Comparison between U.S. GAAP and International ... - Grant Thornton
Comparison between U.S. GAAP and International ... - Grant Thornton
Comparison between U.S. GAAP and International ... - Grant Thornton
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<strong>Comparison</strong> <strong>between</strong> U.S. <strong>GAAP</strong> <strong>and</strong> <strong>International</strong> Financial Reporting St<strong>and</strong>ards 103<br />
8. Group accounts<br />
8.1 Basic requirements for group accounts<br />
IFRS<br />
Relevant guidance: IAS 27; IFRS 5<br />
U.S. <strong>GAAP</strong><br />
Relevant guidance: ASC 810-10; SEC Regulation S-X,<br />
Rule 5-04<br />
Introduction<br />
A parent shall present consolidated financial statements<br />
that include all of its subsidiaries. However, a parent<br />
need not present consolidated financial statements if all<br />
of the conditions listed below are met (IAS 27.9-10):<br />
• The parent is a wholly-owned subsidiary or is a<br />
partially-owned subsidiary of another entity <strong>and</strong> its<br />
other owners, including those not otherwise entitled<br />
to vote, have been informed about <strong>and</strong> do not object<br />
to the parent not presenting consolidated financial<br />
statements<br />
• The parent's debt or equity is not traded in a public<br />
market<br />
• The parent is not in the process of filing its financial<br />
statements with a regulatory body for the purpose of<br />
issuing any class of instruments in a public market<br />
• The ultimate or intermediate parent of the parent<br />
produces consolidated financial statements that<br />
comply with IFRS<br />
A subsidiary is defined as “an entity, including an<br />
unincorporated entity such as a partnership that is<br />
controlled by another entity (known as the parent)”<br />
(IAS 27.4). A subsidiary shall not be excluded from<br />
consolidation because the investor is a venture capital<br />
organisation, mutual fund, unit trust, or similar entity<br />
(IAS 27.16).<br />
Note: The IASB <strong>and</strong> the FASB had been working on a<br />
joint project to provide comprehensive guidance for<br />
consolidation of all entities. The objective of that project<br />
was to consider comprehensive guidance for<br />
consolidation of all entities, including those controlled by<br />
voting or similar interests.<br />
In connection with this project, the IASB issued an<br />
Exposure Draft, Consolidated Financial Statements, in<br />
December 2008. In September 2010, the IASB<br />
published a staff draft that reflects the cumulative<br />
tentative decisions made by the Board through its May<br />
2010 meeting. The proposed guidance would revise the<br />
definition of control <strong>and</strong> the related application guidance<br />
A parent shall consolidate all entities in which it has a<br />
controlling financial interest unless control does not rest<br />
with the majority owner (for example, if the subsidiary is in<br />
legal reorganization or in bankruptcy) (ASC 810-10-15-8<br />
<strong>and</strong> 15-10). The existence of certain rights of a minority<br />
shareholder may also overcome the presumption of<br />
consolidation by the majority voting interest<br />
(ASC 810-10-15-10; ASC 810-10-25-2 through 25-14).<br />
Under U.S. <strong>GAAP</strong>, there is a presumption that<br />
consolidated financial statements are more meaningful<br />
than separate financial statements. Therefore, the<br />
election to present only separate financial statements if<br />
certain conditions apply is not permitted under U.S.<br />
<strong>GAAP</strong>. However, U.S. <strong>GAAP</strong> does provide limited<br />
exemptions from consolidation in certain specialized<br />
industries.<br />
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