Comparison between U.S. GAAP and International ... - Grant Thornton

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Comparison between U.S. GAAP and International Financial Reporting Standards 106 IFRS (IAS 27.38). U.S. GAAP Public companies that meet certain requirements must provide condensed financial information of the registrant in a separate schedule (SEC Regulation S-X, Rule 5-04). 8.2 Noncontrolling interests IFRS U.S. GAAP Relevant guidance: IFRS 3; IAS 1 and IAS 27 Relevant guidance: ASC 805 and 810-10 Introduction A noncontrolling interest is the equity in a subsidiary not attributable, directly or indirectly, to a parent (IAS 27.4). For each business combination, a noncontrolling interest in the acquiree shall be measured either at fair value (full goodwill) or at the noncontrolling interest’s proportionate share of the acquiree’s identifiable net assets (partial goodwill) in accordance with paragraph 19 of IFRS 3. Note: Improvements to IFRSs May 2010, amends the measurement principle in IFRS 3 for noncontrolling interests. The amendment states that at the acquisition date the acquirer shall measure components of noncontrolling interests that are present ownership interests and entitle their holders to a proportionate share of the entity’s net assets in the event of liquidation at either fair value or the present ownership instruments’ proportionate share in the recognized amounts of the acquiree’s identifiable net assets. All other components of noncontrolling interests shall be measured at their acquisition-date fair values, unless another measurement basis is required by IFRS. The amendment is effective for annual periods beginning on or after 1 July 2010. Similar to IFRS, a noncontrolling interest is defined as “the portion of equity (net assets) in a subsidiary not attributable, directly or indirectly, to a parent.” Unlike IFRS, a noncontrolling interest in an acquiree shall be measured at acquisition-date fair value, which includes goodwill attributable to the noncontrolling interests, in accordance with ASC 805-20-30-1. The partial goodwill method is not permitted. For views of the SEC staff on classification and measurement of redeemable securities, refer also to EITF Topic D-98. Presentation Noncontrolling interests shall be presented in the consolidated statement of financial position within equity apart from the parent’s equity (IAS 27.27). Profit or loss and each component of other comprehensive income shall be attributed to the parent and the noncontrolling interests even if the noncontrolling interests have a deficit balance (IAS 27.28). Similar to IFRS (ASC 810-10-45-15 through 45-16). Similar to IFRS (ASC 810-10-45-19 through 45-21 and ASC 810-10-50-1A). Changes in ownership interest – no loss of control Changes in a parent’s ownership interest in a subsidiary that do not result in a loss of control shall be accounted Similar to IFRS, the parent must account for a decrease in its ownership interest in a subsidiary while retaining a © 2011 Grant Thornton LLP All rights reserved U.S. member firm of Grant Thornton International Ltd
Comparison between U.S. GAAP and International Financial Reporting Standards 107 IFRS for as equity transactions (IAS 27.30). U.S. GAAP controlling financial interest in the subsidiary as an equity transaction, without recognition of gain or loss in income. The guidance for changes in a parent’s ownership interest in ASC 810-10-45-22 through 45-24 applies to the following (ASC 810-10-45-21A): • Transactions that result in an increase in ownership of a subsidiary • Transactions that result in a decrease in ownership of either of the following while the parent keeps a controlling financial interest in the subsidiary A subsidiary that is a business or nonprofit activity A subsidiary that is not a business or nonprofit activity if the transaction is not directly addressed in other authoritative guidance The decrease in ownership provisions in ASC 810-10 do not apply if the transaction resulting in an entity’s decreased ownership interest is either the sale of insubstance real estate or the conveyance of oil and gas mineral rights (ASC 810-10-45-21A). Changes in ownership interest – loss of control If a parent loses control of a subsidiary, it shall recognise a gain or loss on the interest sold in profit or loss. In addition, any retained interest in the former subsidiary is remeasured at fair value with any gain or loss recognised in profit or loss (IAS 27.34). Similar to IFRS, the parent must deconsolidate a subsidiary as of the date the parent ceases to have a controlling financial interest in the subsidiary. In a deconsolidation that is a nonreciprocal transfer to owners, the former parent should apply the guidance of ASC 845, Nonmonetary Transactions. Otherwise, the parent must recognize a gain or loss on the transaction and measure any retained investment in the former subsidiary at deconsolidation-date fair value. The deconsolidation guidance in ASC 810-10 applies to the following (ASC 810-10-40-3A): • The deconsolidation of a subsidiary or derecognition of a group of assets if the subsidiary or asset group constitutes a business or nonprofit activity • The deconsolidation of a subsidiary or derecognition of a group of assets that does not constitute a business or nonprofit activity if the substance of the transaction is not directly addressed in other authoritative guidance The deconsolidation provisions in ASC 810-10 do not apply if the transaction resulting in an entity’s decreased ownership interest is either the sale of in-substance real estate or the conveyance of oil and gas mineral rights (ASC 810-10-40-3A). IFRS guidance on decreases in ownership of subsidiaries © 2011 Grant Thornton LLP All rights reserved U.S. member firm of Grant Thornton International Ltd
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