U.S. GAAP v. IFRS: The Basics - Financial Executives International

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U.S. GAAP v. IFRS: The Basics - Financial Executives International

U.S. GAAP IFRS

Restructuring Costs Per FAS 146, once management has

committed to a detailed exit plan, each

type of cost is examined to determine when

recognized. Involuntary employee termination

costs are recognized over future service

period, or immediately if there is none. Other

exit costs are expensed when incurred.

Disclosure of

contingent liability

Convergence

No similar provision to that allowed under IFRS

for reduced disclosure requirements.

Once management has “demonstrably

committed” (that is a legal or constructive

obligation) to a detailed exit plan, the general

provisions of IAS 37 apply. Costs typically

recognized earlier than under U.S. GAAP because

IAS 37 focuses on exit plan as a whole, rather

than individual cost components of the plan.

Reduced disclosure permitted if it would be

severely prejudicial to an entity’s position in a

dispute with other party to a contingent liability.

Both the FASB and the IASB have current agenda items dealing with this topic. An exposure draft

proposing amendments to IAS 7 was issued in 2005, with a final standard expected no earlier than

the first half of 2009.

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