Comparing GAAP and IFRS Current Asset Presentation

• US GAAP requires companies to list assets in order of liquidity starting with Current Assets and followed by Noncurrent Assets. • Under IFRS order of liquidity is not specified.
– Entities can report assets and liabilities broadly without separating current from noncurrent if they believe this is reliable and more relevant.


– Bad debts usually recognized using the aging approach. 2 .Accounts Receivable under IFRS – A/R recorded for events that create revenue but have not been settled – Trade receivables are generally distinguished from other categories of receivables but this isn’t absolutely required. Companies cannot use direct write-off method.

• Per SFAS No.Sale of Receivables • US GAAP sale of trade receivables without recourse is generally treated as a sale if control is surrendered with no continued involvement. 140 sales with recourse are treated as sales if: – Assets are transferred beyond the reach of the transferor – Transferee can pledge or exchange the transferred assets freely – Transferor has not kept effective control such as with required repurchase provisions 3 .

– Management may interpret ‘substantive risk’ in a way consistent with SFAS No. • Now factoring with recourse does not qualify as a sale if there is no substantive risk assumed by the “buyer” of the receivables. – Another example of the use of professional judgment under IFRS which may lead to different treatment than with GAAP 4 . 140 but perhaps not.Sale of Receivables continued • Under IFRS factoring receivables without recourse qualifies as a sale.

Marketable Securities • US GAAP categorizes marketable securities into – Trading – Available for sale (AFS) – Held to maturity (HTM) • To categorize as HTM .entity must have ‘positive intent and ability’ to hold until maturity – Carried at amortized cost (effective interest method) – If more than an insignificant amount (as compared to total HTM securities) are sold entity cannot use the HTM classification for two years (2 year penalty period is not specified for nonpublic firms under US GAAP) 5 .

Marketable Securities continued • AFS securities are valued at fair value • The offsetting side of the asset revaluation is accounted for differently GAAP vs. IFRS – GAAP the change is reflected in other comprehensive income – IFRS the change is recognized directly in equity through the statement of changes in equity 6 .

Marketable Securities continued • Impairments of HTM securities – With both GAAP and IFRS. • Recoveries of impairments are not allowed with GAAP. impaired securities must be written down to estimated recoverable amount (PV of future cash flows discounted at original effective rate) • With IFRS recoveries of impaired HTM securities is included in income. 7 .

GAAP or IFRS IFRS.S. Receivables.No specific guidance offered under either set of standards GAAP-Industry specific guidance for acquired loans and receivables IFRS-Loans and receivables measured at amortized cost 8 .Cash. Prepaid expenses GAAP-No specific guidance offered under U.

revenue should be recognised as follows: [IAS 18. Royalties. • royalties: on an accruals basis in accordance with the substance of the relevant agreement. 9 . and • dividends: when the shareholder's right to receive payment is established. provided that it is probable that the economic benefits will flow to the enterprise and the amount of revenue can be measured reliably. and Dividends • For interest. royalties and dividends.Interest.29-30] • interest: on a time proportion basis that takes into account the effective yield.

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