COMPARISON OF IFRS AND US GAAP

IAS/IFRS TOPIC IFRSS US GAAP

General approach More “principles- More “rules-based”
based” standards with standards with specific
limited application application guidance.
guidance

IFRS 1 First-time adoption General principle is full No specific standard.

First Time Adoption retrospective Practice is generally full
application of IFRSs in retrospective application
force at the time of unless the transitional
adoption, unless the provisions in a specific
specific exceptions and standard require otherwise.
exemptions in IFRS 1
permit or require
otherwise.

IFRS 1 General Certain exceptions and exemptions at transition in

First Time Adoption accordance with IFRS 1 can give rise to differences
between IFRSs and US GAAP in areas that would
not normally give rise to such differences.

IFRS 2 Date for measuring Modified grant date Earlier of counterparty’s

Share Based Payments share-based payments method. commitment to perform
to non-employees (where a sufficiently large
disincentive for non-
performance exists) or
actual performance.

IFRS 2 Use of historical Not permitted. Permitted.

Share Based Payments volatility or industry
index measurement for
non-public entities
when it is not
practicable to estimate
expected volatility.

IFRS 2 Modification of an Expense determined Expense determined based

Share Based Payments award by change in based on the grant date on fair value at the
performance condition fair value. modification date.
(improbable to
probable) (Type III
modifications)

IFRS 2 Share-based payments Charge is recognised An accounting policy

Share Based Payments with graded vesting on an accelerated basis choice exists for awards
features. to reflect the vesting as with a service condition
it occurs. only to either: (a) amortise
the entire grant on a
straight-line basis over the
longest vesting period, or
(b) recognise a charge
similar to IFRSs.

IFRS 2 Balance sheet Focus on whether the More detailed requirements

Share Based Payments classification of share- award can be cash that may result in more
based payment settled. share-based arrangements
arrangements. being classified as
liabilities.

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IFRS 3 Date on which Acquisition date (date Within a reasonable period
Business Combinations marketable equity on which control before and after the date
securities issued as passes) that the terms of the
consideration in a acquisition are agreed to
business combination and announced.
are measured.
IFRS 3 Date on which Acquisition date (if the Generally when
Business Combinations contingent for amount is probable and contingency is resolved.
consideration is can be measured
recorded (as part of reliably).
consideration).

IFRS 3 Recognising a liability Only if acquiree has Can be recognised if the

Business Combinations for a planned post- already recognised a restructuring relates to the
acquisition provision under IAS acquired business and
restructuring. 37. certain conditions are met.

IFRS 3 Measuring minority Minority’s percent of Minority interest measured

Business Combinations interest. fair values. at fair value if entity
consolidated under the risk
and rewards model (FIN
46); otherwise, it is
recorded at proportion of
historical cost.

IFRS 3 Purchased in-process Can be recognised as Determined the fair value of

Business Combinations R&D an acquired finite life in-process R&D and
intangible asset expense immediately unless
(amortised), or as part it has an alternative future
of goodwill if not use.
separately measurable
(not amortised but
subject to an annual
impairment test).

IFRS 3 Excess of fair value of Recognise immediately Allocate on a pro rata basis
Business Combinations net assets acquired over as a gain. to reduce the carrying
the acquisition cost. amounts of certain acquired
non-financial assets, with
any excess recognised as an
extraordinary gain.

IFRS 3 Combinations of Outside the scope of Pooling of interests

Business Combinations entities under common IFRS 3 though merger mentioned is required.
control. accounting (pooling of
interests method) is
generally used in
practice.

IFRS 4 Rights and obligations IFRS 4 addresses Several comprehensive

Insurance Contracts under insurance recognition and pronouncements and other
contracts measurement in only a comprehensive industry
limited way. It is an accounting guides have
interim standard been published.
pending completion of
a comprehensive
project.

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IAS/IFRS TOPIC IFRSS US GAAP

IFRS 4 Derivatives embedded An embedded An embedded derivative
Insurance Contracts in insurance contracts derivative whose whose characteristics and
characteristics and risks risks are not closely related
are not closely related to the host contract must be
to the host contract but accounted for separately.
whose value of the
insurance contract need
not be separated out
and accounted for as a
derivative.

IFRS 5 Definition of a A reportable business A component which may be

Disposal of non-current discontinued operation. of geographical an operating segment, a
assets / discontinued segment or major reporting unit, a subsidiary,
operations component thereof. or an asset group (less
restrictive than the IFRS 5
definition).

IFRS 5 Definition of a Not addressed. Disposing entity should

Disposal of non-current discontinued operation have no continuing cash
assets / discontinued – continuing flows representative of
operations involvement. significant continuing
involvement.

IFRS 5 Presentation of Post-tax income or loss Pre-tax and post-tax income

Disposal of non-current discontinued is required on the face or loss are required on the
assets / discontinued operations. of the income face of the income
operations statement. statement.

IFRS 6 Extractive activities Costs may be More specific rules:

Exploration for and capitalised or expensed Oil and Gas costs accounted
Evaluation of Mineral as incurred in for either under the
Resources accordance with the successful efforts or full
accounting policy of cost methods
the entity.
No specific guidance Specific guidance in place
on recognisation or for oil and gas costs.
measurement of pre-
exploration costs or
post exploration
development
expenditure
IFRS 8 Disclosure of non- Include intangible Exclude intangible assets.
Operating Segments current assets assets.
attributable to
segments.

IFRS 8 Disclosure of measure Required. Not required.

Operating Segments of liabilities.

IFRS 8 ‘Matrix’ form of Operating segments are Operating segments are

Operating Segments organisation – identified on the basis identified based on products
identification of of the core principle. and services.
segments.

IAS 1 Financial statement Specific line items Certain standards require

Presentation of presentation. required. specific presentation of
Financial Statements certain items.
Public companies are

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IAS/IFRS TOPIC IFRSS US GAAP

subject to SEC rules and
regulations, which require
specific line items.

IAS 1 Comparative prior year One year comparative No specific requirement

Presentation of financial statements. financial information is under US GAAP to present
Financial Statements required. comparatives. Generally at
least one year of
comparative financial
information is presented.
Public companies are
subject to SEC rules and
regulations, which generally
require two years of
comparative financial
information for income
statement, statements of
equity and cash flows.
IAS 1 Reporting Can be presented as a As for IFRSs, in addition, it
Presentation of “comprehensive separate financial can be presented with the
Financial Statements income”. statement or in the income statement.
statement of changes in
equity.

IAS 1 Departure from a Permitted in Not directly addressed in

Presentation of standard when “extremely rare” US GAAP literature,
Financial Statements compliance would be circumstances to although an auditor may,
misleading. achieve a fair under Generally Accepted
presentation. Specific Auditing Standards (GAAP)
disclosures are rule 203, conclude that by
required. applying a certain GAAP
requirement the financial
statements are misleading,
thereby allowing for an
“override”.

IAS 1 Classification of Non-current if Non-current if refinancing

Presentation of liabilities on refinancing is is completed before date of
Financial Statements refinancing. completed before issuance of the financial
balance sheet date. statements.

IAS 1 Classification of Non-current if the Non-current if the lender

Presentation of liabilities due on lender has granted a has granted a waiver for a
Financial Statements demand due to 12-month waiver period greater than one year
violation of debt before the balance (or operating cycle, if
covenant. sheet date. longer) before the issuance
of the financial statements
or when it is probably that
the violation will be
corrected within the grace
period, if any, prescribed in
the long-term debt
agreement.

IAS 2 Reversal of inventory Required, if certain Prohibited.

Inventories write-downs. criteria are met.

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IAS 2 Measuring inventory at Permitted only for Permitted, but based on a

Inventories net realisable value producers’ inventories specific product (precious
even if above cost. of agricultural and metals).
forest products and
mineral ores and for
broker-dealers’
inventories of
commodities.

IAS 2 Method for LIFO is prohibited. LIFO is permitted.

Inventories determining inventory
cost.

IAS 7 Classification of Interest received – may Must be classified as an

Cash Flow Statements interest received and be classified as operating activity.
paid in the cash flow operating or investing.
statement.
Interest paid – may be
classified as operating
or financing.

IAS 2 Measuring inventory at Permitted only for Permitted, but based on a

Inventories net realisable value producers’ inventories specific product (precious
even if above cost. of agricultural and metals).
forest products and
mineral ores and for
broker-dealers’
inventories of
commodities.

IAS 2 Method for LIFO is prohibited. LIFO is permitted.

Inventories determining inventory
cost.

IAS 7 Classification of Interest received – may Must be classified as an

Cash Flow Statements interest received and be classified as operating activity.
paid in the cash flow operating or investing.
statement.
Interest paid – may be
classified as operating
or financing.

IAS 7 Inclusion of bank Included if they form Excluded.

Cash Flow Statements overdrafts in cash for an integral part of an
cash flow statement entity’s cash
presentation purposes. management.

IAS 11 Method of accounting Cost recovery method. Completed contract method.

Construction Contracts for construction
contracts when the
percentage of

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COMPARISON OF IFRS AND US GAAP

IAS/IFRS TOPIC IFRSS US GAAP

completion cannot be
determined.

IAS 12 Classification of Always non-current. Classification is split

Income Taxes deferred tax assets and between current and non-
liabilities. current components based
on the classification of the
underlying asset or liability,
or on the expected reversal
of items not related to an
asset or liability.

IAS 12 Reconciliation of actual Required for all entities Required for public
Income Taxes and expected tax applying IFRSs; companies only; expected
expense. expected tax expense is tax expense is computed by
computed by applying applying the domestic
the applicable tax federal statutory tax rates to
rate(s) to accounting pre-tax income from
profit, disclosing also continuing operations. Non-
the basis on which the public companies must
applicable tax rate(s) disclose the nature of the
is(are) computed. reconciling items but not
amounts.

IAS 12 Calculation of tax Deferred tax is Deferred tax is computed

Income Taxes benefits related to
share-based payments.
computed based on the based on the GAAP expense
tax deduction for the recognised and trued up or
share-based payment down at realisation of the
under the applicable tax benefit/deficit.
tax law (i.e. intrinsic
value).

IAS 12 Impact of temporary Deferred tax effect is Deferred tax effect is

Income Taxes differences related to recognised at the recognised at the seller’s tax
intercompany profits. buyer’s tax rate. rate, as if the transaction
had not occurred.

IAS 12 ‘Initial recognition’ Deferred tax not No similar exemption.

Income Taxes exemption. recognised for taxable
temporary differences
that arise from the
initial recognition of an
asset or liability in a
transaction that is (a)
not a business
combination, and (b0
does not affect
accounting profit or
taxable profit. Nor are
changes in this
unrecognised deferred
tax asset or liability
subsequently
recognised.

IAS 12 Other specific Does not have all the US GAAP has three

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COMPARISON OF IFRS AND US GAAP

IAS/IFRS TOPIC IFRSS US GAAP

Income Taxes exemption to the basic exemptions comparable additional exemptions from
principle that deferred to those in US GAAP. providing deferred taxes
tax is recognised for all that differ from IFRSs,
temporary differences. including: leveraged leases,
intragroup inventories, and
differences related to assets
and liabilities that are re-
measured from the local
currency into the functional
currency using historical
exchange rates and that
result from (1) changes in
exchange rates or (2)
indexing for tax purposes.

IAS 12 Tax rate for measuring Use enacted or Use enacted tax rate.
Income Taxes deferred tax assets and ‘substantively enacted’
liabilities. tax rate.

IAS 12 Measurement of Must use rate Generally, US GAAP

Income Taxes deferred tax on applicable to requires the use of the
undistributed earnings undistributed profits. higher of the distributed and
of a subsidiary. the undistributed rates.

IAS 12 Changes in deferred The tax effects of items ‘Backward tracing’ is

Income Taxes taxes that were credited or charged prohibited. Subsequent
originally charged or directly to equity changes are allocated to
credited to equity during the current year continuing operations.
(‘backward tracing’). are allocated directly to
equity. A deferred tax
item originally
recognised by a charge
or credit to
shareholders’ equity
may change either from
changes in assessments
of recovery of deferred
tax assets or from
changes in tax rates,
laws, or other
measurement attributes.
Consistent with the
initial treatment, IAS
12 requires that the
resulting change in
deferred taxes also be
charged or credited
directly to equity.

IAS 12 Uncertain tax positions. Accounting for tax FIN 48 prescribes a

Income Taxes consequences reflects methodology which is based
management’s on the probability of a tax
expectations. position being sustained.

IAS 12 Changes in pre- Generally revise Adjust purchase price

Income Taxes acquisition tax purchase price allocation irrespective of
liabilities of acquired allocation if within the period lapsed since
entities. one year allocation acquisition.

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COMPARISON OF IFRS AND US GAAP

IAS/IFRS TOPIC IFRSS US GAAP

window. Otherwise
record effect in income
statement.

IAS 14 Basis of reportable Lines of business and Components for which

Operating Segments segments. geographical areas. information is reported
internally to top
management, which may or
may not be based on lines of
business or geographical
areas.

IAS 14 Types of segment Required disclosures Only one basis of

Operating Segments disclosures. for both “primary” and segmentation, although
“secondary” segments. certain “enterprise-wise”
disclosures are required
such as revenue from major
customers and revenue by
country.

IAS 14 Accounting basis for Amounts are based on Amounts are based on
Operating Segments reportable segments. IFRS measures. whatever basis is used for
internal reporting purposes.
These amounts should be
reconciled to the relevant
amounts contained in the
financial statements.

IAS 14 Segment result. Segment result defined. No definition of segment

Operating Segments result.

IAS 16 Basis of measurement May use either At historical cost.

PPE for property, plant and revalued amount or Revaluations prohibited.
equipment. historical cost.
Revalued amount is
fair value at date of
revaluation less
subsequent
accumulated
depreciation and
impairment losses.

IAS 16 Major inspection or Generally accounted Either expensed as incurred,

PPE overhaul costs. for as part of the cost of deferred and amortised over
an asset. the period until the next
overhaul, or accounted for
as part of the cost of an
asset.

IAS 16 Measuring the residual Current net selling Generally the discounted
PPE value of property, plant price assuming the present value of expected
and equipment. asset were already of proceeds on future disposal.
the age and in the
condition expected at
the end of its useful
life.

Residual value may be

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COMPARISON OF IFRS AND US GAAP

IAS/IFRS TOPIC IFRSS US GAAP

adjusted upwards or
downwards.

IAS 17 Leases of land and Land and buildings Land and building elements
Leases buildings. elements are are generally accounted for
considered separately as a single unit, unless land
unless the land element represents more than 25%
is not material. of the total fair value of the
leased property.

IAS 17 Present value of Generally would use Lessors must use the
Leases minimum lease the rate implicit in the implicit rate to discount
payments. lease to discount minimum lease payments.
minimum lease Lessees generally would use
payments. the incremental borrowing
rate to discount minimum
lease payments unless the
implicit rate is known and is
the lower rate.

IAS 17 Recognition of a gain The gain is recognised Generally, the gain is

Leases on a sale and leaseback immediately. amortised over the lease
transaction where the term.
leaseback is an
operating lease.

IAS 17 Recognition of a gain The gain is recognised The gain is recognised over
Leases on a sale and leaseback over the lease term. the useful life of the asset.
where the leaseback is
a finance lease.

IAS 18 Revenue recognition General principles are More specific guidance,

Revenue guidance. consistent with US particularly with respect to
GAAP, but IFRSs multiple element
contain limited detailed arrangements and industry-
or industry-specific specific issues (for example,
guidance. software revenue
recognition). In addition,
public companies must
follow more detailed
guidance provided by the
SEC.

IAS18 Revenue recognition of Revenue is recognised For revenue to be

Revenue barter transactions for barter transactions recognised, an exchange of
unless the transaction is dissimilar items is not
incidental to the main required. No revenue is
revenue-generating recognised for barter
activities or the items transactions that facilitate
are exchanged for sales to customers.
items that are similar in
nature or value.
IAS 19 Termination benefits. No distinction between Recognise special (one-
Employee Benefits ‘special’ and other time) termination benefits
termination benefits. generally when they are
Termination benefits communicated to employees
recognised when the unless employees will
employer is render service beyond a
demonstrably “minimum retention

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COMPARISON OF IFRS AND US GAAP
IAS/IFRS TOPIC
IAS 19 Recognising actuarial
Employee Benefits gains and losses
directly in equity when
they arise.
IAS 19 Recycling in profit or
Employee Benefits loss of actuarial gains
and losses previously
recognised in equity.
IAS 19 Measurement of gain
Employee Benefits or loss on curtailment
of a benefit plan.
IAS 19 Presentation of past
Employee Benefits service cost.
IAS 19 Multi-employer plan
Employee Benefits that is a defined benefit
plan.
Page 10 of 17
IFRSS US GAAP
committed to pay. period”, in which case the
liability is recognised
rateably over the future
service period. Recognise
contractual termination
benefits when it is probable
that employees will be
entitled and the amount can
be reasonably estimated.
Recognise voluntary
termination benefits when
the employee accepts the
offer.
Permitted. Required.
Not permitted. Subsequently these amounts
will be reclassified from
other comprehensive
income and recognised in
profit or loss as components
of net periodic benefit cost.
A curtailment gain or Similar to IFRSs. However,
loss comprises (a) the some detailed differences
change in the present may arise in respect of
value of the defined unrecognised actuarial gains
benefit obligation, (b) and losses, unrecognised
any resulting change in transition amount and past
fair value of the plan service costs.
assets, and (c) a pro
rata share of any
related actuarial gains
and losses,
unrecognised transition
amount, and past
service cost that had
not previously been
recognised.
Presented as an offset Presented within other
or increase to the comprehensive income with
defined benefit unrecognised actuarial gains
obligation. and losses.
Should be accounted Accounted for as a defined
for as a defined benefit contribution plan.
plan if the required
information is
available. Otherwise as
a defined contribution
plan.
COMPARISON OF IFRS AND US GAAP
IAS/IFRS TOPIC
IAS 19 Limitation on
Employee Benefits recognition of pension
assets.
IAS 21 Foreign currency
The effect of changes translation reserve –
in Foreign Exchange accounting for
Rates dividends considered to
be returns of
investment.
IAS 23 Borrowing costs related
Borrowing costs to assets that take a
substantial time to
complete.
IAS 23 Types of borrowing
Borrowing Costs costs eligible for
capitalisation.
IAS 23 Income on temporary
Borrowing Costs investment of funds
borrowed for
construction of an
asset.
IAS 27 Basis for consolidation.
Consolidated and
Separate Financial
Statements
IAS 27 Special purpose
Consolidated and entities.
Separate Financial
Statements
IAS 27 Different reporting
Consolidated and dates of parent and
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IFRSS US GAAP
Pension assets cannot No limitation on the amount
be recognised in excess that can be recognised.
of the net total of
unrecognised past
service cost and
actuarial losses plus the
present value of
benefits available from
refunds or reduction of
future contributions to
the plan.
Accounted for as a No recycling of reserve to
disposal of part of the the income statement.
foreign investment and
relevant part o the
reserve is recycled to
the income statement.
Capitalisation is an Capitalisation is mandatory.
available accounting
policy choice.
Includes interest, Generally only includes
certain ancillary costs, interest.
and exchange
differences that are
regarded as an
adjustment of interest.
Reduces borrowing Does not reduce borrowing
costs eligible for costs eligible for
capitalisation. capitalisation except in
certain very limited
circumstances.
Control (look to Approach depends on the
governance and risk type of entity. For voting
and benefits). interests, entities generally
look to majority voting
rights. For variable interest
entities, look to a risks and
rewards model.
Consolidate if If SPE is not a “qualifying
“controlled”. Generally SPE” (QSPE), then assessed
follow the same whether within the scope of
principles as for risks and rewards model for
commercial entities in variable interest entities.
determining whether or Otherwise, apply guidance
not control exists. based on majority voting
interests. QSPEs are not
consolidated.
Reporting date Reporting date difference
difference cannot be generally should not be
COMPARISON OF IFRS AND US GAAP

IAS/IFRS TOPIC IFRSS US GAAP

Separate Financial subsidiaries. more than three more than three months.
Statements months. Must adjust for Must disclose effects of any
any significant significant intervening
intervening transactions. May adjust for
transactions. such transactions.

IAS 27 Different accounting Must conform policies. No specific requirement.

Consolidated and policies of parent and
Separate Financial subsidiaries.
Statements
IAS 27 Presentation of In equity. Outside of equity, within
Consolidated and minority interests. the mezzanine area between
Separate Financial liabilities and equity.
Statements
IAS 28 Different reporting Reporting date Reporting date difference
Investments in dates of investor and difference cannot be generally should not be
Associates associate. more than three more than three months.
months. Must adjust for Must disclose effects of any
any significant significant intervening
intervening transactions. May adjust for
transactions. such transactions.

IAS 28 Different accounting Must conform policies. SEC staff does not require
Investments in policies of investor and policies to be conformed
Associates associate. provided that policies are in
accordance with US GAAP.

IAS 29 Adjusting financial Adjust using a general Adjust the financial

Financial Reporting in statements of an entity price level index before statements as if the
Hyper-inflationary that operates in a translating. reporting currency of the
economies hyperinflationary parent was the entity’s
economy. functional currency.

IAS 31 Investments in joint May use either the Generally use the equity
Interests in Joint ventures. equity method or method (except in
Ventures proportionate construction and oil and gas
consolidation. industries).

IAS 32 Classification of Split the instrument Equity component will arise

Financial Instruments: convertible debt
Presentation instruments with
conversion option fixed
amount of cash for
fixed number of shares
(a “conventional”
instrument).
into its liability and only for instruments with a
equity components and beneficial conversion
measure the liability at feature that exists at the
fair value with the inception of the instrument.
equity component
representing the
residual.

IAS 32 Offsetting amounts due Required when and Prohibited.

Financial Instruments: from and owed to two only when a legally
Presentation different parties. enforceable right and
the intention to settle
net exist.

IAS 33 Disclosures of earnings Basic and diluted Basic and diluted income
Earnings per Share per share (EPS). income from from continuing operations,
continuing operations discontinued operations,
per share and net profit extraordinary items,
or loss per share. cumulative effect of a
change in accounting

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IAS/IFRS TOPIC IFRSS
IAS 33 Calculation of year-to- Apply the treasury
Earnings per Share date (YTD) diluted stock method on a
EPS. YTD basis, that is, do
not average the
individual interim
period calculations.
IAS 33 Contracts that may be Assume always that the
Earnings per Share settled in ordinary contracts will be settled
shares or in cash at in shares.
issuer’s option.
IAS 34 Interim reporting – Interim period is a
Interim Financial revenue and expense discrete reporting
Reporting recognition. period (with certain
exceptions).
IAS 36 Impairment Impairment is recorded
Impairment methodology for long- when an asset’s
term assets (other than carrying amount
goodwill that are exceeds the higher of
subject to the asset’s value-in-use
amortisation). (discounted present
value of the asset’s
expected future cash
flows) and fair value
less costs to sell.
IAS 36 Measurement of Based on the
Impairment impairment loss for recoverable amount
long-term assets (other (the higher of the
than goodwill) that are asset’s value less costs
subject to amortisation. to sell).
IAS 36 Level of impairment Cash generating unit
Impairment testing for goodwill. (CGU) – the lowest
level at which goodwill
is monitored for
internal management
purposes. This level
cannot be larger than a
segment.
IAS 36 Calculating impairment One-step: compare
Impairment of goodwill. recoverable amount of
a CGU (higher of (a)
fair value less costs to
sell and (b) value-in-
use) to carrying
amount.
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US GAAP
policy, and net profit or loss
per share.
Average the individual
interim period incremental
shares.
Include based on rebuttable
presumption that the
contracts will be settled in
shares.
Interim period is an integral
part of the full year (with
certain exceptions).
Impairment is recorded
when an asset’s carrying
amount exceeds the
expected future cash flows
to be derived from the asset
on an undiscounted basis.
Based on fair value,
generally based on
discounted cash flows.
Reporting unit – either an
operating segment or one
organisational level below.
Two steps:
1. Compare fair value
of the reporting
unit with its
carrying amount
including goodwill.
If fair value is
greater than
carrying amount,
no impairment
(skip step 2).
2. Compare “implied
fair value” of
COMPARISON OF IFRS AND US GAAP

IAS/IFRS TOPIC IFRSS US GAAP

goodwill, which is
determined based
on a hypothetical
purchase price
allocation, with its
carrying amount,
recording an
impairment loss for
the difference.

IAS 36 Calculating impairment Calculated by Calculated by comparing

Impairment of indefinite-life comparing recoverable their fair value to carrying
intangible assets. amount (higher of (a) amount.
fair value less costs to
sell and (b) value-in-
use) to carrying
amount.

IAS 36 Subsequent reversal of Required for all assets, Prohibited.

Impairment an impairment loss. other than goodwill, if
certain criteria are met.

IAS 37 Measurement of Best estimate to settle Most probable outcome to

Provisions, Contingent provisions. the obligation, which settle the obligation. If no
Liabilities and generally involves the one item is more likely than
Contingent Assets expected value method. another, use the low end of
the range of possible
amounts.

Unless specifically
Discounting required. permitted by an accounting
standard, discounting is
only allowed where the
timing and amount of the
future cash flows is fixed
and determinable.

IAS 37 Measurement of Use the current, risk- Use the current, credit-
Provisions, Contingent decommissioning adjusted rate to adjusted risk-free rate to
Liabilities and provisions. discount the provision discount the provision when
Contingent Assets when initially initially recognised. Do not
recognised. Adjust the adjust the rate in future
rate at each reporting periods.
date.

IAS 37 Recognition of Recognise if a detailed Recognise when a

Provisions, Contingent restructuring formal plan is transaction or event occurs
Liabilities and provisions. announced or that leaves an entity little or
Contingent Assets implementation of such no discretion to avoid the
a plan has started. future transfer or use of
assets to settle the liability.
An exit or disposal plan, by
itself, does not create a
present obligation to others
for costs expected to be
incurred under the plan.

IAS 37 Disclosures that may “In extremely rare Disclosure is required.

Provisions, Contingent prejudice seriously the cases” amounts and

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Liabilities and position of the entity in details need not be
Contingent Assets a dispute. disclosed, but
disclosure is required
of the general nature of
the dispute and why the
details have not been
disclosed.

IAS 38 Development costs. Capitalise, if certain Expense as incurred (except

Intangible Assets criteria are met. for certain website
development costs and
certain costs associated with
developing internal use
software).

IAS 38 Revaluation of Permitted only if the Prohibited.

Intangible Assets intangible assets. intangible asset trades
in an active market.

IAS 39 Option to designate any Option is allowed if Option allowed at initial

Financial Instruments: financial asset or one of three criteria is recognition. Criteria in
Recognition and financial liability to be met. IFRSs do not apply.
Measurement measured at fair value
through profit or loss.

IAS 39 Investments in unlisted Measured at fair values Measured at cost less “other
Financial Instruments: equity instruments. if reliably measurable; than temporary”
Recognition and otherwise at cost. impairments, if any.
Measurement
IAS 39 Foreign exchange Changes in fair value Changes in fair value
Financial Instruments: differences on resulting from resulting from movements
Recognition and available-for-sale debt movements in in exchange rates are
Measurement instruments. exchange rates are reflected in equity and
reflected in the income recycled to income
statement as exchange statement when instrument
differences. is sold.

IAS 39 Reclassification of Prohibited. Permitted but expected to be

Financial Instruments: financial instruments rare.
Recognition and into or out of the
Measurement trading category.

IAS 39 Classification of Puttable debt No such prohibition exists.

Financial Instruments: financial assets as held- instruments cannot be
Recognition and to-maturity. classified as held to
Measurement maturity.

IAS 39 Effect of selling Prohibited from using Prohibited from using held-
Financial Instruments: investments classified held-to-maturity to-maturity classification.
Recognition and as held-to-maturity. classification for the SEC indicates that
Measurement next two years. prohibition is generally for
two years.

IAS 39 Subsequent reversal of Required for loans and Prohibited for held-to-
Financial Instruments: an impairment loss receivables, held-to- maturity and available-for-
Recognition and recognised in the maturity, and available- sale securities. Reversals of
Measurement income statement. for-sale debt valuation allowances on
instruments, if certain loans are recognised in the
criteria are met. income statement.

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COMPARISON OF IFRS AND US GAAP

IAS/IFRS TOPIC IFRSS US GAAP

IAS 39 Derecognition of Combination of risks Derecognition assets when

Financial Instruments: financial assets. and rewards and transferor has surrendered
Recognition and control approach. Can control over the assets. One
Measurement derecognise part of an of the conditions is legal
asset. No “isolation in isolation. No partial
bankruptcy” test. derecognition.
Partial derecognition
allowed only if specific
criteria are complied
with.

IAS 39 Use of “partial term Permitted Although not explicitly

Financial Instruments: hedges” for financial prohibited, these items
Recognition and items (hedge of a fair would most probably fail
Measurement value exposure for the correlation
only a part of the term requirement of FAS 133
of a hedged item) and hence not qualify for
hedge accounting.

IAS 39 Assume perfect Prohibited. Must Allowed if the critical

Financial Instruments: effectiveness of a always assess and terms of the hedging
Recognition and hedge if critical terms measure effectiveness. instrument and the entire
Measurement match hedged asset or liability
or hedged forecasted
transaction are the same
– “Matched Terms
Method”. Also allowed
for hedge of interest rate
risk in a debt instrument
if certain conditions are
met – “Shortcut
Method”.

IAS 39 Application of Several differences exist between IFRSs and US

Financial Instruments: the effective interest GAAP on this topic. Given the case-by-case nature of
Recognition and rate method such calculations, IFRSs and US GAAP specialists
Measurement should be consulted as and when a comparative
calculation is required.

IAS 39 Impairment of Focus is on ‘loss Impairment is recognised

Financial Instruments: debt and equity events’ that provide only when the decline in
Recognition and securities objective evidence of fair value is other than
Measurement impairment. temporary.

IAS 39 Use of “basis Cash flow hedge of a Cash flow hedge of a

Financial Instruments: adjustments” for cash transaction resulting transaction resulting in
Recognition and flow hedges in a financial asset or an asset or liability –
Measurement liability – same as US gain/loss on hedging
GAAP. instrument that had been
Cash flow hedge of a reported in equity
transaction resulting remains in equity and
in a non-financial reclassified into earnings
asset or liability – in the same period the
choice of US GAAP or acquired asset or
basis adjustment. incurred liability affects
earnings. “Basis
adjustments” prohibited
for cash flow hedges.

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COMPARISON OF IFRS AND US GAAP

IAS/IFRS TOPIC IFRSS US GAAP

IAS 39 Macro hedging Fair value hedge Hedge accounting

Financial Instruments: accounting treatment treatment is prohibited,
Recognition and for a portfolio hedge though similar results
Measurement of interest rate risk is may be achieved by
allowed if certain designating specific
specified conditions assets or liabilities as
are met. hedged items.

IAS 39 Written puts over own Recognise a gross Recognise a derivative

Financial Instruments: (treasury) obligation for the together with
Recognition and shares present value of the subsequent changes in
Measurement strike price. fair value.

IAS40 Measurement Option of Generally required to use

Investment Property basis for investment (a) historical cost historical cost model
property model (depreciation, (depreciation,
impairment) or impairment).
(b) fair value model
with value changes
through profit or loss.

IAS 40 Property Accounted for as Always treated as a

Investment Property interests held investment property prepayment.
under an under IAS 40 if held
operating lease for investment and
if measured at fair
value with value
changes in profit or
loss. Otherwise
upfront payments
are treated as
prepayments.

IAS 41 Measurement Fair value with value Historical cost is generally

Agriculture basis of agricultural changes recognised used. However, fair value
crops, livestock, in profit or loss. less costs to sell is used
orchards, forests for harvested crops and
livestock held for sale.

Page 17 of 17