US GAAP vs. IFRS The basics - Financial Executives International

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Segment reporting Similarities Currently, the requirements for segment reporting under FAS 131 Disclosures about Segments of an Enterprise and Related Information and IAS 1 Segment Reporting are applicable to entities with public reporting requirements and are based on a “management Significant differences (pre-convergence) US GAAP IFRS Definition of a segment A component of an entity that engages in business activities from which it may earn revenues or expenses and whose operating results are regularly reviewed by the entity’s chief operating decision maker (CODM). Enterprise wide disclosures Measurement of segments Limited geographical segment disclosures required if amounts were not already disclosed in the operating segment disclosures, including external revenues and long-lived assets for the entity’s country of domicile, all material foreign countries, and all foreign countries in total. Same accounting policies as are used for internal reporting to the CODM. Certain key subtotals have to be reconciled to the consolidated financial statement amounts. Symmetry in the amounts allocated to segments is not required, but asymmetrical allocations have to be disclosed. 38 US GAAP vs. IFRS The basics approach” in identifying the reportable segments, although there are some different considerations required as part of that assessment. Further, the two standards have similar quantitative thresholds in determining reportable segments (that is revenues, profit or loss, and assets). Management is required to identify both business and geographical segments. A business segment is defined as a “distinguishable component of an entity that is engaged in providing an individual product or service… and that is subject to risks and returns that are different from those of other business segments.” A geographical segment is similar, except that the focus is on economic environments in which the products or services are provided. Entities must identify either their business or geographic segments as the primary format, the other as secondary. The assessment is based on risks and returns. The secondary segment has fewer disclosure requirements than that required for the primary segment. Same accounting policies as are used for the consolidated financial statements. Certain key subtotals have to be reconciled to the consolidated financial statement amounts. Requires symmetry in the allocation of assets/ liabilities and revenues/expenses to individual segments.
Disclosure (based on primary segment disclosure requirements for IFRS) Convergence US GAAP IFRS Factors used to identify segments. Liabilities not required to be disclosed. Revenue on a consolidated basis required, and required on segment basis if included in internal reporting. Items required if included in information provided to the CODM: depreciation, significant non-cash expenses, extraordinary items, interest income and expense, income taxes, capital expenditures, and equity method investments. Revenues from significant external customers. On November 30, 200 , as part of the shortterm convergence project, the IASB adopted IFRS 8 Operating Segments to replace IAS 1 . IFRS 8 is effective for annual periods beginning on or after January 1, 2009, with earlier application encouraged. IFRS 8 eliminates Determination of segments US GAAP IFRS Entities with a “matrix” form of organization (that is, business components are managed in more than one way and the CODM reviews all of the information provided) must determine segments based on products and services. Disclosure requirements Entities are not required to disclose segment liabilities even if reported to the CODM. US GAAP vs. IFRS The basics Basis for identifying segments not required. Liabilities required to be disclosed. External revenue and inter-segment revenue required. Items not required: interest income and expense, extraordinary items (not applicable under IFRS), and income taxes. Revenues from significant external customers not required most of the differences between US GAAP and IFRS highlighted above by converging with the requirements outlined in FAS 131. Subsequent to the adoption of IFRS 8, only limited differences will remain between the two standards, as follows: All entities determine segments based on the management approach, regardless of form of organization. If regularly reported to the CODM, segment liabilities are a required disclosure. 39
Page 1: US GAAP vs. IFRS The basics
Page 4 and 5: Introduction It is not surprising t
Page 6 and 7: At this time, it is not possible to
Page 8 and 9: Income statement — classification
Page 10 and 11: Preparation of consolidated financi
Page 12 and 13: Negative goodwill Allocated on a pr
Page 14 and 15: Intangible assets Similarities The
Page 16 and 17: Inventory Similarities ARB 3 and IA
Page 18 and 19: Significant differences US GAAP IFR
Page 20 and 21: Impairment of assets Similarities B
Page 22 and 23: Leases Similarities The overall acc
Page 24 and 25: Other differences include: (i) the
Page 26 and 27: Debt vs. equity classification Comp
Page 28 and 29: Foreign currency matters Similariti
Page 30 and 31: Income taxes Similarities FAS 109 A
Page 32 and 33: Provisions and contingencies Simila
Page 34 and 35: Revenue recognition Similarities Re
Page 36 and 37: Share-based payments Similarities T
Page 38 and 39: Employee benefits other than share-
Page 42 and 43: Earnings per share Similarities Ent
Page 44 and 45: Subsequent events Similarities Desp
Page 46 and 47: Appendix — The evolution of IFRS
Page 48 and 49: Phase III — 2006 to present ► F
Page 50 and 51: 8 US GAAP vs. IFRS The basics
Page 52: Ernst & Young LLP Assurance | Tax |

US GAAP vs. IFRS The basics - Financial Executives International

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