10-45-12)
reporting dates shall not be more than three months (ARB 51.4).
(IAS 27.22-.23).
Separate parent financial statements
Separate financial statements are not required by IFRS If parent-company financial statements are needed in
but may be by local regulations or by choice (IAS 27.3). addition to consolidated financial statements, ASC 810-
If a parent prepares separate financial statements, 10-45-11 (ARB 51.24) states that consolidating
investments in subsidiaries that are not classified as statements in which one column is used for the parent
held-for-sale in accordance with IFRS 5 shall be and other columns for particular subsidiaries or groups of
accounted for at cost or in accordance with IAS 39 subsidiaries are an effective way of presenting the
(IAS 27.38). pertinent information.
Public companies that meet certain requirements must
provide parent-company financial statements in a
separate schedule (SEC Regulation S-X, Rule 5-04).
8.2 Noncontrolling interests
IFRS U.S. GAAP

Relevant guidance: IFRS 3 (revised 2008); IAS 1 and Relevant guidance: ASC 805 and 810-10 (ARB 51 as
IAS 27 amended by SFAS 160; EITF Topic D-98)
Introduction
A noncontrolling interest is the equity in a subsidiary not Similar to IFRS, a noncontrolling interest is defined as “the
attributable, directly or indirectly, to a parent (IAS 27.4). portion of equity (net assets) in a subsidiary not
For each business combination, a noncontrolling interest attributable, directly or indirectly, to a parent.” Unlike
in the acquiree shall be measured either at fair value IFRS, a noncontrolling interest in an acquiree shall be

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IFRS U.S. GAAP

(full goodwill) or at the noncontrolling interest’s measured at acquisition-date fair value, which includes
proportionate share of the acquiree’s identifiable net goodwill attributable to the noncontrolling interests, in
assets (partial goodwill) in accordance with paragraph accordance with ASC 805-20-30-1 (SFAS 141R.20). The
19 of IFRS 3 (revised 2008). partial goodwill method is not permitted.
Note: Improvements to IFRSs May 2010, amends the For views of the SEC staff on classification and
measurement principle in IFRS 3 for noncontrolling measurement of redeemable securities, refer also to EITF
interests. The amendment states that at the acquisition Topic D-98.
date the acquirer shall measure components of
noncontrolling interests that are present ownership
interests and entitle their holders to a proportionate
share of the entity’s net assets in the event of liquidation
at either fair value or the present ownership instruments’
proportionate share in the recognized amounts of the
acquiree’s identifiable net assets. All other components
of noncontrolling interests shall be measured at their
acquisition-date fair values, unless another
measurement basis is required by IFRS.
The amendment is effective for annual periods
beginning on or after 1 July 2010.
Presentation
Noncontrolling interests shall be presented in the Similar to IFRS (ASC 810-10-45-15 through 45-16)
consolidated statement of financial position within equity (ARB 51.25-26).
apart from the parent’s equity (IAS 27.27).
Profit or loss and each component of other Similar to IFRS (ASC 810-10-45-19 through 45-21 and
comprehensive income shall be attributed to the parent 50-1A) (ARB 51.29-.31 and .38).
and the noncontrolling interests even if the
noncontrolling interests have a deficit balance
(IAS 27.28).
Changes in ownership interest – no loss of control
Changes in a parent’s ownership interest in a subsidiary Similar to IFRS, the parent must account for a decrease in
that do not result in a loss of control shall be accounted its ownership interest in a subsidiary while retaining a
for as equity transactions (IAS 27.30). controlling financial interest in the subsidiary as an equity
transaction, without recognition of gain or loss in income.
The guidance for changes in a parent’s ownership interest
in ASC 810-10-45-22 through 45-24 applies to the
following (ASC 810-10-45-21A):
 Transactions that result in an increase in ownership
of a subsidiary
 Transactions that result in a decrease in ownership of
either of the following while the parent keeps a
controlling financial interest in the subsidiary
− A subsidiary that is a business or nonprofit

activity
− A subsidiary that is not a business or nonprofit

activity if the transaction is not directly addressed
in other authoritative guidance

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IFRS U.S. GAAP

The decrease in ownership provisions in ASC 810-10 do
not apply if the transaction resulting in an entity’s
decreased ownership interest is either the sale of in-
substance real estate or the conveyance of oil and gas
mineral rights (ASC 810-10-45-21A).
Changes in ownership interest – loss of control
If a parent loses control of a subsidiary, it shall Similar to IFRS, the parent must deconsolidate a
recognise a gain or loss on the interest sold in profit or subsidiary as of the date the parent ceases to have a
loss. In addition, any retained interest in the former controlling financial interest in the subsidiary. In a
subsidiary is remeasured at fair value with any gain or deconsolidation that is a nonreciprocal transfer to owners,
loss recognised in profit or loss (IAS 27.34). the former parent should apply the guidance of ASC 845,
Nonmonetary Transactions. Otherwise, the parent must
recognize a gain or loss on the transaction and measure
any retained investment in the former subsidiary at
deconsolidation-date fair value.
The deconsolidation guidance in ASC 810-10 applies to
the following (ASC 810-10-40-3A and 845-10-30-25):
 The deconsolidation of a subsidiary or derecognition
of a group of assets if the subsidiary or asset group
constitutes a business or nonprofit activity
 The deconsolidation of a subsidiary or derecognition
of a group of assets that does not constitute a
business or nonprofit activity if the substance of the
transaction is not directly addressed in other
authoritative guidance
 The transfer of a subsidiary or group of assets that is
a business or a nonprofit activity to an equity method
or joint venture investee
 The exchange of a subsidiary or a group of assets
that constitutes a business or nonprofit activity for a
noncontrolling interest in the entity receiving the
assets, including an equity method investee or joint
venture
The deconsolidation provisions in ASC 810-10 do not
apply if the transaction resulting in an entity’s decreased
ownership interest is either the sale of in-substance real
estate or the conveyance of oil and gas mineral rights
(ASC 810-10-40-3A).
IFRS guidance on decreases in ownership of subsidiaries
applies to all subsidiaries. Therefore, potential differences
could occur in situations in which
 A subsidiary is not a business or nonprofit activity
 A subsidiary is involved in the sale of in substance
real estate or the conveyance of oil and gas mineral
rights
That IFRS guidance also does not address whether it
applies to transactions with nonsubsidiaries that are

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IFRS U.S. GAAP

businesses or nonprofit activities.
See (ASC 810-10-40-3A through 40-5) (ARB 51.35-36).
8.3 Special purpose entities/variable interest entities
IFRS U.S. GAAP

Relevant guidance: SIC-12 Relevant guidance: ASC 810-10 “Variable Interest
Entities” subsections (SFAS 167; FIN 46R; ARB 51)
Introduction
IAS 27 requires a parent to consolidate all entities that it ASC 810-10 (ARB 51) requires a parent to consolidate all
controls. However, it does not provide explicit guidance entities in which it has a controlling financial interest
on the consolidation of special purpose entities (SPEs). unless control does not rest with the majority owner. The
That guidance is in SIC-12. usual condition for a controlling financial interest is
According to SIC 12, an SPE is an entity created to ownership of a majority voting interest (voting interest
accomplish a narrow and well-defined purpose. It may model). However, majority ownership in some entities
take the form of a corporation, trust, partnership, or does not convey a controlling financial interest. For such
unincorporated entity. The legal arrangements entities, called variable interest entities (VIEs), the
governing SPEs often impose strict limits on the guidance in ASC 810-10, “Variable Interest Entities”
decision-making powers of the governing body over the subsections shall be applied to determine if a reporting
operations of the SPE. These provisions may specify entity’s variable interests give it a controlling financial
that policies cannot be modified other than by the interest in the VIE.
entity's creator or sponsor (for example, they operate on A reporting entity that holds a direct or indirect (explicit or
“autopilot”) (SIC 12.1). implicit) variable interest in a legal entity must determine
whether the guidance in the “Variable Interest Entities”
subsections of ASC 810-10 applies to that legal entity
before considering other consolidation guidance.
However, the recognition and measurement provisions in
ASC 810-10 are indefinitely deferred for certain
investment funds (ASC 810-10-65-2).
Under the amended guidance in ASC 810-10, “Variable
Interest Entities” subsections, a legal entity is a variable
interest entity (VIE) if any of the following conditions
exists:
 The total equity investment at risk is not sufficient to
allow it to finance its activities without additional
subordinated financial support
 The legal entity’s total equity investment at risk does
not provide its holders, as a group, with the
characteristics of a controlling financial interest
 Voting rights of some equity investors are not
proportional to their obligation to absorb expected
losses and / or right to receive expected residual
returns and substantially all the activities of the legal
entity involve, or are conducted on behalf of, a single
investor with disproportionately few voting rights
(ASC 810-10-15-14)

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IFRS U.S. GAAP

IFRS does not have the concept of VIEs. Although a
special purpose entity (SPE) could be a VIE, the definition
of a VIE in the ASC 810-10 differs from an SPE in SIC-12.
Differences could occur because the scope and guidance
in the ASC 810-10 differ from SIC-12. In addition, the
guidance in ASC 810-10 applies only to legal entities
(ASC 810-10-15-14).
Consolidation evaluation
An SPE shall be consolidated when the substance of An enterprise has to determine whether it has an explicit
the relationship between a reporting enterprise and the or implicit variable interest in another entity. A variable
SPE indicates that the SPE is controlled by the reporting interest is a contractual, ownership, or other financial
enterprise (SIC-12.8). interest in an entity that changes with changes in the fair
value of the entity’s net assets exclusive of variable
interests. (ASC 810-10-05, “Variable Interests” and ASC
810-10-55-16 through 55-41).
If the reporting entity concludes that it has variable
interests in another legal entity, it should determine if the
other entity is a VIE. If the legal entity is a VIE, it needs to
be evaluated for consolidation (ASC 810-10-15-14).
Factors which may indicate that the reporting enterprise A reporting entity that holds a variable interest in a VIE
controls an SPE include the following (SIC-12.10 and and has both of the following characteristics of a
Appendix to SIC-12): controlling financial interest in a VIE is the primary
 The SPE's activities are conducted on behalf of the beneficiary of the VIE (ASC 810-10-25-38A):
enterprise according to its specific business needs  Power: The power to direct the activities of the VIE
so that it obtains the benefits from the SPE's that most significantly affect the VIE’s economic
activities performance
 The enterprise in substance has decision-making  Economic interest: The obligation to absorb losses, or
powers or has delegated them through an the right to receive benefits that could potentially be
“autopilot” arrangement significant to the VIE
 The enterprise in substance has the rights to obtain The primary beneficiary of a VIE must consolidate the
the majority of the benefits of the SPE and hence VIE. Regardless of whether a reporting entity consolidates
may be exposed to the risks inherent in those a VIE, however, a reporting entity with a variable interest
benefits in a VIE must provide disclosures about its involvement
 The enterprise in substance retains the majority of with the VIE.
the residual or ownership risks related to the SPE
or its assets to obtain the benefits from its activities
Note: The IASB and the FASB are working on a joint
project to provide comprehensive guidance for
consolidation of all entities. In connection with this
project, the IASB issued an Exposure Draft,
Consolidated Financial Statements, in December 2008
that would improve the definition of control and related
application guidance so that a control model can be
applied to all entities.
The IASB and the FASB are also working on a joint
project to provide guidance for assessing whether an
entity is an investment company and how to measure

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IFRS U.S. GAAP

those investments.
8.4 Business combinations
IFRS U.S. GAAP

Relevant guidance: IFRS 3 (revised 2008) Relevant guidance: ASC 805 and 810-10 (SFAS 141R;
FSP FAS 141R-1, EITF 08-7)
Introduction
IFRS 3 (revised 2008) applies to the accounting for a Similar to IFRS (ASC 805-10-15-3 through 15-4)
transaction or other event that meets the definition of a (SFAS 141R.2).
business combination. It does not apply to (paragraph 2
of IFRS 3 (revised 2008)):
 The formation of a joint venture
 A combination between entities under common
control. Appendix B of IFRS 3 (revised 2008)
includes application guidance for business
combinations involving entities under common
control.
 The acquisition of a group of assets that is not a
business
 The acquisition of all or part of the remaining
noncontrolling interest in a consolidated subsidiary
after the date of the business combination (IAS
27.30)
A business combination is defined as “a transaction or Similar to IFRS (ASC Master Glossary, “Business
other event in which an acquirer obtains control of one Combination”) (SFAS 141R.3e). However, the term
or more businesses” (App. A of IFRS 3 (revised 2008)). control has a different meaning in U.S. GAAP compared
IAS 27 defines control as “the power to govern the to IFRS. Control has the meaning of controlling financial
financial and operating policies of an entity so as to interest, as that term is used in ASC 810-10-15-8
obtain benefits from its activities” (IAS 27.4). (paragraph 2 of ARB 51).
An acquirer can obtain control of an acquiree without the Other events that qualify as business combinations
transfer of consideration in the following circumstances: include when an entity ((ASC Master Glossary, “Business
 Acquiree repurchases its own shares such that an Combination” and ASC 805-10-55-2) (SFAS 141R.3 and
investor (the acquirer) obtains control (paragraph A2-3):
43a of IFRS 3 (revised 2008))  Obtains control of a business without exchange of
 Minority veto rights lapse which had previously kept consideration or other direct involvement by the
the acquirer from controlling the acquiree acquirer such as by contract alone, without holding
(paragraph 43b of IFRS 3 (revised 2008)) any ownership interest in that business (ASC 805-10-
25-11).
 Acquirer and acquiree agree to combine their
business by contract alone (paragraph 43c of IFRS  Becomes the primary beneficiary of a variable
3 (revised 2008)) interest entity that is a business, in accordance with
the ASC 810-10, “Variable Interest Entities”
subsections (FIN 46). IFRS do not have guidance for

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IFRS U.S. GAAP

primary beneficiaries because the consolidation
guidance differs from U.S. GAAP.
A business is defined as “an integrated set of activities Similar to IFRS (ASC Master Glossary, “Business”)
and assets that is capable of being conducted and (SFAS 141R.3d).
managed for the purpose of providing a return in the
form of dividends, lower costs, or other economic
benefits directly to investors or other owners, members
or participants” (App. A of IFRS 3 (revised 2008)).
All business combinations must be accounted for using Similar to IFRS (ASC 805-10-5-4) (SFAS 141R.6-.7).
the acquisition method. The acquisition method requires
an entity (paragraph 5 of IFRS 3 (revised 2008))
 To identify the acquirer for every business
combination
 To determine the acquisition date
 To recognise and measure the identifiable assets
acquired, liabilities assumed, and noncontrolling
interests in the acquiree
 To recognise and measure goodwill or a gain on a
bargain purchase
Identifying the acquirer
An entity is required to identify one of the combining Similar to IFRS, an entity is required to identify one of the
entities in each business combination as the acquirer. combining entities in each business combination as the
The acquirer should be determined in accordance with acquirer. The acquirer should be determined in
the guidance in IAS 27. Therefore, the acquirer is the accordance with the guidance in ASC 810-10 (ARB 51).
entity that obtains control of the acquiree (paragraphs 6- Accordingly, the acquirer is the entity that obtains control
7 and B13-18 of IFRS 3 (revised 2008)). (a controlling financial interest) of the other entity or
entities in a business combination, usually through direct
or indirect ownership of a majority voting interest.
However, the primary beneficiary of a variable interest
entity, determined in accordance with the ASC 810-10,
“Variable Interest Entities” subsections (FIN 46R), is the
acquirer of that entity. IFRS use a different consolidation
model than U.S. GAAP. Therefore, identifying the
acquirer could differ as a result of applying the guidance
in IAS 27 rather than ASC 810-10 (ARB 51) (ASC 805-10-
25-4 through 25-5) (SFAS 141R.8 and .9).
Acquisition date
The acquisition date is the date the acquirer obtains Similar to IFRS (ASC Master Glossary, “Acquisition Date,”
control of the acquired business. It is the date the entity and ASC 805-10-25-6 through 25-7) (SFAS 141R.3 and
uses to measure and recognise a business combination. .10-.11).
However, the initial accounting may not be complete by
the end of the reporting period in which the combination
occurs. In this situation, the acquirer uses provisional
amounts for the items for which the accounting is
incomplete. IFRS 3 (revised 2008) provides for a
measurement period after the acquisition date for the

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IFRS U.S. GAAP

acquirer to adjust the provisional amounts recognised.
The measurement period ends as of the earlier of (a)
one year from the acquisition date or (b) the date when
the acquirer receives the information necessary to
complete the business combination accounting
(paragraphs 8,9, and 45 of IFRS 3 (revised 2008)).
Recognising and measuring identifiable assets acquired, liabilities assumed, and noncontrolling interests
Identifiable assets acquired and liabilities assumed must Identifiable assets acquired and liabilities assumed must
be accounted for in accordance with the following be accounted for in accordance with the following general
general principles for recognition, classification, and principles for recognition, classification, and measurement
measurement with certain limited exceptions noted with certain limited exceptions noted below:
below.  Recognition – similar to IFRS, the acquirer
 Recognition – the acquirer recognises the assets recognizes the assets acquired and liabilities
acquired and liabilities assumed in a business assumed in a business combination if, as of the
combination if, as of the acquisition date, both of the acquisition date, both of the following conditions are
following conditions are met (paragraphs 10-12 of met (ASC 805-20-25-1 through 25-5):
IFRS 3 (revised 2008)):
− The item is part of the business combination
− The item is part of the business combination transaction
transaction
− The item meets the definition of an asset or
− The item meets the definition of an asset or liability in SFAC 6
liability in the Framework for the Preparation Regardless of whether the acquiree is the lessee or
and Presentation of Financial Statements lessor in an operating lease, the acquirer recognizes
 Classification – identifiable assets acquired and either (a) an intangible asset if the terms of an
liabilities assumed are classified based on the acquiree’s operating lease are favorable to market
economic conditions, operating and accounting terms at the acquisition date or (b) a liability if the
policies, contract terms, and other relevant factors terms of the operating lease are unfavorable to
that exist as of the acquisition-date, except for an market terms. The acquirer would also recognize an
acquired lease previously classified as an operating identifiable intangible asset for an operating lease at
or finance lease and an acquired contract previously market terms if the lease has value for market
classified as an insurance contract in accordance participants. Under IFRS, an acquirer of an operating
with IFRS 4 (paragraphs 15-17 of IFRS 3 (revised lease in which the acquiree is the lessor is not
2008)). required to recognize a separate asset or liability if
 Measurement – the acquirer is required to measure the terms of the operating lease are favorable or
the identifiable assets acquired and liabilities unfavorable compared to market terms (ASC 805-20-
assumed at their acquisition-date fair values. 25-11 through 25-13) (SFAS 141R A16-A18).
Noncontrolling interests in the acquiree shall be  Classification – similar to IFRS, identifiable assets
measured either at fair value (full goodwill) or at the acquired and liabilities assumed are classified based
noncontrolling interest’s proportionate share of the on the economic conditions, operating and
acquiree’s identifiable net assets (partial goodwill) accounting policies, contract terms, and other
(paragraphs 18-20 of IFRS 3 (revised 2008)). relevant factors that exist as of the acquisition date
Note 1: Improvements to IFRSs May 2010, amends the except for an acquired lease previously classified as
measurement principle in IFRS 3 for noncontrolling an operating or capital lease and an acquired
interests. The amendment states that at the acquisition contract written by an entity within the scope of ASC
date the acquirer shall measure components of 944 (SFAS 60), as an insurance or reinsurance
noncontrolling interests that are present ownerships contract or as a deposit contract (ASC 805-20-25-6
interests and entitle their holders to a proportionate through 25-8) (SFAS 141R.17-.19).
share of the entity’s net assets in the event of liquidation  Measurement – similar to IFRS, the acquirer is
at either fair value or the present ownership instruments’ required to measure the identifiable assets acquired

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IFRS U.S. GAAP

proportionate share in the recognized amounts of the and liabilities assumed at their acquisition-date fair
acquiree’s identifiable net assets. All other components values. Unlike IFRS, noncontrolling interests in the
of noncontrolling interests shall be measured at their acquiree shall be measured at fair value (full
acquisition-date fair values, unless another goodwill) (ASC 805-20-30-1) (SFAS 141R.20).
measurement basis is required by IFRS.
Note 2: In general, after a business combination, an
acquirer measures and accounts for assets, liabilities,
and equity instruments associated with a business
combination in accordance with other applicable IFRS or
U.S. GAAP. Therefore, differences in the other
applicable guidance might result in differences in the
subsequent measurement and accounting for these
items.
IFRS 3 (revised 2008) provides limited exceptions to its ASC 805 (SFAS 141R) provides limited exceptions to its
general guidance for the identifiable assets and liabilities general recognition and measurement guidance for the
listed below: identifiable assets and liabilities listed below:
 A contingent liability assumed in a business  Assets and liabilities arising from contingencies shall
combination shall be recognised if it is a present be recognized at fair value if the acquisition-date fair
obligation that arises from past events and its fair value of that asset or liability can be determined
value can be reliably measured. The requirements during the measurement period (ASC 805-20-25-19
in IAS 37 do not apply in this situation. Therefore, a and ASC 805-20-30-9) (FSP FAS 141R-1.7). If the
contingent liability shall be recognised even if it is acquisition-date fair value cannot be determined, an
not probable that an outflow of resources asset or liability shall be recognized if both of the
embodying economic benefits will be required to following criteria are met:
settle the obligation at the acquisition date
− Information that is available before the end of the
(paragraph 23 of IFRS 3 (revised 2008)).
measurement period indicates that it is probable
A contingent liability recognised in a business that an asset existed or that a liability had been
combination must be measured subsequently at the incurred at the acquisition date
higher of either (paragraph 56 of IFRS 3 (revised
2008)): − The amount of the asset or liability can be
reasonably estimated (ASC 805-20-25-20)
− The amount that would be recognised under (FSP FAS 141R-1.8)
IAS 37
Assets and liabilities arising from contingencies shall
− The amount initially recognised less cumulative be subsequently measured and accounted for using
amortisation recognised under IAS 18, if a systematic and rational basis (ASC 805-20-35-3)
appropriate (FSP FAS 141R-1.11).
 Any liability or asset for employee benefit  Employee benefits shall be accounted for following
arrangements shall be recognised and measured in the guidance in other ASC Topics for the acquisition-
accordance with IAS 19 (paragraph 26 of IFRS 3 date measurement and recognition of assets and
(revised 2008)) liabilities related to the acquiree’s employee benefit
arrangements for deferred compensation,
compensated absences, termination, pension,
postretirement, and postemployment benefits
(ASC 805-20-25-22 through 25-26 and 30-14 through
30-17) (SFAS 141R.28)
 Tax assets and liabilities in connection with a  Deferred taxes and uncertain tax positions shall be

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IFRS U.S. GAAP

business combination shall be accounted for in accounted for in accordance with ASC 740 and ASC
accordance with IAS 12 (paragraph 24 of IFRS 3 805-740 (SFAS 109 and Interpretation 48) (ASC 805-
(revised 2008)) 740-25-2 and 30-1) (SFAS 141R.26-.27)
 Indemnification assets are recognised at the same  Indemnification assets, similar to IFRS (ASC 805-20-
time that the acquirer recognises the indemnified 25-27 through 25-28 and 30-18 through 30-19)
item. Therefore, an indemnification asset would be (SFAS 141R.29-.30)
recognised as of the acquisition date only if the
indemnified item is recognised as of the acquisition
date. An indemnification asset is measured on the
same basis as the indemnified item according to the
contractual terms of the agreement using
assumptions consistent with those used to measure
the indemnified item. Therefore, the indemnification
asset may not be measured at its acquisition-date
fair value (paragraph 27-28 of IFRS 3 (revised
2008)).
 Reacquired rights are recognised as an identifiable  Reacquired rights, similar to IFRS (ASC 805-20-25-
intangible asset and measured based on the 14 through 25-15 and 30-20) (SFAS 141R.31 and
remaining contractual term of the related contract A24)
without consideration of potential contract renewals.
In addition, if the contract is favorable or
unfavorable compared to similar current market
transactions, the acquirer recognises a gain or loss
on the effective settlement of a preexisting
relationship (paragraphs 29 and B35-36 of IFRS 3
(revised 2008)).
 Replacement share-based payment awards shall be  Replacement share-based payment awards shall be
measured in accordance with IFRS 2 (paragraph 30 measured in accordance with ASC 718 (SFAS 123R)
of IFRS 3 (revised 2008)) (ASC 805-20-30-21) (SFAS 141R.32)
Note: Improvements to IFRSs May 2010, amends

the measurement principle in IFRS 3 for exceptions
to the measurement principle. The amendment
clarifies that the guidance for the replacement of
unexpired awards is the same for awards that are
replaced voluntarily by the acquirer and those that
the acquirer is obliged to replace. The amendment
is effective for annual periods beginning on or after
1 July 2010.
 Assets held for sale shall be measured in  Assets held for sale shall be measured in accordance
accordance with IFRS 5. Therefore, such assets are ASC 360 (SFAS 144). Therefore, such assets are
measured at fair value, less cost to sell (paragraph measured at fair value, less cost to sell. (ASC 805-
31 of IFRS 3 (revised 2008)). 20-30-22) (SFAS 141R.33)
Note: To the extent that other IFRS and U.S. GAAP
apply to the recognition, classification, and
measurement of certain identifiable assets and liabilities
assumed in a business combination, differences in
existing guidance might result in differences in the
amounts recognised in a business combination as well

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IFRS U.S. GAAP

as the subsequent accounting for these items.
Goodwill or gain on a bargain purchase
The acquirer measures and recognises either goodwill The acquirer measures and recognizes either goodwill or
or a gain on a bargain purchase as a residual amount, a gain on a bargain purchase as a residual amount, which
which is the difference between the following (paragraph is the difference between the following (ASC 805-30-30-1)
32 of IFRS 3 (revised 2008)): (SFAS 141R.34):
 The total acquisition-date value of the acquiree (see  The total acquisition-date value of the acquiree (see
below), and below), and
 The net of the acquisition-date amounts of the  The net of the acquisition-date amounts of the
identifiable assets acquired and liabilities assumed identifiable assets acquired and liabilities assumed in
in the combination, measured and recognised the combination, measured and recognized
according to the provisions of IFRS 3 (revised 2008) according to the provisions of ASC 805 (SFAS 141R)
Goodwill is not amortised. Instead, it is tested for Similar to IFRS, goodwill is not amortized. See Section
impairment annually or more frequently if indications of 4.4, “Impairment” for a discussion of the goodwill
impairment exist. See Section 4.4, “Impairment” for a impairment test.
discussion of the goodwill impairment test.
A bargain purchase is defined as a business Similar to IFRS (ASC 805-30-25-2 through 25-4)
combination in which (a) the net of the acquisition-date (SFAS 141R.36).
amounts of the identifiable assets acquired and liabilities
assumed in the combination, measured and recognised
according to the provisions of IFRS 3 (revised 2008),
exceeds (b) the total acquisition-date value of the
acquiree (paragraph 34 of IFRS 3 (revised 2008)).
Acquisition-date value of the acquiree equals the sum of Acquisition-date value of the acquiree equals the sum of
the following (paragraph 32 of IFRS 3 (revised 2008)): the following (ASC 805-30-30-1) (SFAS 141R.34):
 The acquisition-date value of consideration  The acquisition-date value of consideration
transferred by the acquirer (generally fair value, but transferred by the acquirer (generally fair value, but
see below) see below)
 The acquisition-date fair value of any equity  The acquisition-date fair value of any equity interests
interests in the acquiree held by the acquirer in the acquiree held by the acquirer immediately
immediately before the acquisition before the acquisition
 The amount of any remaining noncontrolling  The acquisition-date fair value of any remaining
interests measured in accordance with IFRS 3 noncontrolling interests
(revised 2008). For each business combination, a
noncontrolling interest in the acquiree shall be
measured either at fair value (full goodwill) or at the
noncontrolling interest’s proportionate share of the
acquiree’s identifiable net assets (partial goodwill)
(paragraph 19 of IFRS 3 (revised 2008)).
the measurement principle in IFRS 3 for
noncontrolling interests. See the section on
Recognising and measuring identifiable assets
interests above.
Consideration transferred for the acquiree: Consideration transferred for the acquiree (ASC 805-30-

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IFRS U.S. GAAP

25-5 and 30-7 through 30-8) (SFAS 141R.39-.41):
 Includes assets transferred, liabilities incurred by  Similar to IFRS
the acquirer to former owners of the acquiree, and
equity interests issued by the acquirer in
consideration for its interest in the acquiree
(paragraph 37 of IFRS 3 (revised 2008))
 Includes the acquisition-date fair value of any  Similar to IFRS
contingent consideration (paragraph 39 of IFRS 3
(revised 2008))
 Is measured at its acquisition-date fair value, with  Similar to IFRS, is measured at its acquisition-date
the following exceptions (paragraphs 30 and 38 of fair value, with the following exceptions:
IFRS 3 (revised 2008)):
− Replacement share-based payment awards are
− Replacement share-based payment awards are measured in accordance with ASC 718
measured in accordance with IFRS 2 (SFAS 123R)
− Transfers of assets or liabilities that remain − Transfers of assets or liabilities that remain
within the combined entity after the acquisition within the combined entity after the acquisition
are measured at their carrying amounts are measured at their carrying amounts
immediately before the acquisition date immediately before the acquisition date
 Does not include acquisition-related costs or other  Similar to IFRS (ASC 805-10-25-23) (SFAS 141R.59)
amounts transferred in transactions that are not part
of the business combination (paragraphs 51-53 of
IFRS 3 (revised 2008))
Noncontrolling interests in a partially owned acquiree Noncontrolling interests in a partially owned acquiree
(paragraphs B44-45 of IFRS 3 (revised 2008)): (ASC 805-20-30-7 through 30-8) (SFAS 141R A60-61):
 IFRS 3 (revised 2008) allows noncontrolling  Noncontrolling interests in an acquiree are measured
interests in an acquiree to be measured at at acquisition-date fair value, which includes goodwill
acquisition-date fair value, which includes goodwill attributable to the noncontrolling interests. The per-
attributable to the noncontrolling interests. The per- share fair value of the noncontrolling interests in an
share fair value of the noncontrolling interests in an acquiree might differ from the per-share fair value of
acquiree might differ from the per-share fair value of the acquirer’s controlling interest because of the
the acquirer’s controlling interest because of the existence of a control premium or minority interest
existence of a control premium or minority interest discount.
discount.
the measurement principle in IFRS 3 for
noncontrolling interests. See the section on
Recognising and measuring identifiable assets
interests above.
 The acquisition method of accounting for a business  Similar to IFRS, the acquisition method of accounting
combination under IFRS 3 (revised 2008) does not for a business combination under ASC 805 (SFAS
apply to the parent’s acquisition of some or all of the 141R) does not apply to the parent’s acquisition of
noncontrolling interests in a subsidiary after the some or all of the noncontrolling interests in a
business combination date. IAS 27.27-.31 provides subsidiary after the business combination date.
guidance on accounting for changes in the ASC 810-10 (SFAS 160) provides guidance on
controlling interest in a subsidiary and on presenting accounting for changes in the controlling interest in a
noncontrolling interests in consolidated financial subsidiary and on presenting noncontrolling interests
in consolidated financial statements. Noncontrolling

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IFRS U.S. GAAP

statements. Noncontrolling interests are discussed interests are discussed in Section 8.2,
in Section 8.2, “Noncontrolling interests.” “Noncontrolling interests.”
Contingent consideration (paragraphs 40 and 58 of Contingent consideration:

IFRS 3 (revised 2008)):  Initial classification – the amount recognized for a
 Initial classification – the amount recognised for a contingent obligation to pay additional consideration
contingent obligation to pay additional consideration is classified as either a liability or equity in
is classified as either a liability or equity based on accordance with applicable generally accepted
the definition of an equity instrument and a financial accounting principles (ASC 805-30-25-5 through 25-
liability in applicable IFRS 7) (SFAS 141R.41-.42)
 Subsequent measurement:  Subsequent measurement (ASC 805-30-35-1)
(SFAS 141R.65):
− Contingent consideration classified as equity
shall not be remeasured. The settlement of − Contingent consideration classified as equity will
contingent consideration classified as equity not be remeasured. The settlement of contingent
will be accounted for within equity. consideration classified as equity will be
accounted for within equity.
− Contingent consideration classified as an asset
or a liability that is a financial instrument and − Contingent consideration classified as an asset
within the scope of IAS 39 shall be measured at or a liability will be adjusted to fair value at each
fair value with any gain or loss recognised in reporting date through earnings (or other
profit or loss or other comprehensive income as comprehensive income for certain hedging
appropriate instruments under ASC 815 (SFAS 133)) until
the contingency is resolved. Subsequent
− Contingent consideration classified as an asset
measurement under IFRS follows the guidance
or a liability that is not within the scope of
in IAS 39 or IAS 37 which could differ from the
IAS 39 shall be accounted for in accordance
guidance in U.S. GAAP.
with IAS 37 or other applicable IFRS
Note: Improvements to IFRSs May 2010 Amends IFRS
3 to clarify that contingent consideration balances arising
from business combinations that occurred before an
entity's date of adoption of IFRS 3 (revised 2008) shall
not be adjusted on the adoption date. The amendment
provides guidance on the subsequent accounting for
such contingent consideration balances.
Other matters
Business combination achieved in stages (step Business combination achieved in stages (step
acquisition) acquisition)
An acquirer may obtain control of an acquiree in which Similar to IFRS (ASC 805-10-25-9 through 25-10)
the acquirer had an equity interest before the acquisition (SFAS 141R.47-.48).
date. IFRS 3 (revised 2008) requires that any equity
interest in the acquiree held by the acquirer immediately
before the acquisition date be adjusted to acquisition-
date fair value. Any resulting gain or loss will be
recognised in earnings. The calculation of the
acquisition-date gain or loss will include reclassification
of any related amounts previously recognised in
accumulated other comprehensive income by the

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IFRS U.S. GAAP

acquirer (paragraph 42 of IFRS 3 (revised 2008)).
Reverse acquisition Reverse acquisition

If a business combination is effected primarily by an Similar to IFRS (ASC 810-10-55-12) (SFAS 141R A12).
exchange of equity interests, the entity that issues its
equity interests is usually the acquirer. However, in a
reverse acquisition the entity that issues securities to
effect a combination (the legal acquirer) is determined to
be the acquiree for accounting purposes, and the entity
whose equity interests are acquired (the legal acquiree)
is the acquirer for accounting purposes (paragraph B19
of IFRS 3 (revised 2008)).
Research and development Research and development

An in-process research and development project of the Tangible and intangible assets used in research and
acquiree shall be recognised as an intangible asset if the development shall be recognized at their acquisition-date
project meets the definition of an asset and is identifiable fair values. An intangible asset used in research and
(IAS 38.34). development activities that is recognized in a business
combination shall be accounted for as an indefinite-lived
asset until the associated research and development
efforts are completed or abandoned (ASC 805-20-35-5)
(SFAS 141R.66 and E11).
Fair value Fair value

Fair value is defined as “the amount to which an asset Fair value is defined as “the price that would be received
could be exchanged, or a liability settled, between to sell an asset or paid to transfer a liability in an orderly
knowledgeable, willing parties in an arm’s length transaction between market participants at the
transaction.” measurement date.”
Note: The IASB issued an exposure draft in May 2009, Note: In October 2009, the IASB and the FASB agreed to
Fair Value Measurement, to clarify the definition of fair work together to develop common fair value
value, establish one source of guidance for all fair value measurement and disclosure requirements. As a result of
measurements, enhance disclosures, and increase that decision, in June 2010 the FASB issued a proposed
convergence with U.S. GAAP. The exposure draft was ASU to amend ASC 820, Fair Value Measurements and
developed based on the requirements in ASC 820 Disclosures, to take into consideration some of the
(SFAS 157). comments the IASB received on its May 2009 exposure
draft and the IASB published Measurement Uncertainty
Analysis Disclosure for Fair Value Measurements, a
limited re-exposure of the May 2009 exposure draft.

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9. Associates, equity method investees, and joint

ventures
9.1 Associates and equity method investees
Note: Certain sections of IAS 28 have been amended as a result of amendments to IAS 27. The amendments are
effective for annual periods beginning on or after July 1, 2010. If an entity applies IAS 27 for an earlier period, the
amendments must be applied for that earlier period. If an entity applies the amendments before July 1, 2010 it must
disclose that fact. Please refer to paragraphs 41B and 41E of IAS 28 for information on effective dates for the amended
sections of IAS 28.
IFRS U.S. GAAP

Relevant guidance: IAS 1 and 28 Relevant guidance: ASC 323, 360, 805, 810, 825,
and 970 (APB 18; SFAS 130, 142, 144, and 159; SOP
78-9; FSP APB 18-1; EITF 98-13, 99-10, 02-14, 04-5,
06-9, and 08-6); SEC Regulation S-X, Rules 4-08(g),
10-01(b), and 3-09
Introduction
IAS 28 shall be used to account for investments in ASC 323-10, Investments-Equity Method and Joint
associates except for investments in associates held by Ventures -Overall, applies to investments in common
venture capital organisations, mutual funds, unit trusts, and stock or in-substance common stock except for the
similar entities that on initial recognition are designated as circumstances listed in ASC 323-10-15-4. This section
at fair value through profit or loss or are classified as held focuses primarily on those entities within the scope of
for trading and accounted for in accordance with IAS 39, ASC 323-10 unless specifically noted.
Financial Instruments: Recognition and Measurement
An associate is defined as “an entity, including an
unincorporated entity such as a partnership, over which the
investor has significant influence and that is neither a
subsidiary nor an interest in a joint venture” (IAS 28.2).
Significant influence Significant influence

An investor is presumed to have significant influence if the Similar to IFRS, however, the existence and effect of
investor holds, directly or indirectly, 20 percent or more of potential voting rights that are currently exercisable or
the voting power of the investee unless it can be clearly convertible shall not be considered when assessing
demonstrated that is not the case (IAS 28.6). The whether an entity has significant influence (ASC 323-
existence and effect of potential voting rights that are 10-15-6 through 15-11) (APB 18.18).
currently exercisable or convertible are considered when
assessing whether an entity has significant influence
(IAS 28.8). Significant influence is normally evidenced by
one or more of the following (IAS 28.7):
 Representation on the board of directors or equivalent
governing body of the investee
 Participation in policy-making processes including
participation in decisions about dividends or other
distributions
 Material transactions between the investor and
investee

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IFRS U.S. GAAP

 Interchange of managerial personnel
 Provision of essential technical information
An entity loses significant influence when it loses the power
to participate in the financial and operating policy decisions
of the investee, which could occur with or without a change
in ownership levels (IAS 28.10).
Equity method Equity method

An investment in an associate shall be accounted for using An investor that has the ability to exercise significant
the equity method except for the following (IAS 28.1 and influence over the operating and financial policies of
.13): the investee should apply the equity method when it
 Investments classified as held for sale in accordance has an investment in common and/or an investment
with IFRS 5 that is in-substance common stock except for the
circumstances listed in ASC 323-10-15-4, unless the
 Investments in associates for which the exception to fair value option is elected in accordance with the
consolidation in paragraph 10 in IAS 27 applies, requirements of ASC 825 (SFAS 159), when it is
discussed in Section 8.1, “Basic requirements for applicable. (ASC 825-10-15-4 and ASC 323-10-15-3)
group accounts” (SFAS 159.7, APB 18.17, and EITF 02-14).
 All of the following apply: Investments in unincorporated entities, such as
− Investor is a subsidiary of another entity and its partnerships shall generally apply the equity method if
owners do not object to the investor not applying the investor has the ability to exercise significant
the equity method; influence over the investee (ASC 323-30-25-1)
(EITF 00-01).
− Investor's debt or equity instruments are not
traded in a public market; Some of the items subject to the guidance in ASC 323-
10 and 323-30 may qualify for application of the fair
− Investor did not file / is not in the process of filing, value option subsections of ASC 825-10 (ASC 323-10-
its financial statements with a regulatory 25 and 323-30-25). Unlike IFRS, an equity method
organisation for the purpose of issuing any class investee that is held-for-sale shall be accounted for
of instruments in a public market; and under the equity method. Investments accounted for
− Ultimate or any intermediate parent of the investor under the equity method are not within the scope of
produces consolidated financial statements ASC 360 (SFAS 144) (ASC 360-10-15-5)
available for public use that comply with (SFAS 144.5).
International Financial Reporting Standards
An investor shall discontinue the use of the equity method
when it no longer has significant influence over the
associate (IAS 28.18).
Application of the equity method – initial recognition
An investment shall be initially recorded at cost. Any Similar to IFRS. Except as provided in the following
difference between the cost of the investment and the sentence, an investment shall be initially measured at
investor’s share of the net fair value of the associate’s cost in accordance with ASC 323-10-30-2 (paragraphs
assets and liabilities shall be accounted for either as D3 – D7 of SFAS 141R). An investor shall initially
(IAS 28.11 and .23): measure, at fair value, a retained investment in the
 Goodwill and included in the carrying amount of the common stock of an investee (including a joint venture)
investment in a deconsolidation transaction in accordance with
ASC 810-10-40-3A through 40-5. A difference between
 Income in the determination of the investor’s share of the cost of an investment and the amount of the
the associate’s profit or loss if there is any excess of underlying net assets of the investee shall be
the investor’s share of the net fair value of the accounted for as if the investee were a consolidated

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IFRS U.S. GAAP

associate’s identifiable assets and liabilities over the subsidiary (ASC 323-10-35-13) (APB 18.19b).
cost of the investment
Application of the equity method – subsequent increases or decreases
The carrying amount of the investment in an associate The carrying amount of the investment in an investee
shall be increased or decreased to recognise the shall be increased or decreased to recognize the
following: following:
 Profits or losses of the investee – an investor’s share  Profits or losses of the investee – similar to IFRS,
of profit or loss shall be determined based on present an investor’s share of profit or loss shall be
ownership interests and shall not reflect potential determined based on present ownership interests
voting rights (IAS 28.11-.12). Losses shall be and shall not reflect potential voting rights (ASC
recognised up to the amount of the investor’s interest 323-10-35-4) (APB 18.18). Losses shall be
in the investee. Additional losses shall be recognised recognized up to the amount of the investor’s
only to the extent the investor has incurred legal or common stock or in-substance common stock. Like
constructive obligations or made payments on behalf IFRS, additional losses shall be recognized to the
of the investee. An investor’s interest in an investee extent the investor has guaranteed obligations of
includes the carrying amount of the investment in the the investee or is otherwise committed to provide
associate under the equity method and any long-term further financial support for the investee. Unlike
interests in the associate that in substance form a IFRS, additional losses shall also be recognized
part of the investor’s net investment in the associate when the imminent return to profitability by an
(for example, preference shares and long-term investee appears to be assured (ASC 323-10-35-
receivables or loans) (IAS 28.29-30). 19 through 35-22) (APB 18.19i).
 Distributions from the investee (IAS 28.11) The methodology for applying losses to other
 Changes in the investee’s other comprehensive investments in the investee is detailed in ASC 323-
income (IAS 28.11) 10-35-24 and 35-28 (EITF 98-13 and 99-10)
(ASC 323-10-35-19 through 35-30) (APB 18.19i).
 Impairment losses – the entire carrying amount of the
investment shall be tested for impairment in  Distributions from the investee (ASC 323-10-35-17)
accordance with IAS 36 as a single asset by (APB 18.6b)
comparing its recoverable amount (higher of value in  Changes in the investee’s other comprehensive
use and fair value less cost to sell) with its carrying income (ASC 323-10-35-18) (SFAS 130.121)
amount, for conditions in accordance with IAS 39 that  Impairment losses – the entire carrying amount of
indicate an impairment exists. If the recoverable the investment shall be tested for impairment in
amount is less than the carrying amount of the accordance with ASC 323-10-35-31 through 35-
investment, an impairment loss shall be recognised. 32A (APB 18.19h and EITF 08-6). Unlike IFRS, an
Any reversal of an impairment loss shall be impairment loss shall be recognized only if the loss
recognised in accordance with IAS 36 (IAS 28.33). in value is other than temporary and impairment
losses may not be reversed.
Intra-entity profits and losses on transactions between
the investor and an equity method investee are
eliminated until realized by the investor or investee as if
the investee were consolidated. Intra-entity profits or
losses on assets still remaining with an investor or
investee are eliminated, except for both of the following
(ASC 323-10-35-7):
 A transaction with an investee (including a joint
venture investee) that is accounted for as a
deconsolidation of a subsidiary or a derecognition
of a group of assets in accordance with ASC 810-
10-40-3A through 40-5

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IFRS U.S. GAAP

 A transaction with an investee (including a joint
venture investee) that is accounted for as a change
in ownership transaction in accordance with
ASC 810-10-45-21A through 45-24
Application of the equity method – loss of significant influence
An investor shall discontinue the use of the equity method An investor shall discontinue the use of the equity
when it no longer has significant influence over the method when it no longer has significant influence over
associate. From that date, an investor shall account for its the investee. From that date, an investor shall account
investment in accordance with IAS 39. On the date for its investment under other applicable accounting
significant influence is lost, the investor shall measure its literature, such as ASC 320 (SFAS 115) (ASC 323-10-
retained investment at fair value and recognise in profit or 35-36) (APB 18.19l).
loss any difference between the following:
 The fair value of the retained investment and any
proceeds from disposing of part of its interest, and
 The carrying amount of the investment at the date
when significant influence is lost (IAS 28.18)
 Account for all amounts recognised in other
comprehensive income in relation to that associate
on the same basis as would be required if the
associate had directly disposed the related assets
and liabilities (IAS 28.19A)
An investor’s financial statements shall be prepared using Unlike IFRS, there is no explicit requirement for an
uniform accounting policies for like transactions and investor to use uniform accounting policies for like
events. Therefore, adjustments shall be made to conform transactions and events.
the associate’s accounting policies to those of the investor
(IAS 28.26-.27).
Investments in associates shall be classified as a Equity method investments shall be displayed as a

non-current asset and the carrying amount shall be separate item in the consolidated balance sheet
disclosed separately (IAS 28.38). (ASC 323-10-45-1) (APB 18.19c).
The investor's share of the associate's profit or loss shall The investor's share of the earnings or losses of an
be shown separately in the consolidated income equity method investee should normally be shown in
statement (IAS 1.82). Any discontinued operations of the the income statement as a single amount except for the
associate shall be separately disclosed (IAS 28.38). separate presentation of any extraordinary items of the
investee, if material (ASC 323-10-45-1 through 45-2)
(APB 18.19c). Unlike IFRS, an investor is not required
to separately disclose or display the discontinued
operations of an equity method investee.
The investor's share of changes recognised in other An investor shall record its proportionate share of the
comprehensive income by the associate shall be investee’s equity adjustments for other comprehensive
recognised in other comprehensive income by the income as increases or decreases to the investment
investor (IAS 28.39). account with corresponding adjustments in equity
(ASC 323-10-35-18) (SFAS 130.121).
Disclosures include summarised financial information of Similar to IFRS, disclosures for material equity method
associates, such as the aggregated amounts of assets, investees include summarized financial information for
assets, liabilities, and results of operations of the

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IFRS U.S. GAAP

liabilities, revenues, and profit or loss (IAS 28.37b). investees in the notes or in separate statements
(ASC 323-10-50-3) (APB 18.20d). Publicly traded
companies may have additional reporting requirements
if investees meet certain size criteria (for example, SEC
Regulation S-X, Rules 4-08(g), 10-01(b), and 3-09).
The investor shall use the most recent financial An investee may not prepare financial statements timely
statements of the associate to apply the equity method. If for an investor to apply the equity method currently. In
the associate’s reporting period is different from the those situations, the investor should normally use the
investor’s, the associate shall prepare financial most recent financial statements of the investee to
statements as of the same date of the investor unless record its share of the earnings and losses of the
impracticable. If not practicable, adjustments shall be investee. Any lag in reporting should be consistent from
made for the effects of significant transactions or events period to period (ASC 323-10-35-6) (APB 18.19g).
that occur between the date of the associate’s financial
statements and the date of the investor’s financial
statements. In any case, the difference between reporting
dates shall not be more than three months (IAS 28.24-
.25).

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9.2 Joint ventures

Note 1: Certain sections of IAS 31 have been amended as a result of amendments to IAS 27. The amendments are
effective for annual periods beginning on or after July 1, 2010. If an entity applies IAS 27 for an earlier period, the
amendments shall be applied for that earlier period. If an entity applies the amendments before July 1, 2010 it shall
disclose that fact. Refer to paragraphs 58A and 58D of IAS 31 for information on effective dates for the amended
sections of IAS 31.
Note 2: In September 2007, the IASB issued Exposure Draft 9, Joint Arrangements, to replace IAS 31. The objective
of the joint venture project is to improve the accounting for, and the quality of the information being reported – what the
proposed IFRS defines as joint arrangements – which include joint ventures, joint assets, and joint operations. The
most significant change proposed is the requirement to use the equity method of accounting for joint ventures, thus
eliminating the choice to use the equity method or proportionate consolidation.
IFRS U.S. GAAP

Relevant guidance: IAS 31; SIC-13 Relevant guidance: ASC 323, 360, 605, 808, 810-10,
825 (APB 18; SFAS 144 and 167; FIN 46R; EITF 99-19,
00-1, and 07-1)
Introduction
A joint venture is defined as “a contractual arrangement A joint venture is generally defined as “An entity owned
whereby two or more parties undertake an economic and operated by a small group of businesses (the “joint
activity that is subject to joint control” (IAS 31.3). The venturers”) as a separate and specific business or
existence of a contractual arrangement distinguishes project for the mutual benefit of the members of the
interests that have joint control from investments in group. The purpose usually is to share risks and
associates in which the investor has significant influence rewards in developing a new market, product or
(IAS 31.9). technology; to combine complementary technological
IAS 31 does not apply to venturer’s interests in jointly knowledge; or to pool resources in developing
controlled entities held by venture capital organisations, production or other facilities. It also usually provides an
mutual funds, unit trusts, and similar entities that on initial arrangement under which each joint venturer may
recognition are designated as at fair value through profit participate, directly or indirectly, in the overall
or loss or are classified as held for trading and accounted management of the joint venture” (ASC Master
for in accordance with IAS 39, Financial instruments: Glossary, “Corporate Joint Venture” and “Joint
Recognition and Measurement (IAS 31.1). Venture”).
IAS 31.7 identifies the following three types of joint A collaborative arrangement is defined in the ASC
ventures: Master Glossary as “A contractual arrangement that
involves a joint operating activity. These arrangements
 Jointly controlled operations – the use of assets and involve two (or more) parties that meet both of the
other resources of the venturers rather than the following requirements:
establishment of a corporation, partnership or other
entity, or a financial structure separate from the  They are active participants in the activity
venturers themselves. Each venturer uses its own  They are exposed to significant risks and rewards
assets and incurs its own expenses and liabilities. dependent on the commercial success of the joint
The contractual arrangement normally establishes operating activity.”
how the revenue from the sale of joint products and A collaborative arrangement in the scope of ASC 808-
any common expenses will be shared among the 10 is not primarily conducted through a separate legal
venturers (IAS 31.13). entity. The part of an arrangement conducted in a legal
 Jointly controlled assets – joint control, and often joint entity should be accounted for under ASC 810-10, ASC
ownership, of assets contributed to, or acquired for 323-10 (ARB 51, SFAS 94, APB 18, FIN 46R), or other
the purpose of, the joint venture. The assets are used related accounting literature (ASC 808-10-15-4)
to obtain benefits for the venturers. These ventures (EITF 07-1.5 and .6).

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do not involve the establishment of a corporation, An investor must first determine whether the joint
partnership, other entity or financial structure venture is a variable interest entity. If it is a variable
separate from the venturers themselves (IAS 31.18- interest entity, the ASC 810-10, “Variable Interest
.19). Entities” subsections shall be applied.
 Jointly controlled entities – the establishment of a
corporation, partnership, or other entity in which each
venture has an interest. The jointly controlled entity
controls the venture's assets, incurs liabilities and
expenses, and earns income (IAS 31.24-.25).
Jointly controlled operations/collaborative arrangement
A venturer shall recognise in its separate financial Participants in a collaborative arrangement within the
statements (IAS 31.15): scope of ASC 808-10 shall report costs incurred and
 The assets it controls and the liabilities it incurs revenue generated:
 The expenses it incurs and its share of the income  Transactions with third parties – a participant in a
earned by the joint venture collaborative arrangement must report the costs
incurred and revenues generated on sales to third
parties at gross or net amounts, depending on
whether the participant is the principal or the agent
in the transaction, pursuant to ASC 605-45 (EITF
Issue 99-19). Accordingly, the participant deemed
to be the principal for a particular transaction
should report that transaction on a gross basis in
its income statement (ASC 808-10-45-1 through
45-2) (EITF 07-1.16-.17). The equity method of
accounting shall not be applied to the activities of
collaborative arrangements.
 Payments between participants – the income
statement presentation of payments between
participants pursuant to a collaborative agreement
shall be determined as follows (ASC 808-10-45-3
through 45-4) (EITF 07-1.18):
− If the payments are within the scope of other

authoritative accounting literature on income
statement presentation, the participant shall
apply the relevant provisions of that literature
− If the payments are not within the scope of

other authoritative accounting literature, the
participant shall base its income statement
classification by analogy to authoritative
literature
− If the payments are not within the scope of

other authoritative accounting literature and
there is no appropriate analogy, the participant
shall base its income statement presentation
of the payment on a reasonable, rational, and
consistently applied accounting policy

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Jointly controlled assets
A venturer shall recognise in its separate financial See discussion above for a collaborative arrangement.
statements (IAS 31.21)
 Its share of the jointly controlled assets
 Liabilities it has incurred as well as its share of any
liabilities incurred jointly with other venturers
 Any income from its share of the output of the venture
 Any expenses it has incurred as well as its share of
any expenses incurred by the venture
Jointly controlled entities
A venturer shall recognise its interest in a jointly controlled An investor must first determine whether the joint
entity using proportionate consolidation (benchmark venture is a variable interest entity. If it is a variable
treatment) or the equity method (alternative method) interest entity, the ASC 810-10, “Variable Interest
(IAS 31.30 and .38) except when it meets the conditions Entities” subsections shall be applied. If the joint
in paragraph 2 of IAS 31. venture is not a variable interest entity, the investor
shall apply:
Proportionate consolidation Proportionate consolidation
The following two reporting formats are permitted Unlike IFRS, proportionate consolidation is not
(IAS 31.34): appropriate except for unincorporated entities in either
 Combining line-by-line the share of each asset, the construction or extractive industries (ASC 810-10-
liability, income and expense of the jointly controlled 45-14) (EITF 00-1.4).
entity with that of the venturer
 Reporting the share of each asset, liability, income
and expense of the jointly controlled entity as a
separate line item in the venturer's financial
statements
A venturer shall discontinue the use of proportionate
consolidation when it ceases to have joint control over a
jointly controlled entity (IAS 31.36).
Equity method Equity method

As an alternative, a venturer can recognise its interest in a If the ASC 810-10, “Variable Interest Entities”
jointly controlled entity using the equity method as subsections do not apply, the equity method shall be
described in IAS 28 (IAS 31.38). Section 9.1, “Associates applied except in the limited situations when
and equity method investees” discusses IAS 28. A proportionate consolidation is permitted or the fair value
venturer shall discontinue the use of the equity method option is elected in accordance with the requirements of
when it ceases to have joint control over, or significant ASC 825 (SFAS 159), when it is applicable. Section
influence in, a jointly controlled entity (IAS 31.41). 9.1, “Associates and equity method investees”
discusses the equity method of accounting.
Held for sale Held for sale

Interests that are classified as held for sale in accordance Unlike IFRS, an equity method investee that is held-for-
with IFRS 5, shall be accounted for in accordance with sale shall be accounted for under the equity method.
that IFRS and therefore the proportionate consolidation Investments accounted for under the equity method are
method or equity method shall not be used (IAS 31.42). not in the scope of the ASC 360 “Impairment or

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Disposal of Long-Lived Assets,” subsections
(SFAS 144) (ASC 360-10-15-5) (SFAS 144.5).
Contributions by venturers Contributions by venturers
A venturer that contributes nonmonetary assets to a jointly Generally, a venturer that contributes nonmonetary
controlled entity in exchange for an equity interest shall assets to a jointly controlled entity in exchange for an
recognise in profit or loss for the period the portion of the equity interest shall record its investment in the jointly
gain or loss attributable to the equity interests of the other controlled entity at cost and therefore no gain is
venturers except when (SIC-13.5): recognized. However, in certain situations a gain may
 The significant risks and rewards of ownership of the be recognized for a portion of the appreciated assets
contributed assets have not been transferred to the transferred to the jointly controlled entity if the other
jointly controlled entity venturer(s) contribute cash for their interest in the jointly
controlled entity. Section 9.1, “Associates and equity
 The gain or loss cannot be measured reliably method investees” discusses the equity method of
 The contribution lacks commercial substance as accounting.
described in IAS 16
Loss of control
On loss of joint control, an investor shall account for any The deconsolidation guidance in ASC 810-10 applies
remaining investment in accordance with only to the following:
 IAS 39, as long as the former jointly controlled entity  The deconsolidation of a subsidiary or
does not become a subsidiary or associate derecognition of a group of assets if the subsidiary
 IAS 27 and IFRS 3 (as revised in 2008) if the former or asset group constitutes a business or nonprofit
jointly controlled entity becomes a subsidiary activity
 IAS 28 if the former jointly controlled entity becomes  The deconsolidation of a subsidiary or
an associate derecognition of a group of assets that does not
constitute a business or nonprofit activity if the
On the date joint control is lost, the investor shall measure substance of the transaction is not directly
any retained investment at fair value and recognise in addressed in other authoritative guidance
profit or loss any difference between the following (IAS
31.45):  The transfer of a subsidiary or group of assets that
is a business or a nonprofit activity to an equity
 The fair value of the retained investment and any method or joint venture investee
proceeds from disposing part of its interest
 The exchange of a subsidiary or a group of assets
 The carrying amount of the investment at the date that constitutes a business or nonprofit activity for a
when joint control is lost noncontrolling interest in the entity receiving the
assets, including an equity method investee or joint
venture
However, the deconsolidation provisions in ASC 810-10
do not apply if the transaction resulting in an entity’s
decreased ownership interest is either the sale of in-
substance real estate or the conveyance of oil and gas
mineral rights.

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10. Other matters

10.1 Foreign currency translation
IFRS U.S. GAAP

Relevant guidance: IAS 21, 29, and 39; IFRIC 16 Relevant guidance: ASC 740, 830, and 815 (SFAS 52,
109, and 133)
Introduction
An entity may carry on foreign activities in two ways. It The functional currency translation approach adopted in
may have transactions in foreign currencies or it may ASC 830 (SFAS 52) encompasses:
have foreign operations. In addition, an entity may present  Identifying the functional currency of the entity’s
its financial statements in a foreign currency. The economic environment
objective of IAS 21 is to prescribe how to include foreign
currency transactions and foreign operations in the  Measuring all elements of the financial statements
financial statements of an entity and how to translate in the functional currency
financial statements into a presentation currency  Using the current exchange rate for translation
(IAS 21.1). from the functional currency to the reporting
currency, if they are different
 Distinguishing the economic impact of changes in
exchange rates on a net investment from the
impact of such changes on individual assets and
liabilities that are receivable or payable in
currencies other than the functional currency
IAS 21.3(a) excludes from its scope certain derivative ASC 830 (SFAS 52.14A) excludes from its scope
transactions and balances that are within the scope of freestanding foreign currency derivatives and certain
IAS 39. foreign currency derivatives embedded in other
instruments that are within the scope of ASC 815-20-15
(SFAS 133.36-.41).
Presentation currency is the currency in which the Reporting currency is the currency in which an
financial statements are presented and it is essentially a enterprise prepares its financial statements. Unlike
matter of choice. The presentation currency of a reporting IFRS, U.S. GAAP does not indicate that an entity can
entity may be any currency (or currencies) (IAS 21.8 and have more than one reporting currency. (ASC Master
.18). Financial statements must be prepared in the entity's Glossary, “Reporting Currency”) (SFAS 52.162 -
functional currency but may then be presented in any Appendix E).
currency (IAS 21.20-.26 and .38-.43). Foreign currency translation is the process of
Functional currency is the currency of the primary expressing in the reporting currency of the enterprise
economic environment in which the entity operates. All those amounts that are denominated or measured in a
other currencies are then treated as foreign currencies. different currency (ASC Master Glossary, “Foreign
(IAS 21.8). The primary economic environment in which Currency Translation”) (SFAS 52.162 – Appendix E).
an entity operates is normally the one in which it primarily Functional currency is the currency of the primary
generates and expends cash (IAS 21.9). IAS 21.9-.14 economic environment in which that entity operates.
contains extensive guidance (including primary and Normally, it will be the currency of the economic
secondary indicators) on the determination of the environment in which cash is generated and expended
functional currency (which is not a matter of choice). Once by the entity (ASC Master Glossary, “Functional
determined, the functional currency is not changed unless Currency”) (SFAS 52.5). The foreign currency is a
there is a change in the underlying transactions, events, currency other than the functional currency of the entity
and conditions (IAS 21.13). being referred to (ASC Master Glossary, “Foreign

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IFRS U.S. GAAP

When the indicators are mixed and the functional currency Currency”) (SFAS 52.162 - Appendix E).
is not obvious, management uses judgement to determine The functional currency (or currencies) of an entity is
the functional currency. Management gives priority to the basically a matter of fact, but in some instances the
primary indicators before considering the secondary observable facts will not clearly identify a single
indicators (IAS 21.12). functional currency. For example, if a foreign entity
Net investment in a foreign operation is the amount of the conducts significant amounts of business in two or more
reporting entity’s interest in the net assets of that currencies, the functional currency might not be clearly
operation (IAS 21.8). identifiable. In those instances, the economic facts and
circumstances pertaining to a particular foreign
Monetary items are units of currency held and assets and
operation shall be assessed in relation to the Board’s
liabilities to be received or paid in a fixed or determinable
stated objectives for foreign currency translation (see
number of units of currency (IAS 21.8).
ASC 830-10-10-1 through 10-2) (SFAS 52.4).
Management’s judgment will be required to determine
the functional currency in which financial results and
relationships are measured with the greatest degree of
relevance and reliability (ASC 830-10-45-6)
(SFAS 52.8).
Unlike IFRS, U.S. GAAP does not include a hierarchy of
indicators to consider in determining the functional
currency of an entity (ASC 830-10-45-3) (SFAS 52.5).
Instead, ASC 830-10-55-3 through 55-7 (Appendix A of
SFAS 52) provide guidance for the determination of the
functional currency. The economic factors cited in ASC
830-10-55-3 through 55-7 (Appendix A), and possibly
others, should be considered both individually and
collectively when determining the functional currency
(ASC 830-10-55-3) (SFAS 52.5).
Translation adjustments result from the process of
translating financial statements from the entity’s
functional currency into the reporting currency. They are
disclosed and accumulated in a separate component of
consolidated equity (ASC Master Glossary, “Translation
Adjustments”) (SFAS 52.162 – Appendix E).
Transaction gains or losses result from a change in
exchange rates between the functional currency and
the currency in which a foreign currency transaction is
denominated. They are generally included in
determining net income for the period in which
exchange rates change (ASC Master Glossary,
“Transaction Gain or Loss”) (SFAS 52.162 – Appendix
E).
Summary of the approach required
All entities All entities

In preparing financial statements, each entity (whether a The assets, liabilities, and operations of a foreign entity
stand-alone entity, an entity with foreign operations (such shall be measured using the functional currency of that
as a parent) or a foreign operation (such as a subsidiary entity in accordance with ASC 830-10-55-3 (SFAS 52.5
or branch)) determines its functional currency in and Appendices A and B). A foreign entity is defined as
accordance with IAS 21.9-.14 and then translates foreign an operation (for example, subsidiary, division, branch,

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IFRS U.S. GAAP

currency items into its functional currency and reports the joint venture, etc.) whose financial statements (a) are
effects of such translation in accordance with IAS 21.20- prepared in a currency other than the reporting currency
.37 and .50 (IAS 21.17). of the reporting enterprise and (b) are combined or
Each individual entity included in the reporting entity consolidated with or accounted for on the equity basis
in the financial statements of the reporting enterprise
It is necessary for the results and financial position of (ASC Master Glossary, “Foreign Entity”) (SFAS 52
each individual entity included in the reporting entity to be Appendix E).
translated into the currency in which the reporting entity
presents its financial statements. The presentation Each individual entity included in the reporting entity
currency of the reporting entity may be any currency or The financial statements of separate entities within an
currencies. The results and financial position of any enterprise, which may exist and operate in different
individual entity within the reporting entity whose economic and currency environments, are consolidated
functional currency differs from the presentation currency and presented as though they were the financial
are translated in accordance with IAS 21.38-.50 statements of a single enterprise. Because it is not
(IAS 21.18). possible to combine, add, or subtract measurements
Stand-alone entity preparing financial statements or an expressed in different currencies, it is necessary to
entity preparing separate financial statements in translate into a single reporting currency those assets,
accordance with IAS 27 liabilities, revenues, expenses, gains, and losses that
are measured or denominated in a foreign currency
IAS 21 permits a stand-alone entity preparing financial (ASC 830-10-10-1) (SFAS 52.4).
statements or an entity preparing separate financial
statements in accordance with IAS 27 to present its Hyperinflationary economy
financial statements in any currency or currencies. If the If the functional currency is the currency of a
entity’s presentation currency differs from its functional hyperinflationary economy, the entity’s financial
currency, its results and financial position are also statements are restated in accordance with ASC 830-
translated into the presentation currency in accordance 10-45-11 and 45-17 (SFAS 52.10-.11) (see
with IAS 21.38-.50 (IAS 21.19). Hyperinflationary economies section below).
Hyperinflationary economy
If the functional currency is the currency of a
hyperinflationary economy, the entity’s financial
statements are restated in accordance with IAS 29 (IAS
21.14) (see Hyperinflationary economies section below).
Reporting foreign currency transactions in the functional currency
Initial recognition Initial recognition

A foreign currency transaction shall be recorded, on initial All elements of financial statements shall be translated
recognition in the functional currency, by applying to the by using the current exchange rate. For assets and
foreign currency amount the spot exchange rate between liabilities, the exchange rate at the balance sheet date
the functional currency and the foreign currency at the shall be used. For revenues, expenses, gains, and
date of the transaction (IAS 21.21). losses, the exchange rate at the dates on which those
A rate that approximates the actual rate at the date of elements are recognized shall be used. Because
transaction is often used (e.g. an average rate for a week translation at the exchanges rates at dates the
or a month might be used for all transactions in each numerous revenues, expenses, gains, and losses are
foreign currency occurring during that period if rates do recognized is generally impractical, an appropriately
not fluctuate significantly (IAS 21.22). weighted average exchange rate for the period may be
used to translate those elements (ASC 830-30-45-3
through 45-5) (SFAS 52.12).
Reporting at the ends of subsequent reporting periods Reporting at the ends of subsequent reporting periods
At the end of each reporting period (IAS 21.23): For other than derivative instruments, the following shall
 Foreign currency monetary items shall be translated apply to all foreign currency transactions of an

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IFRS U.S. GAAP

using the closing rate enterprise and its investees (ASC 830-20-30-1 and 35-
 Non-monetary items that are measured in terms of 2) (SFAS 52.16):
historical cost in a foreign currency shall be translated  At the date the transaction is recognized, each
using the exchange rate at the date of the transaction asset, liability, revenue, expense, gain, or loss
 Non-monetary items that are measured at fair value arising from the transaction shall be measured and
in a foreign currency shall be translated using the recorded in the functional currency of the recording
exchange rates at the date when the fair value was entity by use of the exchange rate in effect at that
determined date
 At each balance sheet date, recorded balances
that are denominated in a currency other than the
functional currency of the recording entity shall be
adjusted to reflect the current exchange rate
Recognition of exchange differences Recognition of exchange differences

Exchange differences arising on the settlement of A change in exchange rates between the functional
monetary items or on translating monetary items at rates currency and the currency in which a transaction is
different from those at which they were translated on initial denominated increases or decreases the expected
recognition during the period or in previous financial amount of functional currency cash flows upon
statements shall be recognised in profit or loss in the settlement of the transaction. That increase or decrease
period in which they arise, except as described in IAS in expected currency cash flows is a foreign currency
21.32 – exchange differences arising on a monetary item transaction gain or loss that generally shall be included
that forms part of a reporting entity’s net investment in a in determining net income for the period in which the
foreign operation (IAS 21.28). exchange rate changes (ASC 830-20-35-1)
When a gain or loss on a non-monetary item is (SFAS 52.15).
recognised in other comprehensive income, any Likewise, a transaction gain or loss (measured from the
exchange component of that gain or loss shall be transaction date or the most recent intervening balance
recognised in other comprehensive income. Conversely, sheet date, whichever is later) realized upon settlement
when a gain or loss on a non-monetary item is recognised of a foreign currency transaction generally shall be
in profit or loss, any exchange component of that gain or included in determining net income for the period in
loss shall be recognised in profit or loss (IAS 21.30). which the transaction is settled. The exceptions to this
requirement for inclusion in net income of transaction
gains and losses are set forth in ASC 830-20-35-3
(SFAS 52.20) and pertain to certain intercompany
transactions and to transactions that are designated as,
and effective as, economic hedges of net investments
(ASC 830-20-40-1) (SFAS 52.15).
Change in functional currency Change in functional currency

When there is a change in an entity’s functional currency, Once the functional currency for a foreign entity is
the entity shall apply the translation procedures applicable determined, that determination shall be used
to the new functional currency prospectively from the date consistently unless significant changes in economic
of the change (IAS 21.35-.37). facts and circumstances indicate clearly that the
functional currency has changed. Previously issued
financial statements shall not be restated for any
change in functional currency (ASC 830-10-45-7)
(SFAS 52.9).
Use of a presentation currency other than the functional currency
Translation to the presentation currency Translation of foreign currency statements

An entity may present its financial statements in any All elements of financial statements shall be translated

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IFRS U.S. GAAP

currency (or currencies). If the presentation currency by using a current exchange rate. For assets and
differs from the entity’s functional currency, it translates its liabilities, the exchange rate at the balance sheet date
results and financial position into the presentation shall be used. For revenues, expenses, gains, and
currency as follows (IAS 21.38 -.40): losses, the exchange rate at the dates on which those
 Assets and liabilities shall be translated at the closing elements are recognized shall be used. Because
rate at the date of the statement of financial position translation at the exchange rates at the dates the
numerous revenues, expenses, gains, and losses are
 Income and expenses shall be translated at recognized is generally impractical, an appropriately
exchange rates at the dates of the transactions (or an weighted average exchange rate for the period may be
average rate as an approximation) used to translate those elements (ASC 830-30-45-3
 All resulting exchange differences shall be through 45-5 and ASC 830-10-55-10 through 55-11)
recognised in other comprehensive income (SFAS 52.12 and .47-.54).
If an entity’s functional currency is a foreign currency,
translation adjustments result from the process of
translating that entity’s financial statements into the
reporting currency. Translation adjustments shall not be
included in determining net income but shall be
reported in other comprehensive income (ASC 830-30-
45-12) (SFAS 52.13).
Translation of a foreign operation Translation of a foreign operation

The results and financial position of a foreign operation Like IFRS, normal consolidation procedures apply
follow normal consolidation procedures except that an (ASC 830-10-15-5, and ASC 830-30-45-10 and 45-17)
intragroup monetary asset or liability cannot be eliminated (SFAS 52.25 and .101).
against the corresponding intragroup liability or asset After a business combination accounted for by the
without showing the results of currency fluctuations in the purchase method, the amount assigned at the
consolidated financial statements. Any exchange acquisition date to the assets acquired and the liabilities
difference is recognised in profit or loss unless IAS 21.32 assumed (including goodwill or the gain recognized for
applies in which case it is recognised in other a bargain purchase) should be translated in conformity
comprehensive income (IAS 21.45). with the requirements of ASC 830 (SFAS 52).
IAS 21.46 provides guidance for when the foreign Accumulated translation adjustments attributable to
operation has a different reporting date than the reporting noncontrolling interests should be allocated to and
entity. reported as part of the non-controlling interest in the
Goodwill arising on the acquisition of a foreign operation consolidated enterprise (ASC 830-30-45-17).
and any fair value adjustments to the carrying amounts of
assets and liabilities arising on the acquisition of that
foreign operation shall be treated as assets and liabilities
of the foreign operation and shall be translated at the
closing rate (IAS 21.47).
Disposal or partial disposal of a foreign operation
An entity may dispose or partially dispose of its interest in Upon sale or upon complete or substantially complete
a foreign operation through sale, liquidation, repayment of liquidation of an investment in a foreign entity, the
share capital or abandonment of all, or part of, that entity amount attributable to that entity and accumulated in
(IAS 21.49). the translation adjustment component of equity shall be
On the disposal of a foreign operation, the cumulative removed from the separate component of equity and
amount of the exchange differences relating to that shall be reported as part of the gain or loss on sale or
foreign operation recognised in other comprehensive liquidation of the investment for the period during which
income and accumulated in the separate component of the sale or liquidation occurs (ASC 830-30-40-1)
equity shall be reclassified from equity to profit or loss (as (SFAS 52.14).

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IFRS U.S. GAAP

a reclassification adjustment) when the gain or loss on Unlike IFRS, U.S. GAAP does not remove any amount
disposal is recognised (IAS 21.48). from the separate component of equity when there is a
On the partial disposal of a subsidiary that includes a partial return of investment to the parent (i.e. dividend).
foreign operation, the entity shall re-attribute the
proportionate share of the cumulative amount of the
exchange differences recognised in other comprehensive
income to the non-controlling interests in that foreign
operation. In any other partial disposal of a foreign
operation the entity shall reclassify to profit or loss only
the proportionate share of the cumulative amount of the
exchange differences recognised in other comprehensive
income (IAS 21.48C).
When a foreign operation that was hedged is disposed of,
the amount reclassified to profit or loss as a
reclassification adjustment from the foreign currency
translation reserve in the consolidated financial
statements of the parent in respect of the hedging
instrument is the amount that IAS 39.102 requires to be
identified. That amount is the cumulative gain or loss on
the hedging instrument that was determined to be an
effective hedge (IFRIC 16.16-17).
Intercompany foreign currency transactions that are of a long-term-investment nature
IAS 21 does not provide for the deferral of gains on Unlike IFRS, U.S. GAAP indicates that gains and losses
intercompany currency transactions that are of a long- on intercompany foreign currency transactions that are
term-investment nature. of a long-term-investment nature (that is, settlement is
not planned or anticipated in the foreseeable future),
when the entities to the transaction are consolidated,
combined, or accounted for by the equity method in the
reporting enterprise’s financial statements, shall not be
included in determining net income but shall be
reported in the same manner as translation adjustments
(ASC 830-20-35-3) (SFAS 52.20b).
Translation adjustments shall not be included in
determining net income but should be reported in other
comprehensive income (ASC 830-30-45-12)
(SFAS 52.13).
Tax effects of all exchange differences
Gains and losses on foreign currency transactions and Similar to IFRS whereas ASC 740 (SFAS 109) applies
exchange differences arising on translating the results to exchange differences (ASC 830-20-5-3 and 45-5,
and financial position of an entity (including a foreign and ASC 830-30-45-21) (SFAS 52.22-.24).
operation) into a different currency may have tax effects.
IAS 12 applies to these tax effects (IAS 21.50).
Hyperinflationary economies
IAS 29 is applied to the financial statements, including U.S. GAAP does not have a separate standard
consolidated financial statements, of any entity whose addressing highly inflationary economies. However,
functional currency is the currency of a hyperinflationary ASC 830-10-45-11 (SFAS 52.11) indicates that the
economy (IAS 29.1). financial statements of a foreign entity in a highly

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IFRS U.S. GAAP

inflationary economy shall be remeasured as if the
functional currency were the reporting currency.
Accordingly, the financial statements of those entities
shall be remeasured into the reporting currency
according to the requirements of ASC 830-10-45-17
(SFAS 52.10).
IAS 29 does not establish an absolute rate at which For purposes of the requirement included in ASC 830-
hyperinflation is deemed to arise. IAS 29.3 provides a list 10-45-17 (SFAS 52.10), a highly inflationary economy is
of characteristics that might indicate hyperinflation, one that has cumulative inflation of approximately 100
including when the cumulative inflation rate over three percent or more over a 3-year period (ASC 830-10-45-
years is approaching, or exceeds, 100%. 11) (SFAS 52.11).
The financial statements of an entity whose functional See ASC 830-10-45-11 and 45-17 (SFAS 52.10 and
currency is the currency of a hyperinflationary economy, .11).
whether they are based on a historical cost approach or a
current cost approach shall be stated in terms of the
measuring unit current at the end of the reporting period
(e.g. general price level index). The corresponding figures
for the previous period required by IAS 1 and any
information in respect of earlier periods shall also be
stated in terms of the measuring unit current at the end of
the reporting period. For the purpose of presenting
comparative amounts in a different presentation currency,
IAS 21.42(b) and .43 apply (IAS 29.8).
When an entity’s functional currency is the currency of a Unlike IFRS. U.S. GAAP requires that the financial
hyperinflationary economy, the entity shall restate its statements be remeasured as if the functional currency
financial statements in accordance with IAS 29 (see were the reporting currency, with translation gains and
section above) before applying the translation method set losses recognized in profit or loss (ASC 830-10-45-11)
out in IAS 21.42, except for comparative amounts that are (SFAS 52.11).
translated into a currency of a non-hyperinflationary
economy (see IAS 21.42(b)) (IAS 21.43).
The results and financial position of an entity whose In a highly inflationary economy the reporting currency
functional currency is the currency of a hyperinflationary is used as the functional currency (ASC 830-10-45-11)
economy shall be translated into a different presentation (SFAS 52.11 and .107).
currency using the following procedures (IAS 21.42):
 All amounts including comparatives shall be
translated at the closing rate as of the date of the
most recent statement of financial position
 When amounts are translated into the currency of a
non-hyperinflationary economy, comparative amounts
shall be those that were presented as current year
amounts in the relevant prior year financial
statements (i.e. not adjusted for subsequent changes
in the price level or subsequent changes in exchange
rates)
Hedges of a net investment in a foreign operation
Hedges of a net investment in a foreign operation, Similar to IFRS (see ASC 815-20-25-66 and ASC 815-
including a hedge of a monetary item that is accounted for 35-35-1 through 35-2) (SFAS 133.42).

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IFRS U.S. GAAP

as part of the net investment (see IAS 21), shall be
accounted for similarly to cash flow hedges (IAS 39.102).
IFRIC 16 applies to an entity that hedges the foreign
currency risk arising from its net investments in foreign
operations and wishes to qualify for hedge accounting in
accordance with IAS 39. For convenience IFRIC 16 refers
to such an entity as a parent entity and to the financial
statements in which the net assets of foreign operations
are included as consolidated financial statements
(IAS 16.7).
IFRIC 16.9 addresses the following issues:
 The nature of the hedged risk and the amount of the
hedged item for which a hedging relationship may be
designated
 Where in a group the hedging instrument can be held
 What amounts should be reclassified from equity to
profit or loss as reclassification adjustments on
disposal of the foreign operation
10.2 Government grants and disclosure of government assistance
IFRS U.S. GAAP

Relevant guidance: IAS 8, 20, 37 and 39; SIC-10 Relevant guidance: Government grants to business
enterprises are not specifically addressed by U.S.
GAAP.
Introduction
IAS 20 shall be applied in the accounting for, and in the U.S. GAAP does not define government grants and
disclosure of, government grants and in the disclosure of there are no specific standards applicable to
other forms of government assistance (IAS 20.1). government grants.
Government refers to government, government agencies
and similar bodies whether local, national, or international
(IAS 20.3).
Government grants are assistance by government in the
form of transfers of resources to an entity in return for past
or future compliance with certain conditions relating to the
operating activities of the entity. They exclude those forms
of government assistance which cannot reasonably have
a value placed upon them and transactions with
government which cannot be distinguished from the
normal trading transactions of the entity (IAS 20.3).
Government assistance is action by the government
designed to provide an economic benefit specific to an
entity or range of entities qualifying under certain criteria.
Government assistance for the purpose of this Standard
does not include benefits provided only indirectly through

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IFRS U.S. GAAP

action affecting general trading conditions, such as the
provision of infrastructure in development areas or the
imposition of trading constraints on competitors
(IAS 20.3).
Government grants
Government grants, including non-monetary grants at fair General revenue recognition principles should be
value, shall not be recognised until there is reasonable considered in accounting for government grants.
assurance that the entity will comply with the conditions Accrual basis of accounting is used. Under U.S. GAAP,
attaching to them and that the grants will be received revenue recognition would be delayed until any
(IAS 20.7). conditions attached to a grant are satisfied.
Once a government grant is recognised, any related
contingent liability or contingent asset is treated in
accordance with IAS 37.27-.35 (IAS 20.11).
Government grants shall be recognised in profit or loss on U.S. GAAP revenue recognition principles would apply.
a systematic basis over the periods in which the entity
recognises as expenses the related costs for which grants
are intended to compensate (IAS 20.12).
There are two broad approaches to the accounting for
government grants (IAS 20.13):
 Capital approach: under which a grant is recognised
outside profit or loss
 Income approach: under which a grant is recognised
in profit or loss over one or more periods
Government grants that become receivable as U.S. GAAP revenue recognition principles would apply.
compensation for expenses or losses already incurred or
for the purpose of giving immediate financial support with
no future related costs shall be recognised in profit or loss
of the period in which they become receivable
(IAS 20.20).
The benefit of a government loan at a below-market rate Interest free loans or below market rate loans should be
of interest is treated as a government grant. The loan initially recognized at fair value in accordance with ASC
shall be recognised and measured in accordance with IAS 835-30-25 (APB Opinion 21.11-.16). The difference
39. The benefit of the below market rate of interest shall between the face amount of the loan and its fair value is
be measured as the difference between the initial carrying then treated as a grant.
value of the loan determined in accordance with IAS 39
and the proceeds received. The benefit is accounted for in
accordance with IAS 20. The entity shall consider the
conditions and obligations that have been, or must be met
when identifying the costs for which the benefit of the loan
is intended to compensate (IAS 20.10A).
Government grants related to assets, including non- Grants that relate to a capital expenditure (i.e. for the
monetary grants at fair value, shall be presented in the acquisition or construction of an asset) are accounted
statement of financial position either by setting up the for either as deferred income or a credit against the
grant as deferred income or by deducting the grant in recorded cost of the asset in the period received. In the
arriving at the carrying amount of the asset (IAS 20.24). latter case, the grant is recognized through the
reduction of the resulting depreciation expense.

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IFRS U.S. GAAP

Government grants that become repayable shall be A liability to repay a grant should be recognized on a
accounted for as a change in an accounting estimate (see prospective basis when it is probable that repayment
IAS 8.32-.38 and IAS 20.32). will be made and the amount can be reasonably
estimated (ASC 450-20-25-2) (SFAS 5.8).
Government assistance
The significance of the benefit may be such that Disclosure related to certain material items may be
disclosure of the nature, extent and duration of the necessary to keep the financial statements from being
assistance is necessary in order that the financial misleading.
statements may not be misleading (IAS 20.36).
10.3 Earnings per share

Note: In August 2008, the IASB issued an Exposure Draft, Simplifying Earnings per Share, which proposes
amendments to IAS 33 as part of its joint project with the FASB to simplify the guidance for the denominator in the
basic and diluted earnings per share calculation. In addition, in August 2008, the FASB issued an Exposure Draft,
Earnings per Share, which would amend ASC 260 (SFAS 128). The comment period for both exposure drafts ended
on 5 December 2008.
The FASB exposure draft is similar to the IASB exposure draft, with limited exceptions. The proposals in the IASB and
FASB exposure drafts focus on achieving convergence in the method for calculating the denominator of the earnings
per share calculation. However, the IASB and the FASB both acknowledge that currently there are still differences in
the underlying accounting for certain instruments that could result in differences in the calculated EPS denominator
under U.S. GAAP and IFRS. Those instruments include, but are not limited to:
 Forward purchase contracts that provide for the option of gross physical or net-share or net-cash settlement
 Written put options
 Convertible debt instruments that may be settled in cash upon conversion
The IASB and the FASB are participating in a joint project on liabilities and equity that would eliminate those
accounting differences. The Boards also acknowledge that there will remain differences in the accounting result for the
numerator, but addressing that issue is outside the scope of this project.
At its April 2009 IASB meeting, the IASB, in light of other projects, decided to pause the earnings per share project.
The IASB directed the staff to consider at a later date when would be the best time for the IASB to start reviewing the
responses in more detail. As of August 31, 2010, the date has yet to be confirmed. The FASB had also decided to
consider this an inactive project.
IFRS U.S. GAAP

Relevant guidance: IAS 33 Relevant guidance: ASC 260, 718, and 810 (SFAS
128; ARB 51; SOP 93-6; and EITF Topics D-42, D-53,
and D-82)
Introduction
The objective of IAS 33 is to prescribe principles for the The objective of ASC 260 (SFAS 128) is to simplify the
determination and presentation of earnings per share, so computation of earnings per share and to make the
as to improve performance comparisons between different U.S. standard more compatible with IFRS ASC 260-10-
entities in the same reporting period and between different 05-1) (SFAS 128.1).
reporting periods for the same entity (IAS 33.1).

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IFRS U.S. GAAP

IAS 33 applies to entities (IAS 33.2): ASC 260 (SFAS 128) applies to entities (ASC 260-10-
 Whose ordinary shares or potential ordinary shares 15-2) (SFAS 128.6):
are traded in a public market (a domestic, or foreign  That have issued common stock or potential
stock exchange or an over-the-counter market, common stock (i.e. securities such as options,
including local and regional markets), or warrants, convertible securities, or contingent stock
 That files, or is in the process of filing its financial agreements) if those securities trade in a public
statements with a securities commission or other market either on a stock exchange (domestic or
regulatory organisation for the purpose of issuing foreign) or in the over-the-counter market, including
ordinary shares in a public market securities quoted only locally or regionally
 That have made a filing or are in the process of
filing with a regulatory agency in preparation for the
sale of those securities in a public market
Measurement − basic EPS
Basic earnings per share shall be calculated by dividing Similar to IFRS (ASC 260-10-10-1 and 45-10)
profit or loss attributable to ordinary equity holders of the (SFAS 128.8).
parent entity (the numerator) by the weighted average
number of ordinary shares outstanding (the denominator)
during the period (IAS 33.10).
The objective of basic earnings per share information is to
provide a measure of the interests of each ordinary share
of a parent entity in the performance of the entity over the
reporting period (IAS 33.11).
Earnings in basic EPS Earnings in basic EPS

The amounts attributable to ordinary equity holders of the Income available to common stockholders shall be
parent entity is the profit or loss from continuing computed by deducting both the dividends declared in
operations attributable to the parent entity and the profit or the period on preferred stock (whether or not paid) and
loss attributable to the parent entity both adjusted for the the dividends accumulated for the period on cumulative
after-tax amounts of preference dividends, differences preferred stock (whether or not earned) from income
arising on the settlement of preference shares, and other from continuing operations (if that amount appears in
similar effects of preference shares classified as equity the income statement) and also from net income.
(IAS 33.12-.18). Income available to common stockholders must also be
adjusted for the effects of the redemption or induced
conversion of preferred stock (ASC 260-10-45-11
through 45-12) (SFAS 128.9 and EITF Topics D-42, D-
53, and D-82).
Number of shares in basic EPS Number of shares in basic EPS

The weighted average number of ordinary shares Similar to IFRS (ASC 260-10-45-10 and 55-2, ASC
outstanding during the period is the number of ordinary Master Glossary, “Weighted-Average Number of
shares outstanding at the beginning of the period, Common Shares Outstanding”) (SFAS 128.8 and
adjusted by the number of ordinary shares bought back or Appendix A.45).
issued during the period multiplied by a time-weighting
factor. The time-weighting factor is the number of days
that the shares are outstanding as a proportion of the total
number of days in the period; a reasonable approximation
of the weighted average is adequate in many
circumstances (IAS 33.19-.29).
The weighted average number of ordinary shares Similar to IFRS (ASC 260-10-55-12 through 55-14)

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outstanding during the period and for all periods (SFAS 128.54-.56).
presented shall be adjusted for events, other than the
conversion of potential ordinary shares, that have
changed the number of ordinary shares outstanding
without a corresponding change in resources (e.g.
bonuses and rights issues) (IAS 33.26).
Measurement – diluted EPS
When calculating diluted earnings per share, an entity Similar to IFRS (ASC 260-10-45-16 and 45-21)
shall adjust profit or loss attributable to ordinary equity (SFAS 128.11).
holders of the parent entity, and the weighted average
number of shares outstanding for the effects of all dilutive
potential ordinary shares (IAS 33.31).
The objective of diluted earnings per share is consistent
with that of basic earnings per share – to provide a
measure of the interest of each ordinary share in the
performance of an entity – while giving effect to all dilutive
potential ordinary shares outstanding during the period
(IAS 33.32).
Earnings in diluted EPS Earnings in diluted EPS

The profit or loss attributable to ordinary equity Similar to IFRS (ASC 260-10-45-16 and 45-21)
shareholders of the parent entity as calculated in (SFAS 128.11-.12).
accordance with IAS 33.12 (basic EPS) shall be adjusted
by the after-tax effect of any (IAS 33.33):
 Dividends or other items related to dilutive potential
ordinary shares deducted in arriving at profit or loss
attributable to ordinary equity holders of the parent
entity as calculated in accordance with IAS 33.12
 Interest recognised in the period related to dilutive
potential ordinary shares
 Other changes in income or expense that would
result from the conversion of the dilutive potential
ordinary shares
Number of shares in diluted EPS Number of shares in diluted EPS

The number of ordinary shares shall be the weighted Similar to IFRS (ASC 260-10-45-40 through 45-42)
average number of ordinary shares calculated in (SFAS 128.26-.28).
accordance with IAS 33.19 and .26 (basic EPS), plus the
weighted average number of ordinary shares that would
be issued on the conversion of all the dilutive potential
ordinary shares into ordinary shares. Dilutive potential
ordinary shares shall be deemed to have been converted
into ordinary shares at the beginning of the period or the
date of the issue of the potential ordinary shares, if later
(IAS 33.36).
Dilutive potential ordinary shares shall be determined Unlike IFRS, U.S. GAAP requires that the number of
independently for each period presented. The number of incremental shares included in the denominator for
dilutive potential ordinary shares included in the year-to- quarterly diluted EPS shall be computed using the

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IFRS U.S. GAAP

date period is not a weighted average of the dilutive average market prices during the three months included
potential ordinary shares included in each interim in the reporting period. For year-to-date diluted EPS,
computation (IAS 33.37). the incremental shares to be included in the
denominator shall be determined by computing a year-
to-date weighted average of the number of incremental
shares included in each quarterly diluted EPS
computation (ASC 260-10-55-3) (SFAS 128.46).
Potential ordinary shares are weighted for the period they Similar to IFRS (ASC 260-10-45-42) (SFAS 128.28).
are outstanding. Potential ordinary shares that are
cancelled or allowed to lapse during the period are
included in the calculation of diluted earnings per share
only for the portion of the period during which they are
outstanding. Potential ordinary shares that are converted
into ordinary shares during the period are included in the
calculation of diluted earnings per share from the
beginning of the period to the date of conversion; from the
date of conversion, the resulting ordinary shares are
included in both basic and diluted earnings per share (IAS
33.38).
Method of determining whether or not dilutive Method of determining whether or not dilutive
Potential ordinary shares are treated as dilutive when, and Similar to IFRS (ASC 260-10-45-16 through 45-20)
only when, their conversion to ordinary shares would (SFAS 128.11 and .13).
decrease earnings per share or increase loss per share
from continuing operations (IAS 33.41).
In determining whether potential ordinary shares are Similar to IFRS (ASC 260-10-45-18) (SFAS 128.14).
dilutive or antidilutive, each issue or series of potential
ordinary shares is considered separately rather than in the
aggregate. The sequence in which potential ordinary
shares are considered may affect whether they are
dilutive. Therefore, to maximise the dilution of basic
earnings per share, each issue or series of potential
ordinary shares is considered in sequence from the most
dilutive to the least dilutive (i.e. dilutive potential ordinary
shares with the lowest earnings per incremental share are
included in the diluted earnings per share calculation
before those with a higher earnings per incremental
share.) Options and warrants are generally included first
because they do not affect the numerator of the
calculation (IAS 33.44).
Options, warrants and their equivalents Options, warrants and their equivalents
The treasury share method is used when calculating Unlike IFRS, when applying the treasury stock method
diluted earnings per share. An entity shall assume the the number of incremental shares included in quarterly
exercise of dilutive options and warrants of the entity. The diluted EPS is computed using the average market
assumed proceeds from these instruments are regarded prices during the three months included in the reporting
as having been received from the issue of ordinary shares period. For year-to-date diluted EPS, the number of
at the average market price of ordinary shares during the incremental shares to be included in the denominator is
period. The difference between the number of ordinary determined by computing a year-to-date weighted
shares issued and the number of ordinary shares that average of the number of incremental shares included

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would have been issued at the average market price of in each quarterly diluted EPS computation (ASC 260-
ordinary shares during the period shall be treated as an 10-55-3) (SFAS 128.46).
issue of ordinary shares for no consideration (IAS 33.45).
Employee share options
Employee share options with fixed or determinable terms Similar to IFRS (ASC 260-10-45-28 through 45-32)
and non-vested ordinary shares are treated as options in (SFAS 128.20-.23).
the calculation of diluted EPS, even though they may be
contingent on vesting. They are treated as outstanding on
grant date. Performance-based employee share options
are treated as contingently issuable shares because their
issue is contingent upon satisfying specified conditions in
addition to the passage of time (IAS 33.48).
Not dealt with by IAS 33. With respect to leveraged ESOPs, ESOP shares that
have been committed to be released should be
considered to be outstanding. ESOP shares that have
not been committed to be released should not be
considered to be outstanding (ASC 718-40-45-3) (SOP
93-6; par. 28). All shares held by a nonleveraged ESOP
should be treated as outstanding in computing the
employer’s EPS, except the suspense account shares
of a pension reversion ESOP, which should not be
treated as outstanding until they are committed to be
released for allocation to participant accounts
(ASC 718-40-45-9) (SOP 93-6; par. 44).
Special rules apply to employers with ESOPs that hold
convertible preferred stock (ASC 718-40-45-6 through
45-8) (SOP 93-6; pars. 29 to 34).
Not dealt with by IAS 33. ASC 810-10-45-5 (ARB 51.13) states, “shares of the
parent held by a subsidiary shall not be treated as
outstanding stock in the consolidated balance sheet.”
Thus, such shares would also be considered treasury
shares for EPS computation purposes and they would
not be included in the denominator.
Contingently issuable shares – basic EPS
Contingently issuable shares are treated as outstanding Similar to IFRS (ASC 260-10-45-12A through 45-13)
and are included in the calculation of basic earnings per (SFAS 128.10).
share only from the date when all necessary conditions
are satisfied (i.e. the events have occurred). Shares that
are issuable solely after the passage of time are not
contingently issuable shares, because the passage of
time is a certainty. Outstanding ordinary shares that are
contingently returnable (i.e. subject to recall) are not
treated as outstanding and are excluded from the
calculation of basic earnings per share until the date the
shares are no longer subject to recall (IAS 33.24).

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IFRS U.S. GAAP
Contingently issuable shares – diluted EPS
As in the calculation of basic EPS, contingently issuable Shares whose issuance is contingent upon the
ordinary shares are treated as outstanding and included in satisfaction of certain conditions shall be considered
diluted EPS if conditions are satisfied (i.e. the events have outstanding and included in the computation of diluted
occurred). Contingently issuable shares are included from EPS as follows (ASC 260-10-45-48 through 45-57)
the beginning of the period (or from the date of the (SFAS 128.30-.35):
contingent share agreement, if later). If the conditions are  If all necessary conditions have been satisfied by
not satisfied, the number of contingently issuable shares the end of the period (the events have occurred),
in the diluted EPS is based on the number that would be those shares shall be included as of the beginning
issuable if the end of the period were the end of the of the period in which the conditions were satisfied
contingency period. Restatement is not permitted if the (or as of the date of the contingent stock
conditions are not met when the contingency period agreement, if later)
expires (IAS 33.52).
 If all necessary conditions have not been satisfied
by the end of the period, the number of
contingently issuable shares included in diluted
EPS shall be based on the number of shares, if
any, that would be issuable if the end of the
reporting period were the end of the contingency
period (for example, the number of shares that
would be issuable based on current period
earnings or period-end market price) and the result
would be dilutive. Those contingently issuable
shares shall be included in the denominator of
diluted EPS as of the beginning of the period (or as
of the date of the contingent stock agreement, if
later).
However unlike IFRS, for year-to-date
computations, contingent shares are included on a
weighted-average basis. That is, contingent shares
shall be weighted for the interim periods in which
they were included in the computation of diluted
EPS.
The number of ordinary shares contingently issuable may The number of shares contingently issuable may
depend on the future market price of the ordinary shares. depend on the market price of the stock at a future
If the effect is dilutive, the calculation of diluted EPS is date. If the effect is dilutive, the computation of diluted
based on the number of ordinary shares that would be EPS reflects the number of shares that would be issued
issued if the market price at the end of the reporting based on the current market price at the end of the
period were the market price at the end of the contingency period being reported on (ASC 260-10-45-52)
period (i.e. the contingencies must be satisfied at the end (SFAS 128.32).
of the reporting period) (IAS 33.54).
Contracts that may be settled in cash or ordinary shares
When an entity has issued a contract that may be settled Unlike IFRS, under U.S. GAAP, the inclusion of the
in cash or ordinary shares at the entity's option, the entity shares is based on a rebuttable presumption that the
always presumes that the contract will be settled in contracts will be settled in shares (if more dilutive).
ordinary shares and includes the resulting potential However, the presumption that the contract will be
ordinary shares in diluted EPS if the effect is dilutive settled in common stock may be overcome if past
(IAS 33.58). experience or a stated policy provides a reasonable
For contracts that may be settled in cash or ordinary basis to believe that the contract will be paid partially or

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shares at the holders' option, the more dilutive of cash wholly in cash (ASC 260-10-45-45 through 45-47)
settlement and share settlement shall be used in (SFAS 128.29).
calculating diluted EPS (IAS 33.60).
Presentation
An entity shall present in the statement of comprehensive Similar to IFRS. However, entities that report an
income basic and diluted earnings per share for profit or extraordinary item or the cumulative effect of an
loss from continuing operations attributable to the ordinary accounting change are required to present basic and
equity holders of the parent entity and for profit or loss diluted per-share amounts for those line items either on
attributable to the ordinary equity holders of the parent the face of the income statement or in the notes to the
entity for the period for each class of ordinary shares that financial statements (ASC 260-10-45-2 through 45-8)
has a different right to share in profit for the period. An (SFAS 128.36-.37).
entity shall present basic and diluted EPS with equal
prominence for all periods presented (IAS 33.9, .30, and
.66).
An entity that reports a discontinued operation in
accordance with IFRS 5 shall disclose the basic and
diluted amounts per share for the discontinued operation
either in the statement of comprehensive income or in the
notes (IAS 33.68).
If an entity presents the components of profit or loss in a
separate income statement as described in paragraph 81
of IAS 1 (as revised in 2007), it presents basic and diluted
earnings per share for the discontinued operation as
required in IAS 33.68, in that separate statement or in the
notes (IAS 33.68A).
An entity shall present basic and diluted EPS even if the Earnings per share is defined as the amount of
amounts are negative (i.e. loss per share) (IAS 33.69). earnings attributable to each share of common stock.
For convenience, the term is used in ASC 260 (SFAS
128) to refer to either earnings or loss per share (ASC
Master Glossary, “Earnings Per Share” (SFAS 128 -
Appendix E).
Additional EPS basis presented
If an entity discloses, in addition to basic and diluted Similar to IFRS (ASC 260-10-45-5) (SFAS 128.37).
earnings per share, amounts per share using a reported
component of the statement of income other than one
required by IAS 33, such amounts shall be calculated
using the weighted average number of ordinary shares
determined in accordance with IAS 33. Basic and diluted
amounts per share relating to such a component shall be
disclosed with equal prominence and presented in the
notes. An entity shall indicate the basis on which the
numerator(s) is (are) determined, including whether
amounts per share are before tax or after tax. If a
component of the statement of comprehensive income is
used that is not reported as a line item in the statement of
comprehensive income, a reconciliation shall be provided
between the component used and a line item that is
reported in the statement of comprehensive income.

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IFRS U.S. GAAP

(IAS 33.73).
Retrospective adjustments
If the number of ordinary or potential ordinary shares If the number of common shares outstanding increases
outstanding increases as a result of a capitalisation, due to a stock dividend or stock split or decreases as a
bonus issue, or share split, or decreases as a result of a result of a reverse stock split, the computations of basic
reverse share split, the calculation of basic and diluted and diluted EPS are adjusted retroactively for all
earnings per share for all periods presented shall be periods presented. This is the case even if such
adjusted retrospectively. If these changes occur after the changes occur after the close of the period but before
reporting period but before the financial statements are issuance of the financial statements. If per-share
authorised for issue, the per share calculations for those computations reflect such changes in the number of
financial statements and any prior period financial shares that fact shall be disclosed (ASC 260-10-55-12)
statements presented shall be based on the new number (SFAS 128.54).
of shares. The fact that per share calculations reflect such
changes in the number of shares shall be disclosed
(IAS 33.64).
Basic and diluted earnings per share of all periods Similar to IFRS (ASC 260-10-55-15 through 55-16)
presented shall be adjusted for the effects of errors and (SFAS 128.57-.58).
adjustments resulting from changes in accounting policies
accounted for retrospectively (IAS 33.64).
An entity does not restate diluted earnings per share of Similar to IFRS (ASC 260-10-45-21) (SFAS 128.12).
any prior period presented for changes in the assumptions
used in earnings per share calculations or for the
conversion of potential ordinary shares into ordinary
shares (IAS 33.65).
10.4 Events after the reporting period
IFRS U.S. GAAP

Relevant guidance: IAS 1, 10, and 33; IFRS 3 (revised Relevant guidance: ASC 260, 470, 805, and 855
2008) (SFAS 128, 141R, and 165)EITF Topic D-86; SEC SAB
Topic 4:C; AICPA AU Section 341; Sarbanes-Oxley Act
of 2002 (Section 302)
Introduction
The objective of IAS 10 is to prescribe (IAS 10.1): The objective of ASC 855 (SFAS 165) is to establish
 When an entity should adjust its financial statements principles and requirements for subsequent events. The
for events after the reporting date guidance sets forth (ASC 855-10-05-1) (SFAS 165.1):
 The disclosures that an entity should give about the  The period after the balance sheet date during
date when the financial statements were authorised which management of a reporting entity shall
for issue and about events after the reporting period evaluate events or transactions that may occur for
potential recognition or disclosure in the financial
statements
Events after the reporting period are those events,
favourable and unfavourable, that occur between the end  The circumstances under which an entity shall
of the reporting period and the date when the financial recognize events or transactions that occurred after
statements are authorised for issue. Two types of events the balance sheet date

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can be identified (IAS 10.3):  The disclosures that an entity shall make about
 Those that provide evidence of conditions that events or transactions that occurred after the
existed at the end of the reporting period (adjusting balance sheet date
events)
 Those that are indicative of conditions that arose after Subsequent events are events or transactions that
the reporting period (non-adjusting events) occur after the balance sheet date but before financial
statements are issued or are available to be issued.
There are two types of subsequent events (ASC 855-
10-20-Glossary) (SFAS 165.4):
 Recognized subsequent events: events or
transactions that provide additional evidence about
conditions that existed at the date of the balance
sheet, including the estimates inherent in the
process of preparing financial statements
 Nonrecognized subsequent events: events that
provide evidence about conditions that did not exist
at the date of the balance sheet but arose
subsequent to that date
Financial statements are issued: financial statements
are considered issued when they are widely distributed
to shareholders and other financial statement users for
general use and reliance in a form and format that
complies with U.S GAAP (See EITF Topic D-86 for SEC
staff views about the issuance of financial statements.)
(ASC 855-10-20-Glossary) (SFAS 165.5).
Financial statements are available to be issued:
financial statements are considered available to be
issued when they are complete in a form and format
that complies with U.S. GAAP and all approvals
necessary for issuance have been obtained, for
example, from management, the board of directors,
and/or significant shareholders. The process involved in
creating and distributing the financial statements will
vary depending on an entity’s management and
corporate governance structure as well as statutory and
regulatory requirements (ASC 855-10-20-Glossary).
Revised financial statements: financial statements are
revised only for either of the following conditions
(ASC 855-10-20-Glossary):
 Correction of an error
 Retrospective application of U.S. GAAP
Date through which events after the reporting period are evaluated
Events after the reporting period are required to be Unlike IFRS, U.S. GAAP requires that an entity that
evaluated through the date that the financial statements meets either of the following criteria shall evaluate
are authorised for issue (IAS 10.7). subsequent events through the date that the financial
statements are issued (ASC 855-10-25-1A):
 It is an SEC filer

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IFRS U.S. GAAP

 It is a conduit bond obligor for conduit debt
securities that are traded in a public market (a
domestic or foreign stock exchange or an over-the-
counter market, including local or regional markets)
An entity that meets neither criteria in the preceding
paragraph shall evaluate subsequent events through the
date that the financial statements are available to be
issued (ASC 855-10-25-2).
Recognition and measurement
Adjusting events after the reporting period Recognized subsequent events

An entity shall adjust the amounts recognised in its An entity shall recognize in the financial statements the
financial statements to reflect adjusting events after the effects of all subsequent events that provide additional
reporting period (IAS 10.8). evidence about conditions that existed at the date of the
IAS 10.9 provides examples of adjusting events after the balance sheet, including the estimates inherent in the
reporting period that require an entity to adjust the process of preparing financial statements (ASC 855-10-
amounts recognised in its financial statements, or to 25-1) (SFAS 165.8).
recognise items that were not previously recognised. ASC 855-10-55-1 (SFAS 165.9) provides examples of
recognized subsequent events.
Non-adjusting events after the reporting period Nonrecognized subsequent events

An entity shall not adjust the amounts in its financial An entity shall not recognize subsequent events that
statements to reflect non-adjusting events after the provide evidence about conditions that did not exist at
reporting period (IAS 10.10). the date of the balance sheet but arose after the
An example of a non-adjusting event after the reporting balance sheet date but before financial statements are
period is a decline in market value of investments issued or are available to be issued (ASC 855-10-25-3)
between the end of the reporting period and the date (SFAS 165.10).
when the financial statements are authorised for issue ASC 855-10-55-2 (SFAS 165.11) provides examples of
(IAS 10.11). nonrecognized subsequent events.
Financial statements are not adjusted for a stock dividend Unlike IFRS, public entities retroactively adjust the
declared after the reporting period financial statements for a stock dividend declared after
the balance sheet date (SEC SAB Topic 4:C).
Cash dividends declared
If an entity declares dividends to holders of equity Similar to IFRS (ASC 855-10-25-3) (SFAS 165.10).
instruments (as defined in IAS 32) after the reporting
period, the entity shall not recognise those dividends as a
liability at the end of the reporting period (IAS 10.12).
If dividends are declared after the reporting period but
before the financial statements are authorised for issue,
the dividends are not recognised as a liability at the end of
the reporting period because no obligation exists at that
time. Such dividends are disclosed in the notes
(IAS 10.13; IAS 1.137).

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IFRS U.S. GAAP
Going concern
An entity shall not prepare its financial statements on a Financial statements should not be prepared on the
going concern basis if management determines after the going concern basis if subsequent to the balance sheet
reporting period that either it intends to liquidate the entity date, but before issuance of the financial statements,
or to cease trading, or that it has no realistic alternative liquidation appears imminent (AU Section 341, fn. 1).
but to do so (IAS 10.14).
Date of authorisation for issue – disclosure
An entity shall disclose the date when the financial If an entity is not an SEC filer, then the entity shall
statements were authorised for issue and who gave that disclose both of the following (ASC 855-10-50-1):
authorisation. If the entity’s owners or others have the  The date through which subsequent events have
power to amend the financial statements after issue, the been evaluated
entity shall disclose that fact (IAS 10.17).
 Whether that date is either of the following:
The process involved in authorising the financial
statements for issue will vary depending upon the − The date the financial statements were issued
management structure, statutory requirements, and − The date the financial statements were
procedures followed in preparing and finalizing the available to be issued
financial statements (IAS 10.4).
Unless the entity is an SEC filer, an entity shall disclose
in the revised financial statements the dates through
which subsequent events have been evaluated in both
of the following (ASC 855-10-50-4):
 The issued or available-to-be-issued financial
statements
 The revised financial statements
CEO and CFO of SEC registrants must certify financial
statements (Sarbanes-Oxley Act of 2002 (Section
302)). The certification is outside of basic general
purpose financial statements and not required by U.S.
GAAP.
Non-adjusting events after the reporting period – disclosure
If non-adjusting events after the reporting period are Some nonrecognized subsequent events may be of
material, non-disclosure could influence the economic such a nature that they must be disclosed to keep the
decisions that users make on the basis of the financial financial statements from being misleading. For such
statements. Accordingly, an entity shall disclose the events, an entity shall disclose the following (ASC 855-
following for each material category of non-adjusting 10-50-2) (SFAS 165.13):
event after the reporting period (IAS 10.21):  The nature of the event
 The nature of the event  An estimate of its financial effect, or a statement
 An estimate of its effect, or a statement that such an that such an estimate cannot be made
estimate cannot be made
IAS 10.22 provides examples of non-adjusting events
after the reporting period that would generally result in
disclosure.
Reissuance of financial statements
Reissuance of financial statements is not specifically An entity may need to reissue financial statements, for
addressed in IAS 10. However, IFRS recognises only one example, in reports filed with the SEC or other

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IFRS U.S. GAAP

date through which events after the reporting period are regulatory agencies. After the original issuance of the
evaluated (i.e. the date that the financial statements are financial statements, events or transactions may have
authorised for issue) even if they are reissued. occurred that require disclosure in the reissued financial
Accordingly, an entity could have adjusting events in its statements to keep them from being misleading. Unlike
reissued financial statements. IFRS, an entity shall not recognize events occurring
between the time the financial statements were issued
or available to be issued and the time the financial
statements were reissued unless the adjustment is
required by U.S. GAAP or regulatory requirements.
Similarly, an entity shall not recognize events or
transactions occurring after the financial statements
were issued or were available to be issued in financial
statements of subsequent periods unless the
adjustment meets the criteria stated in ASC 855-10-25-
4 (SFAS 165.15).
Revised financial statements are considered reissued
financial statements. For guidance on the recognition of
subsequent events in reissued financial statements, see
ASC 855-10-25-4 (ASC 855-10-50-5).
Retrospective adjustment for basic and diluted EPS
Basic and diluted EPS are adjusted retrospectively for all If after the balance sheet date but before the date the
periods presented if the number of ordinary or potential financial statements were issued or the date the
ordinary shares outstanding increases as a result of a financial statements were available to be issued an
capitalisation, bonus issue or share split, or decreases as entity’s common shares outstanding either increase due
a result of a reverse share split. If these changes occur to a stock dividend or stock split or decrease as a result
after the reporting period but before the financial of a reverse stock split, the computations of basic and
statements are authorised for issue, the per share diluted EPS are adjusted retroactively for all periods
calculations for those and any prior period financial presented. If per-share computations reflect such
statements presented shall be based on the new number changes in the number of shares that fact must be
of shares (IAS 33.64). disclosed (ASC 260-10-55-12) (SFAS 128.54); also
(SEC SAB Topic 4:C).
Disclosure for business combinations
IFRS 3 (revised 2008) contains extensive disclosure ASC 805-10-50-1 through 50-4; 805-20-50-1 through
requirements for each business combination effected 50-3; 805-30-50-1 through 50-3 (Paragraphs 67-70 of
during the current reporting period or after the end of the SFAS 141R) include disclosures that must be provided
reporting period but before the financial statements are if a material business combination is completed after
authorised for issue (IFRS 3.59-.63 and B64-B67). the balance sheet date but before the financial
statements are issued (unless not practicable) (ASC
855-10-55-2) (SFAS 165.11.b).
Current vs. non-current presentation of debt – breach of a provision of a long-term debt agreement
When an entity breaches a provision of a long-term loan Unlike IFRS, an entity must classify as current a long-
agreement on or before the end of the reporting period term obligation that is or will be callable by a creditor
with the effect that the liability becomes payable on because of the entity’s violation of a provision of the
demand, it classifies the liability as current, even if the debt agreement at the balance sheet date or because
lender agreed after the reporting period and before the the violation, if not cured within a specified grace
authorisation of the financial statements for issue, not to period, will make the obligation callable unless (ASC
demand payment as a consequence of the breach. An 470-10-45-11) (SFAS 78.5):

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IFRS U.S. GAAP

entity classifies the liability as current because, at the end  The creditor has waived or subsequently lost the
of the reporting period, it does not have an unconditional right to demand repayment for more than one year
right to defer its settlement for at least 12 months after (or operating cycle, if longer) from the balance
that date (IAS 1.74). sheet date; or
 For long-term obligations containing a grace period
within which the entity may cure the violation, it is
probable that the violation will be cured within that
period
Note: The FASB decided that the project should not
address inconsistencies or differences between U.S.
GAAP and IFRS in the areas of refinancing short-term
obligations and curing of borrowing covenants.
Refinancing of short-term obligations on a long-term basis
An entity classifies its financial liabilities as current when Unlike IFRS, short-term obligations are classified as
they are due to be settled within 12 months after the long-term if the entity intends to refinance the short-
reporting period, even if an agreement to refinance, or to term obligation on a long-term basis and, prior to
reschedule payments, on a long-term basis is completed issuing the financial statements, the entity can
after the reporting period and before the financial demonstrate an ability to refinance the short-term
statements are authorised for issue (IAS1.72(b)). obligation (ASC 470-10-45) (SFAS 6.11).
Note: The FASB had decided that the project should
not address inconsistencies or differences between
U.S. GAAP and IFRS in the areas of refinancing short-
term obligations and curing of borrowing covenants.
10.5 Operating segments
IFRS U.S. GAAP

Relevant guidance: IFRS 8: IAS 34 Relevant guidance: ASC 280 (SFAS 131)
Introduction
The core principle of IFRS 8 is that an entity shall disclose The objective of ASC 280 (SFAS 131) is to provide
information to enable users of its financial statements to information about different types of business activities in
evaluate the nature and financial effects of the business which an enterprise engages and the different
activities in which it engages and the economic economic environments in which it operates to help
environments in which it operates (IFRS 8.1 and .20). users of financial statements (ASC 280-10-10-1) (SFAS
IFRS 8 was issued as a result of the joint project with the 131.3):
FASB to converge IFRS segment reporting requirements  Better understand the enterprise’s performance
with the U.S. GAAP SFAS 131, except for minor  Better assess its prospects for future net cash
differences listed in IFRS 8.BC60. The wording of IFRS 8 flows
is the same as that of SFAS 131 except for changes to
make the terminology consistent with that in other IFRS  Make more informed judgments about the
(IFRS 8.IN3). enterprise as a whole
IFRS 8 applies to the separate or individual financial ASC 280 (SFAS 131) applies to public business
statements of an entity and the consolidated financial enterprises that:
statements of a group with a parent (IFRS 8.2):  Have issued debt or equity securities or are conduit

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IFRS U.S. GAAP

 Whose debt or equity instruments are traded in a bond obligors for conduit debt securities that are
public market (a domestic or foreign stock exchange traded in a public market (a domestic or foreign
or an over-the-counter market, including local and stock exchange or an over-the counter market,
regional markets), or including local or regional markets)
 That files, or is in the process of filing, its financial  Are required to file financial statements with the
statements/consolidated financial statements with a SEC, or
securities commission or other regulatory  Provide financial statements for the purpose of
organizations for the purpose of issuing any class of issuing any class of securities in a public market
instruments in a public market
ASC 280 (SFAS 131) does not apply to parent
enterprises, subsidiaries, joint ventures, or investees
accounted for by the equity method if those enterprises’
separate company statements also are consolidated or
combined in a complete set of financial statements and
both the separate company statements and the
consolidated or combined statements are included in
the same financial report, but does apply if their
statements are issued separately (ASC 280-10-15-3)
(SFAS 131.9).
Differences remaining between IFRS 8 and ASC 280
See U.S. GAAP discussion. The differences remaining between ASC 280 (SFAS
131) and IFRS 8 are as follows (IFRS 8.BC60):
 Unlike IFRS 8, ASC 280 (SFAS 131) indicates that
the FASB staff believes that long-lived assets (as
used in ASC 280-10-50-41(SFAS 131.38) implies
hard assets that cannot be readily removed, which
would appear to exclude intangibles. Whereas non-
current assets as used in IFRS 8 include
intangibles (see IFRS 8.BC56 and 57)
 Unlike IFRS 8, ASC 280 (SFAS 131) does not
require disclosure of a measure of segment
liabilities. The FASB had concluded that the value
of information about segment liabilities in assessing
the performance of the segments was limited. IFRS
8 requires disclosure of segment liabilities if such a
measure is regularly provided to the chief operating
decision maker (see IFRS 8.BC36-38)
 Unlike IFRS 8, ASC 280 (SFAS 131) requires an
entity with a matrix form of organization to
determine operating segments based on products
and services. IFRS 8 requires such an entity to
determine segments by reference to the core
principle of IFRS 8 (see IFRS 8.BC27)
Operating segments
An operating segment is a component of an entity An operating segment is a component of an enterprise

(IFRS 8.5): (ASC Master Glossary, “Operating Segment” (SFAS
131.10):
 That engages in business activities from which it may Similar to IFRS.

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IFRS U.S. GAAP

earn revenues and incur expenses (including
revenues and expenses relating to transactions with
other components of the same entity)
 Whose operating results are regularly reviewed by

the entity’s chief operating decision maker to make
decisions about resources to be allocated to the
segment and asses its performance
 For which discrete financial information is available
An operating segment may engage in business activities Similar to IFRS (ASC 280-10-50-3) (SFAS 131.10).
for which it has yet to earn revenues, for example, start-up
operations may be operating segments before earning
revenues (IFRS 8.5).
The term chief operating decision maker identifies a Similar to IFRS (ASC 280-10-50-5) (SFAS 131.12).
function, not necessarily a manager with a specific title.
The function is to allocate resources to and asses the
performance of the operating segments of an entity
(IFRS 8.7).
Matrix form of organisation: an entity with business The characteristics above may apply to two or more
components that are managed in more than one way and overlapping sets of components for which managers
the Chief Operating Decision Maker reviews all of the are held responsible. That structure is sometimes
information provided (IFRS 8.10). With respect to a matrix referred to as a matrix form of organization. For
form of organization, the IASB decided that the use of example, in some enterprises, certain managers are
components based on products and services was responsible for different product and service lines
inconsistent with the management approach. Accordingly, worldwide, while other managers are responsible for
IFRS 8 requires the identification of operating segments to specific geographic areas. The chief operating decision
be made by reference to the core principle of IFRS 8 maker regularly reviews the operating results of both
(IFRS 8.10 and BC27). sets of components, and financial information is
available for both. Unlike IFRS 8, in that situation, the
components based on products and services would
constitute the operating segments (ASC 280-10-50-9
(SFAS 131.15).
Reportable segments
Aggregation criteria Aggregation criteria

Two or more operating segments may be aggregated into Similar to IFRS (ASC 280-10-50-11) (SFAS 131.17).
a single operating segment if aggregation is consistent
with the core principle of IFRS 8, the segments have
similar economic characteristics, and the segments are
similar in each of the following respects (IFRS 8.12):
 The nature of the products and services
 The nature of the production processes
 The type or class of customer for their products and
services
 The methods used to distribute their products or
provide their services

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IFRS U.S. GAAP

 If applicable, the nature of the regulatory
environment, for example, banking, insurance or
public utilities
Quantitative thresholds Quantitative thresholds

An entity shall report separately information about an Similar to IFRS (ASC 280-10-50-12 through 50-19)
operating segment that meets any of the following (SFAS 131.18-.24).
quantitative thresholds (IFRS 8.13):
 Its reported revenue, including both sales to external
customers and intersegment sales or transfers, is 10
per cent or more of the combined revenue, internal
and external, of all operating segments
 The absolute amount of its reported profit or loss is
10 per cent or more of the greater, in absolute
amount, of (i) the combined reported profit of all
operating segments that did not report a loss and (ii)
the combined reported loss of all operating segments
that reported a loss
 Its assets are 10 percent or more of the combined
assets of all operating segments
Operating segments that do not meet any of the
quantitative thresholds may be considered reportable, and
separately disclosed, if management believes that
information about the segment would be useful to users of
the financial statements (IFRS 8.13-.19).
Disclosure
An entity shall disclose the following for each period for Similar to IFRS, except for the following:
which a statement of comprehensive income is presented  Non-current assets as used in IFRS 8 include
(IFRS 8.21): intangibles. Unlike IFRS, long-lived assets (as used
 General information as described in IFRS 8.22 in ASC 280-10-50-41 (SFAS 131.38) implies hard
assets that cannot be readily removed, which
− Factors used to identify the entity’s reportable
would appear to exclude intangibles.
segments and types of products
 IFRS 8 requires disclosure of segment liabilities if
− Types of products and services from which each such a measure is regularly provided to the chief
reportable segment derives its revenues operating decision maker. Unlike IFRS, ASC 280
 A measure of profit or loss for each reportable (SFAS 131) does not require disclosure of a
segment (IFRS 8.23) measure of segment liabilities (ASC 280-10-50-20
 A measure of total assets and liabilities for each through 50-26 (SFAS 131.25-.28).
reportable segment if such amounts are regularly
provided to the chief operating decision maker (IFRS
8.23)
 The following information shall also be disclosed for
each reportable segment if the specified amounts are
included in the measure of segment profit or loss
reviewed by the chief operating decision maker, or
are otherwise regularly provided to the chief
operating decision maker, even if not included in that

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IFRS U.S. GAAP

measure of segment profit or loss (IFRS 8.23):
− Revenues from external customers
− Revenues from transactions with other operating

segments of the same entity
− Interest revenue and interest expense

(separately reported unless certain conditions
are met)
− Depreciation and amortisation
− Material items of income and expense disclosed

in accordance with IAS 1.97
− The entity’s interest in the profit or loss of

associates and joint ventures accounted for by
the equity method
− Income tax expense or income
− Material non-cash items other than depreciation

and amortisation
 The following information shall be disclosed for each
reportable segment if the specified amounts are
included in the measure of segment assets reviewed
by the chief operating decision maker or are
otherwise regularly provided to the chief operating
decision maker, even if not included in the measure
of segment assets (IFRS 8.24):
− Amount of investment in associates and joint

ventures accounted for by the equity method
− Amounts of additions to non-current assets other

than financial instruments, deferred tax assets,
post-employment benefit assets (see IAS 19.54-
.58), and rights arising under insurance contracts
 Reconciliations of the totals of segment revenues,
reported segment profit or loss, segment assets,
segment liabilities and other material segment items
to corresponding entity amounts as described in IFRS
8.28 (IFRS 8.21)
Reconciliations of the amounts in the statement of
financial position for reportable segments to the amounts
in the entity’s statement of financial position are required
for each date at which a statement of financial position is
presented. Information for prior periods shall be restated
as described in IFRS 8.29-.30 (IFRS 8.21).
Entity-wide disclosures
IFRS 8.32.-.34 apply to all entities subject to IFRS 8 Similar to IFRS (ASC 280-10-50-38 through 50-42)
including those entities that have a single reportable (SFAS 131.36-.39).
segment. Information required by those paragraphs shall

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IFRS U.S. GAAP

be provided only if it is not provided as part of the
reportable segment information that is required
(IFRS 8.31).
Information about products and services
An entity shall report the revenues from external
customers for each product and service or each group of
similar products and services, unless the necessary
information is not available and the cost to develop it
would be excessive, in which case that fact shall be
disclosed. The amount of revenues reported shall be
based on the financial information used to produce the
entity’s financial statements (IFRS 8.32).
Information about geographical areas
An entity shall report the information about geographical
areas that is required by IFRS 8.33, unless the necessary
information is not available and the cost to develop it
would be excessive.
Information about major customers
An entity shall provide information about the extent of its
reliance on its major customers. If revenues from
transactions with a single external customer amount to 10
percent or more of an entity’s revenues, the entity shall
disclose that fact, the total amount of revenues from each
such customer, and the identity of the segment or
segments reporting the revenues. The entity need not
disclose the identity of a major customer or the amount of
revenues that each segment reports from that customer.
For purposes of IFRS 8, a group of entities known to a
reporting entity to be under common control shall be
considered a single customer. However, judgement is
required to assess whether a government (including
government agencies and similar bodies whether local,
national or international) and entities known to the
reporting entity to be under the control of that government
are considered a single customer. In assessing this, the
reporting entity shall consider the extent of economic
integration between those entities (IFRS 8.34).
Interim period information
IAS 34, on interim financial reporting, requires an entity to ASC 280-10-50-32 through 50-33 (SFAS 131.33)
report selected information about its operating segments requires similar disclosures about each reportable
in interim financial reports (IAS 34.16(g)). segment in condensed financial statements of interim
periods.

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10.6 Related party disclosures

Note: A revised version of IAS 24 was issued on November 4, 2009. That version is effective for annual periods
beginning on or after January 1, 2011, with earlier application permitted.
The revisions relate substantially to the following:
 Introduced a partial exemption from the disclosure requirements of IAS 24 for transactions with (a) a government
that has control, joint control or significant influence over the reporting entity and (b) government-related entities,
which are entities controlled, jointly controlled or significantly influenced by that same government
 Amended the definition of a related party to clarify the intended meaning and remove some inconsistencies. It
makes it explicitly clear that in the definition of a related party, an associate includes subsidiaries of the associate
and a joint venture includes subsidiaries of the joint venture.
IFRS U.S. GAAP

Relevant guidance: IAS 24 Relevant guidance: ASC 740, 825, and 850 (SFAS 57,
159, and 109); SEC Regulation S-K, Item 402; SEC
Regulation S-X, Rule 4-08(k)
Introduction
The objective of IAS 24 is to ensure that an entity’s ASC 850 (SFAS 57) establishes requirements for
financial statements contain the disclosures necessary to related party disclosures (ASC 850-10-05-1) (SFAS 57 -
draw attention to the possibility that its financial position Summary).
and profit or loss may have been affected by the
existence of related parties and by transactions and
outstanding balances with such parties (IAS 24.1).
A related party transaction is a transfer of resources, Related parties are (ASC Master Glossary, “Related
services or obligations between related parties regardless Parties”) (SFAS 57.24f):
of whether a price is charged (IAS 24.9).  Affiliates of the enterprise
A party is related to an entity if (IAS 24.9):  Entities for which investments in their equity
 The party directly or indirectly through one or more securities would, absent the election of the fair
intermediaries (i) controls, is controlled by, or is under value option under ASC 825 (SFAS 159), be
common control with the entity (this includes parents, required to be accounted for by the equity method
subsidiaries, and fellow subsidiaries); (ii) has an by the enterprise
interest in the entity that gives it significant influence  Trusts for the benefit of employees, such as
over the entity; or (iii) has joint control over the entity pension and profit-sharing trusts that are managed
 The party is an associate of the entity (see IAS 28) by or under the trusteeship of management
 The party is a joint venture in which the entity is a  Principal owners of the enterprise
venturer (see IAS 31)  Management of the enterprise
 The party is a member of the key management  Members of the immediate families of principal
personnel of the entity or its parent owners (owners of more than 10 percent of voting
 The party is a close member of the family of any interests (ASC Master Glossary, “Principal
individual referred to in the first and fourth bullets Owners”) (SFAS 57.24e)) of the enterprise and its
above management
 The party is an entity that is controlled, jointly  Other parties with which the enterprise may deal if
controlled or significantly influenced by, or for which one party controls or can significantly influence the
significant voting power in such entity resides with, management or operating policies of the other to
directly or indirectly, any individual referred to in the an extent that one of the transacting parties might
previous two bullets be prevented from fully pursuing its own separate
 The party is a post employment benefit plan for the interests

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IFRS U.S. GAAP

benefit of employees of the entity, or of any entity that  Another party if it can significantly influence the
is a related party of the entity management or operating policies of the
Key management personnel are those persons having transacting parties or if it has an ownership interest
authority and responsibility for planning, directing and in one of the transacting parties and can
controlling the activities of the entity, directly, or indirectly, significantly influence the other to an extent that
including any director (whether executive or otherwise) of one or more of the transacting parties might be
that entity (IAS 24.9). prevented from fully pursuing its own separate
interests
In considering each possible related party relationship,
attention is directed to the substance of the relationship
and not merely the legal form (IAS 24.10).
The separate financial statements of a parent, venturer, or It is not necessary to duplicate disclosures in a set of
investor (prepared in accordance with IAS 27) must separate financial statements that is presented in the
disclose related party transactions and outstanding financial report of another enterprise if those separate
balances (IAS 24.3). statements are also consolidated or combined in a
complete set of financial statements and both sets of
financial statements are presented in the same financial
report (ASC 850-10-50-4) (SFAS 57, fn. 2).
Related party transactions and outstanding balances with Disclosure of transactions that are eliminated in the
other entities in a group are disclosed in an entity’s preparation of consolidated or combined financial
financial statements. Intragroup related party transactions statements is not required in those statements (ASC
and outstanding balances are eliminated in the 850-10-50-1) (SFAS 57.2).
preparation of consolidated financial statements of the
group (IAS 24.4).
Disclosure of relationships between parents and subsidiaries
Relationships between parents and subsidiaries shall be If the reporting enterprise and one or more other
disclosed irrespective of whether there have been enterprises are under common ownership or
transactions between those related parties. An entity shall management control and the existence of that control
disclose the name of the entity’s parent and, if different, could result in operating results or financial position of
the ultimate controlling party. If neither the entity’s parent the reporting enterprise significantly different from those
nor the ultimate controlling party produces financial that would have been obtained if the enterprises were
statements available for public use, the name of the next autonomous, the nature of the control relationship must
most senior parent that does so must also be disclosed be disclosed even though there are no transactions
(IAS 24.12). between the enterprises (ASC 850-10-50-6) (SFAS
The identification of related party relationships between 57.4).
parents and subsidiaries is in addition to the disclosure The name of the related party should be disclosed if
requirements in IAS 27, IAS 28, and IAS 31, which require necessary to the understanding of the relationship
an appropriate listing and description of significant (ASC 850-10-50-3) (SFAS 57, fn. 3).
investments in subsidiaries, associates, and jointly
controlled entities (IAS 24.14).
Disclosure of key management personnel compensation
An entity shall disclose key management personnel Unlike IFRS, ASC 850 (SFAS 57) does not require
compensation in total and for each of the following disclosure of compensation arrangements, expense
categories (IAS 24.16 and BC4-BC7): allowances, and other similar items in the ordinary
 Short term employee benefits (IAS 19.7 and .8-.23) course of business (ASC 850-10-50-1) (SFAS 57.2)
 Post-employment benefits (IAS 19.7 and .24-.125) SEC Regulation S-K, Item 402 requires disclosure of
executive compensation. Such disclosures are outside
 Other long term benefits (IAS 19.7 and .126-.131)

All rights reserved
IFRS U.S. GAAP

 Termination benefits (IAS 19.7 and .132-.143) of the entity’s basic general purpose financial
statements and are not required by U.S. GAAP.
 Share-based payment (IFRS 2)
Disclosure of transactions and outstanding balances
If there have been transactions between related parties, ASC 850 (SFAS 57) requires disclosure of material
an entity shall disclose the nature of the related party related party transactions, including (ASC 850-10-50-1)
relationship as well as information about the transaction (SFAS 57.2):
and outstanding balances necessary for an understanding  Nature of the relationship
of the potential effect of the relationship on the financial
statements. These disclosures are in addition to the  Description of the transactions, including
requirements in IAS 24.16 to disclose key management transactions to which no amounts or nominal
personnel compensation. At a minimum, disclosures shall amounts were ascribed, for each period for which
include (IAS 24.17): income statements are presented
 Amount of the transactions  Such other information deemed necessary to an

understanding of the effects of the transactions on
 Amount of the outstanding balances the financial statements
− The terms and conditions, including whether they  Amount of the transactions for each of the periods
are secured, and the nature of consideration to for which income statements are presented and the
be provided in settlement effects of any change in the method of establishing
− Details of any guarantees given or received the terms from that used in the preceding period
 Provisions for doubtful accounts related to the  Amounts due from or to related parties as of the
amount of outstanding balances date of each balance sheet presented and, if not
otherwise apparent, the terms and manner of
 The expense recognised during the period with settlement
respect to bad or doubtful debts due from related
parties  An entity that is a member of a group that files a
consolidated tax return must disclose in its
The disclosures required by IAS 24.27 are made separately issued financial statements (ASC 740-
separately for the following categories (IAS 24.18): 10-50-17) (SFAS 109.49):
 The parent
− The amount of any tax-related balances due to
 Entities with joint control or significant influence over or from affiliates as of the date of each balance
the entity sheet
 Subsidiaries − Principal provisions of the method by which
 Associates the consolidated amount of current and
 Joint ventures in which the entity is a venturer deferred tax expense is allocated to members
of the group and the nature and effect of any
 Key management personnel of the entity or its parent changes in that method (and in determining
 Other related parties related balances to or from affiliates)
Unlike IFRS, there is no specific requirement in U.S.
GAAP to disclose allowances for doubtful accounts
related to the amount of related party outstanding
balances.
Disclosure of items of a similar nature
Items of a similar nature may be disclosed in aggregate In some cases, aggregation of similar transactions by
except where separate disclosure is necessary for an type of related party may be appropriate (ASC 850-10-
understanding of the effects of related party transactions 50-3) (SFAS 57, fn. 3).
on the financial statements of the entity (IAS 24.22).

All rights reserved
IFRS U.S. GAAP
Other
IAS 24 does not require that related party transactions be Similar to IFRS, U.S. GAAP does not require that
disclosed on the face of the financial statements. related party transactions be disclosed on the face of
the financial statements. However, SEC registrants are
required to disclose related party transactions on the
face of their financial statements (SEC Regulation S-X,
Rule 4-08(k)).

All rights reserved
Appendix A
Listing of IFRS standards
(Note: All IFRS standards are included in the listing below.)
International Financial Reporting Standards (IFRS)
IFRS 1, First-Time Adoption of International Financial Reporting Standards

IFRS 2, Share-based Payment
IFRS 3, Business Combinations
IFRS 3, Business Combinations (revised January 2008)
IFRS 4, Insurance Contracts
IFRS 5, Non-current Assets Held for Sale and Discontinued Operations
IFRS 6, Exploration for and Evaluation of Mineral Resources
IFRS 7, Financial Instruments - Disclosures
IFRS 8, Operating Segments
IFRS 9, Financial Instruments
International Accounting Standards (IAS)
IAS 1, Presentation of Financial Statements

IAS 2, Inventories
IAS 7, Statements of Cash Flows
IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors
IAS 10, Events after the Reporting Period
IAS 11, Construction Contracts
IAS 12, Income Taxes
IAS 16, Property, Plant and Equipment
IAS 17, Leases
IAS 18, Revenue
IAS 19, Employee Benefits
IAS 20, Accounting for Government Grants and Disclosure of Government Assistance
IAS 21, The Effects of Changes in Foreign Exchange Rates
IAS 23, Borrowing Costs
IAS 24, Related Party Disclosures
All rights reserved
IAS 26, Accounting and Reporting by Retirement Benefit Plans

IAS 27, Consolidated and Separate Financial Statements
IAS 27, Consolidated and Separate Financial Statements (revised January 2008)
IAS 28, Investments in Associates
IAS 29, Financial Reporting in Hyperinflationary Economies
IAS 31, Interests in Joint Ventures
IAS 32, Financial Instruments: Presentation
IAS 33, Earnings per Share
IAS 34, Interim Financial Reporting
IAS 36, Impairment of Assets
IAS 37, Provisions, Contingent Liabilities and Contingent Assets
IAS 38, Intangible Assets
IAS 39, Financial Instruments: Recognition and Measurement
IAS 40, Investment Property
IAS 41, Agriculture
International Financial Reporting Interpretations Committee (IFRIC)
IFRIC 1, Changes in Existing Decommissioning, Restoration and Similar Liabilities

IFRIC 2, Members’ Shares in Co-operative Entities and Similar Instruments
IFRIC 4, Determining whether an Arrangement Contains a Lease
IFRIC 5, Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds
IFRIC 6, Liabilities arising from Participating in a Specific Market-Waste Electrical and Electronic Equipment
IFRIC 7, Applying the Restatement Approach under IAS 29 "Financial Reporting in Hyperinflationary Economies"
IFRIC 8, Scope of IFRS 2
IFRIC 9, Reassessment of Embedded Derivatives
IFRIC 10, Interim Financial Reporting and Impairment
IFRIC 11, IFRS 2 - Group and Treasury Share Transactions
IFRIC 12, Service Concession Arrangements
IFRIC 13, Customer Loyalty Programmes
IFRIC 14, IAS 19 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction
IFRIC 15, Agreements for the Construction of Real Estate
IFRIC 16, Hedges of a Net Investment in a Foreign Operation

All rights reserved
IFRIC 17, Distributions of Non-Cash Assets to Owners

IFRIC 18, Transfers of Assets from Customers
IFRIC 19, Extinguishing Financial Liabilities with Equity Instruments
Standing Interpretations Committee (SIC)
SIC-7, Introduction of the Euro

SIC-10, Government Assistance - No Specific Relation to Operating Activities
SIC-12, Consolidation - Special Purpose Entities
SIC-13, Jointly Controlled Entities - Non-Monetary Contributions by Venturers
SIC-15, Operating Leases - Incentives
SIC-21, Income Taxes - Recovery of Revalued Non-Depreciable Assets
SIC-25, Income Taxes - Changes in the Tax Status of an Entity or its Shareholders
SIC-27, Evaluating the Substance of Transactions Involving the Legal Form of a Lease
SIC-29, Service Concession Arrangements - Disclosures
SIC-31, Revenue - Barter Transactions Involving Advertising Services
SIC-32, Intangible Assets - Web Site Costs

All rights reserved
Appendix B
Listing of FASB Codification Topics
(Note: All FASB Codification topics are included in the listing below.)
FASB Accounting Standards Codification™ (ASC)
ASC 105, Generally Accepted Accounting Principles

ASC 205, Presentation of Financial Statements
ASC 210, Balance Sheet
ASC 215, Statement of Shareholder Equity
ASC 220, Comprehensive Income
ASC 225, Income Statement
ASC 230, Statement of Cash Flows
ASC 235, Notes to Financial Statements
ASC 250, Accounting Changes and Error Corrections
ASC 255, Changing Prices
ASC 260, Earnings per Share
ASC 270, Interim Reporting
ASC 272, Limited Liability Entities
ASC 274, Personal Financial Statements
ASC 275, Risks and Uncertainties
ASC 280, Segment Reporting
ASC 305, Cash and Cash Equivalents
ASC 310, Receivables
ASC 320, Investments–Debt and Equity Securities
ASC 323, Investments–Equity Method and Joint Ventures
ASC 325, Investments–Other
ASC 330, Inventory
ASC 340, Deferred Costs and Other Assets
ASC 350, Intangibles–Goodwill and Other
ASC 360, Property, Plant, and Equipment
ASC 405, Liabilities

All rights reserved
ASC 410, Asset Retirement and Environmental Obligations

ASC 420, Exit or Disposal Cost Obligations
ASC 430, Deferred Revenue
ASC 440, Commitments
ASC 450, Contingencies
ASC 460, Guarantees
ASC 470, Debt
ASC 480, Distinguishing Liabilities from Equity
ASC 505, Equity
ASC 605, Revenue Recognition
ASC 705, Cost of Sales and Services
ASC 710, Compensation–General
ASC 712, Compensation–Nonretirement Postemployment Benefits
ASC 715, Compensation–Retirement Benefits
ASC 718, Compensation–Stock Compensation
ASC 720, Other Expenses
ASC 730, Research and Development
ASC 740, Income Taxes
ASC 805, Business Combinations
ASC 808, Collaborative Arrangements
ASC 810, Consolidation
ASC 815, Derivatives and Hedging
ASC 820, Fair Value Measurements and Disclosures
ASC 825, Financial Instruments
ASC 830, Foreign Currency Matters
ASC 835, Interest
ASC 840, Leases
ASC 845, Nonmonetary Transactions
ASC 850, Related Party Disclosures
ASC 852, Reorganizations
ASC 855, Subsequent Events
ASC 860, Transfers and Servicing

All rights reserved
ASC 905, Agriculture

ASC 908, Airlines
ASC 910, Contractors–Construction
ASC 912, Contractors–Federal Government
ASC 92X, Entertainment
ASC 930, Extractive–Activities Mining
ASC 932, Extractive–Activities Oil and Gas
ASC 94X, Financial Services
ASC 952, Franchisors
ASC 954, Health Care Entities
ASC 958, Not-for-Profit Entities
ASC 96X, Plan Accounting
ASC 97X, Real Estate
ASC 980, Regulated Operations
ASC 985, Software
ASC 995, Steamship Entities
ASC Master Glossary

All rights reserved
Appendix C
Listing of post-codification U.S. GAAP standards (Accounting Standards Updates (ASUs))
(Note: All ASUs are included in the listing below.)
ASU 2010-24, Health Care Entities (Topic 954): Presentation of Insurance Claims and Related Insurance Recoveries (a
consensus of the FASB Emerging Issues Task Force)
ASU 2010-23, Health Care Entities (Topic 954): Measuring Charity Care for Disclosure (a consensus of the FASB Emerging
Issues Task Force)
ASU 2010-22, Accounting for Various Topics: Technical Corrections to SEC Paragraphs (SEC Update)
ASU 2010-21, Accounting for Technical Amendments to Various SEC Rules and Schedules: Amendments to SEC
Paragraphs Pursuant to Release No. 33-9026: Technical Amendments to Rules, Forms, Schedules and Codification of Financial
Reporting Policies (SEC Update)
ASU 2010-20, Receivables (Topic 310): Disclosures about the Credit Quality of Financing Receivables and the Allowance for
Credit Losses
ASU 2010-19, Foreign Currency (Topic 830): Foreign Currency Issues: Multiple Foreign Currency Exchange Rates (SEC
Update)
ASU 2010-18, Receivables (Topic 310): Effect of a Loan Modification When the Loan Is Part of a Pool That Is Accounted for
as a Single Asset (a consensus of the FASB Emerging Issues Task Force)
ASU 2010-17, Revenue Recognition – Milestone Method (Topic 605): Milestone Method of Revenue Recognition (a consensus of
the FASB Emerging Issues Task Force)
ASU 2010-16, Entertainment – Casinos (Topic 924): Accruals for Casino Jackpot Liabilities (a consensus of the FASB
Emerging Issues Task Force)
ASU 2010-15, Financial Services – Insurance (Topic 944): How Investments Held through Separate Accounts Affect an
Insurer’s Consolidation Analysis of Those Investments (a consensus of the FASB Emerging Issues Task Force)
ASU 2010-14, Accounting for Extractive Activities – Oil & Gas: Amendments to Paragraph 932-10-S99-1 (SEC
Update)
ASU 2010-13, Compensation—Stock Compensation (Topic 718): Effect of Denominating the Exercise Price of a Share-Based
Payment Award in the Currency of the Market in Which the Underlying Equity Security Trades (a consensus of the FASB
ASU 2010-12, Income Taxes (Topic 740): Accounting for Certain Tax Effects of the 2010 Health Care Reform Acts (SEC
Update)
ASU 2010-11, Derivatives and Hedging (Topic 815): Scope Exception Related to Embedded Credit Derivatives
ASU 2010-10, Consolidation (Topic 810): Amendments for Certain Investment Funds
ASU 2010-09, Subsequent Events (Topic 855): Amendments to Certain Recognition and Disclosure Requirements
ASU 2010-08, Technical Corrections to Various Topics

All rights reserved
ASU 2010-07, Not-for-Profit Entities (Topic 958): Not-for-Profit Entities: Mergers and Acquisitions
ASU 2010-06, Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value
Measurements
ASU 2010-05, Compensation – Stock Compensation (Topic 718): Escrowed Share Arrangements and the Presumption of
Compensation (SEC Update)
ASU 2010-04, Accounting for Various Topics – Technical Corrections to SEC Paragraphs (SEC Update)
ASU 2010-03, Extractive Activities – Oil and Gas (Topic 932): Oil and Gas Reserve Estimation and Disclosures
ASU 2010-02, Consolidation (Topic 810): Accounting and Reporting for Decreases in Ownership of a Subsidiary – a Scope
Clarification
ASU 2010-01, Equity (Topic 505): Accounting for Distributions to Shareholders with Components of Stock and Cash (a
consensus of the FASB Emerging Issues Task Force)
ASU 2009-17, Consolidations (Topic 810): Improvements to Financial Reporting by Enterprises Involved with Variable
Interest Entities
ASU 2009-16, Transfers and Servicing (Topic 860): Accounting for Transfers of Financial Assets
ASU 2009-15, Accounting for Own-Share Lending Arrangements in Contemplation of Convertible Debt Issuance or Other
Financing (a consensus of the FASB Emerging Issues Task Force)
ASU 2009-14, Software (Topic 985): Certain Revenue Arrangements That Include Software Elements (a consensus of the
FASB Emerging Issues Task Force)
ASU 2009-13, Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements (a consensus of the FASB
ASU 2009-12, Fair Value Measurements and Disclosures (Topic 820): Investments in Certain Entities That Calculate Net
Asset Value per Share (or Its Equivalent)
ASU 2009-11, Extractive Activities – Oil and Gas – Amendment to Section 932-10-S99 (SEC Update)
ASU 2009-10, Financial Services – Broker and Dealers: Investments – Other: Amendment to Subtopic 940-325 (SEC
Update)
ASU 2009-09, Accounting for Investments – Equity Method and Joint Ventures and Accounting for Equity-Based Payments
to Non-Employees: Amendments to Sections 323-10-S99 and 505-50-S99 (SEC Update)
ASU 2009-08, Earnings per Share: Amendments to Section 260-10-S99 (SEC Update)
ASU 2009-07, SEC Update – Accounting for Various Topics: Technical Corrections to SEC Paragraphs (SEC Update)
ASU 2009-06, Income Taxes (Topic 740): Implementation Guidance on Accounting for Uncertainty in Income Taxes and
Disclosure Amendments for Nonpublic Entities
ASU 2009–05, Fair Value Measurements and Disclosures (Topic 820): Measuring Liabilities at Fair Value
ASU 2009–04, Accounting for Redeemable Equity Instruments: Amendment to Section 480-10-S99 (SEC Update)
ASU 2009–03, SEC Update: Amendments to Various Topics Containing SEC Staff Accounting Bulletins (SEC Update)

All rights reserved
ASU 2009–02, Omnibus Update: Amendments to Various Topics for Technical Corrections
ASU 2009–01, Topic 105 – Generally Accepted Accounting Principles: amendments based on – Statement of Financial
Accounting Standards No. 168 – The FASB Accounting Standards CodificationTM and the Hierarchy of Generally Accepted
Accounting Principles

All rights reserved
Appendix D
Listing of pre-codification U.S. GAAP standards
(Note: Only those pre-codification U.S. GAAP standards that are mentioned in the Comparison Document are included
in the listing below.)
Statements of Financial Accounting Standards (SFAS)
SFAS 2, Accounting for Research and Development Costs

SFAS 5, Accounting for Contingencies
SFAS 6, Classification of Short-Term Obligations Expected to Be Refinanced
SFAS 13, Accounting for Leases
SFAS 28, Accounting for Sales with Leasebacks
SFAS 29, Determining Contingent Rentals
SFAS 34, Capitalization of Interest Cost
SFAS 43, Accounting for Compensated Absences
SFAS 47, Disclosure of Long-Term Obligations
SFAS 48, Revenue Recognition When Right of Return Exists
SFAS 52, Foreign Currency Translation
SFAS 57, Related Party Disclosures
SFAS 62, Capitalization of Interest Cost in Situations Involving Certain Tax-Exempt Borrowings and Certain Gifts and
Grants
SFAS 66, Accounting for Sales of Real Estate
SFAS 67, Accounting for Costs and Initial Rental Operations of Real Estate Projects
SFAS 78, Classification of Obligations That Are Callable by the Creditor
SFAS 86, Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed
SFAS 87, Employers' Accounting for Pensions
SFAS 88, Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination
Benefits
SFAS 91, Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct
Costs of Leases
SFAS 94, Consolidation of All Majority-Owned Subsidiaries
SFAS 95, Statement of Cash Flows

All rights reserved
SFAS 98, Accounting for Leases; Sale-Leaseback Transactions Involving Real Estate; Sales-Type Leases of Real Estate;
Definition of the Lease Term; Initial Direct Costs of Direct Financing Lease
SFAS 102, Statement of Cash Flows - Exemption of Certain Enterprises and Classification of Cash Flows from Certain
Securities Acquired for Resale
SFAS 104, Statement of Cash Flows - Net Reporting of Certain Cash Receipts and Cash Payments and Classification of Cash
Flows from Hedging Transactions
SFAS 106, Employers' Accounting for Postretirement Benefits Other Than Pensions
SFAS 107, Disclosures about Fair Value of Financial Instruments
SFAS 109, Accounting for Income Taxes
SFAS 112, Employers' Accounting for Postemployment Benefits
SFAS 114, Accounting by Creditors for Impairment of a Loan
SFAS 115, Accounting for Certain Investments in Debt and Equity Securities
SFAS 123R, Share-Based Payment
SFAS 128, Earnings per Share
SFAS 130, Reporting Comprehensive Income
SFAS 131, Disclosures about Segments of an Enterprise and Related Information
SFAS 133, Accounting for Derivative Instruments and Hedging Activities
SFAS 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities
SFAS 141R, Business Combinations
SFAS 142, Goodwill and Other Intangible Assets
SFAS 143, Accounting for Asset Retirement Obligations
SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets
SFAS 146, Accounting for Costs Associated with Exit or Disposal Activities
SFAS 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity
SFAS 151, Inventory Costs
SFAS 154, Accounting Changes and Error Corrections
SFAS 155, Accounting for Certain Hybrid Financial Instruments
SFAS 157, Fair Value Measurements
SFAS 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans
SFAS 159, The Fair Value Option for Financial Assets and Financial Liabilities
SFAS 160, Noncontrolling Interests in Consolidated Financial Statements
SFAS 162, The Hierarchy of Generally Accepted Accounting Principles
SFAS 165, Subsequent Events
All rights reserved
SFAS 166, Accounting for Transfers of Financial Assets - An Amendment of FASB Statement No. 140
SFAS 167, Amendments to FASB Interpretation No. 46(R)
SFAS 168, The FASB Accounting Standards Codification™ and the Hierarchy of Generally Accepted Accounting Principles
FASB Staff Positions (FSP)
FSP FAS 13-1, “Accounting for Rental Costs Incurred during a Construction Period”
FSP FAS 115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments”
FSP FAS 141R-1, “Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That
Arise from Contingencies”
FSP FAS 142-3, “Determination of the Useful Life of Intangible Assets”
FSP APB 14-1, “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion
(Including Partial Cash Settlement)”
FSP APB 18-1, “Accounting by an Investor for Its Proportionate Share of Accumulated Other Comprehensive
Income of an Investee Accounted for under the Equity Method in Accordance with APB Opinion No. 18
upon a Loss of Significant Influence”
Emerging Issues Task Force (EITF)
EITF Issue 85-12, “Retention of Specialized Accounting for Investments in Consolidation”

EITF Issue 96-16, “Investor's Accounting for an Investee When the Investor Has a Majority of the Voting
Interest but the Minority Shareholder or Shareholders Have Certain Approval or Veto Rights”
EITF Issue 96-18, “Accounting for Equity Instruments That Are Issued to Other Than Employees for
Acquiring, or in Conjunction with Selling, Goods or Services”
EITF Issue 97-10, “The Effect of Lessee Involvement in Asset Construction”
EITF Issue 98-5, “Accounting for Convertible Securities with Beneficial Conversion Features or Contingently
Adjustable Conversion Ratios”
EITF Issue 98-11, “Accounting for Acquired Temporary Differences in Certain Purchase Transactions That
Are Not Accounted for as Business Combinations”
EITF Issue 98-13, “Accounting by an Equity Method Investor for Investee Losses When the Investor Has
Loans to and Investments in Other Securities of the Investee”
EITF Issue 99-10, “Percentage Used to Determine the Amount of Equity Method Losses”
EITF Issue 99-17, “Accounting for Advertising Barter Transactions”
EITF Issue 99-19, “Reporting Revenue Gross as a Principal versus Net as an Agent”
EITF Issue 00-1, “Investor Balance Sheet and Income Statement Display under the Equity Method for
Investments in Certain Partnerships and Other Ventures”
EITF Issue 00-2, “Accounting for Web Site Development Costs”

All rights reserved
EITF Issue 00-21, “Revenue Arrangements with Multiple Deliverables”

EITF Issue 00-27, “Application of Issue No. 98-5 to Certain Convertible Instruments”
EITF Issue 01-08, “Determining Whether an Arrangement Contains a Lease”
EITF Issue 01-12, “The Impact of the Requirements of FASB Statement No. 133 on Residual Value
Guarantees in Connection with a Lease”
EITF Issue 02-14, “Whether an Investor Should Apply the Equity Method of Accounting to Investments
Other Than Common Stock”
EITF Issue 04-5, “Determining Whether a General Partner, or the General Partners As a Group, Controls a
Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights”
EITF Issue 06-9, “Reporting a Change in (or the Elimination of) a Previously Existing Difference between the
Fiscal Year-End of a Parent Company and That of a Consolidated Entity or between the Reporting Period of
an Investor and That of an Equity Method Investee”
EITF Issue 07-1, “Accounting for Collaborative Arrangements”
EITF Issue 08-6, “Equity Method Investment Accounting Considerations”
EITF Issue 08-7, “Accounting for Defensive Intangible Assets”
EITF Topic D-42, “The Effect on the Calculation of Earnings per Share for the Redemption or Induced
Conversion of Preferred Stock”
EITF Topic D-43, “Assurance That a Right of Setoff Is Enforceable in a Bankruptcy under FASB
Interpretation No. 39”
EITF Topic D-53, “Computation of Earnings per Share for a Period That Includes a Redemption or an
Induced Conversion of a Portion of a Class of Preferred Stock”
EITF Topic D-82, “Effect of Preferred Stock Dividends Payable in Common Shares on Computation of
Income Available to Common Stockholders”
EITF Topic D-86, “Issuance of Financial Statements”
EITF Topic D-98, “Classification and Measurement of Redeemable Securities”
FASB Interpretations (FIN)
FIN 14, Reasonable Estimation of the Amount of a Loss - an Interpretation of FASB Statement No. 5
FIN 19, Lessee Guarantee of the Residual Value of Leased Property - an Interpretation of FASB Statement No. 13
FIN 39, Offsetting of Amounts Related to Certain Contracts - an Interpretation of APB Opinion No. 10 and FASB
Statement No. 105
FIN 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others - an Interpretation of FASB Statements No. 5, 57, and 107 and Rescission of FASB Interpretation No. 34
FIN 46R, Consolidation of Variable Interest Entities - an Interpretation of ARB No. 51
FIN 47, Accounting for Conditional Asset Retirement Obligations - an Interpretation of FASB Statement No. 143

All rights reserved
FIN 48, Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109
Accounting Principles Board Opinions (APB)
APB 6, Status of Accounting Research Bulletins

APB 12, Omnibus Opinion - 1967 -- Classification and Disclosure of Allowances; Disclosure of Depreciable Assets and
Depreciation; Deferred Compensation Contracts; Capital Changes; Convertible Debt and Debt Issued with Stock Warrants;
Amortization of Debt Discount and Expense or Premium
APB 14, Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants
APB 18, The Equity Method of Accounting for Investments in Common Stock
APB 21, Interest on Receivables and Payables
APB 22, Disclosure of Accounting Policies
APB 26, Early Extinguishment of Debt
APB 29, Accounting for Nonmonetary Transactions
APB 30, Reporting the Results of Operations - Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary,
Unusual and Infrequently Occurring Events and Transactions
Accounting Research Bulletins (ARB)
ARB 43, Restatement and Revision of Accounting Research Bulletins

• Chapter 1 – “Prior Opinions”
• Chapter 2 – “Form of Statements”
• Chapter 3 – “Working Capital”
• Chapter 4 – “Inventory Pricing”
• Chapter 9 – “Depreciation”
ARB 45, Long-Term Construction-Type Contracts

ARB 51, Consolidated Financial Statements
FASB Technical Bulletins (FTB)
FTB 85-6, Accounting for a Purchase of Treasury Shares at a Price Significantly in Excess of the Current Market Price of the
Shares and the Income Statement Classification of Costs Incurred in Defending against a Takeover Attempt
FTB 88-1, Issues Relating to Accounting for Leases - Time Pattern of the Physical Use of the Property in an Operating Lease;
Lease Incentives in an Operating Lease; Applicability of Leveraged Lease Accounting to Existing Assets of the Lessor; Money-
Over-Money Lease Transactions; Wrap Lease Transactions

All rights reserved
Statements of Financial Accounting Concepts (SFAC)
SFAC 2, Qualitative Characteristics of Accounting Information

SFAC 5, Recognition and Measurement in Financial Statements of Business Enterprises
SFAC 6, Elements of Financial Statements - A replacement of FASB Concepts Statement No. 3
AICPA Statements of Position (SOP)
SOP 78-9, Accounting for Investments in Real Estate Ventures

SOP 81-1, Accounting for Performance of Construction-Type and Certain Production-Type Contracts
SOP 93-6, Employers' Accounting for Employee Stock Ownership Plans
SOP 93-7, Reporting on Advertising Costs
SOP 94-6, Disclosure of Certain Significant Risks and Uncertainties
SOP 97-2, Software Revenue Recognition
SOP 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use
SOP 98-5, Reporting on the Costs of Start-up Activities
SOP 01-6, Accounting by Certain Entities (Including Entities with Trade Receivables) That Lend to or Finance the Activities
of Others

All rights reserved
Appendix E
Listing of SEC standards
(Note: Only those SEC standards that are mentioned in the Comparison Document are included in the listing below.)
SEC Regulation S-X (Financial Statement Requirements)
Rule 3-01, Consolidated Balance Sheets

Rule 3-02, Consolidated Statements of Income and Cash Flows
Rule 3-09, Separate Financial Statements of Subsidiaries Not Consolidated and 50 Percent or Less Owned Persons
Rule 4-08, General Notes to Financial Statements
Rule 5-02, Balance Sheets
Rule 5-03, Income Statements
Rule 5-04, What Schedules are to be Filed
Rule 10-01, Interim Financial Statements
SEC Regulation S-K (Non Financial Statement Requirements)
Item 402, Executive Compensation
Staff Accounting Bulletin (SAB)
SAB Topic 4:C, Change in Capital Structure

SAB Topic 5:CC, Impairments
SAB Topic 11:M, Disclosure of the Impact That Recently Issued Accounting Standards Will Have on the Financial
Statements of the Registrant When Adopted in a Future Period
SAB Topic 13, Revenue Recognition

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Appendix F
Listing of other standards
(Note: Only those other standards that are mentioned in the Comparison Document are included in the listing below.)
Sarbanes-Oxley Act of 2002
Section 302, Corporate Responsibility for Financial Reports
American Institute of Certified Public Accountants (AICPA)
AICPA AU Section 341, The Auditor's Consideration of an Entity's Ability to Continue as a Going Concern

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Grant Thorton Comparison US GAAP To IFRS 2010

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Grant Thorton Comparison US GAAP To IFRS 2010

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Comparison between U.S.

© 2010 Grant Thornton LLP

© 2010 Grant Thornton LLP

9.2 Joint ventures ............................................................................................................................................. 118

© 2010 Grant Thornton LLP

© 2010 Grant Thornton LLP

• Improvements in IFRS accounting standards

• Availability of more detailed tagging for interactive reporting

• Advances in IFRS education and training

© 2010 Grant Thornton LLP

Financial accounting and reporting in the United States

© 2010 Grant Thornton LLP

IFRS and U.S. GAAP comparison

• IFRS 4, Insurance Contracts

• IFRS 6, Exploration for and Evaluation of Mineral Resources

• IAS 26, Accounting and Reporting by Retirement Benefit Plans

• IAS 41, Agriculture

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• IFRS 1, First-time Adoption of International Financial Reporting Standards

• IFRS 3, Business Combinations

• IFRS 4, Insurance Contracts

• IFRS 5, Non-Current Assets Held for Sale and Discontinued Operations

• IFRS 7, Financial Instruments: Disclosures

• IAS 1, Presentation of Financial Statements

• IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors

• IAS 12, Income Taxes

• IAS 18, Revenue

• IAS 21, The Effects of Changes in Foreign Exchange Rates

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• IAS 27, Consolidated and Separate Financial Statements

• IAS 28, Investments in Associates

• IAS 31, Interests in Joint Ventures

• IAS 32, Financial Instruments: Presentation

• IAS 36, Impairment of Assets

• IAS 39, Financial Instruments: Recognition and Measurement

• IFRIC 10, Interim Financial Reporting and Impairment

• IFRIC 12, Service Concession Arrangements

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2. Overall financial statement presentation

IFRS U.S. GAAP

An entity shall apply IAS 1 in preparing and presenting

© 2010 Grant Thornton LLP

IFRS U.S. GAAP

An entity cannot rectify inappropriate accounting Similar to IFRS.

An entity shall clearly identify each financial statement Similar to IFRS.

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IFRS U.S. GAAP

2.2 Statement of financial position/balance sheet

IFRS U.S. GAAP

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IFRS U.S. GAAP

An entity shall present additional line items, headings Similar to IFRS.

© 2010 Grant Thornton LLP

IFRS U.S. GAAP

© 2010 Grant Thornton LLP

IFRS U.S. GAAP

An entity shall disclose, either in the statement of Similar to IFRS.

− Par value per share, or that the shares have

− A reconciliation of the number of shares

− The rights, preferences and restrictions

− Shares in the entity held by the entity or by its

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IFRS U.S. GAAP