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

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Segment Reporting Similarities Currently, the requirements for segment reporting under FAS 1 1 Disclosures about Segments of an Enterprise and Related Information and IAS 14 Segment Reporting are applicable to entities with public reporting requirements and are based on a “management 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). Significant Differences (Pre-Convergence) Definition of a segment Enterprise wide disclosures Measurement of segments U.S. GAAP IFRS 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). 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. u.s. gaaP v. iFrs: t h E Basics 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 U.S. 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. 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 On November 0, 200 , as part of the short-term convergence project, the IASB adopted IFRS 8 Operating Segments to replace IAS 14. IFRS 8 is effective for annual periods beginning on or after January 1, 2009, with earlier application encouraged. IFRS 8 eliminates most of the differences between U.S. GAAP and IFRS highlighted above by converging with the requirements outlined in FAS 1 1. Subsequent to the adoption of IFRS 8, only limited differences will remain between the two standards, as follows: Determination of segments U.S. 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. 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. 7
Page 1: F a L L 2007 U.S. GAAP v. IFRS: The
Page 4 and 5: Introduction It is not surprising t
Page 6 and 7: Financial Statement Presentation Si
Page 8 and 9: Consolidations, Joint Venture Accou
Page 10 and 11: Business Combinations Similarities
Page 12 and 13: Acquisition of minority interest Co
Page 14 and 15: Intangible Assets Similarities The
Page 16 and 17: Long-Lived Assets Similarities Alth
Page 18 and 19: U.S. GAAP IFRS Investment property
Page 20 and 21: Impairment loss calculation — goo
Page 22 and 23: Significant Differences Lease of la
Page 24 and 25: Debt vs. equity classification Comp
Page 26 and 27: Foreign Currency Matters Similariti
Page 28 and 29: Income Taxes Similarities FAS 109 A
Page 30 and 31: Provisions and Contingencies Simila
Page 32 and 33: Revenue Recognition Similarities Re
Page 34 and 35: Share-Based Payments Similarities T
Page 36 and 37: Employee Benefits Other Than Share-
Page 40 and 41: Earnings Per Share Similarities Ent
Page 42 and 43: Subsequent Events Similarities Desp
Page 44 and 45: Appendix — The Evolution of IFRS
Page 46 and 47: a P P E n d i x — t h E Evo L u t
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U.S. GAAP v. IFRS: The Basics - Financial Executives International

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