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

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Comparison between U.S. GAAP and International Financial Reporting Standards 10 2. Overall financial statement presentation Note: IFRS and U.S. GAAP provide only limited financial statement presentation guidance. In addition, presentation guidelines in U.S. GAAP are dispersed across the standards. Moreover, users of financial statements have often expressed dissatisfaction that information is not linked across the different statements and that dissimilar items are in some cases aggregated in one number. The objective of the IASB/FASB joint financial statement presentation project is to establish a global standard that will guide the organization and presentation of information in the financial statements. The Boards’ goal is to improve the usefulness of the financial information provided in an entity’s financial statements to assist management to better communicate its financial information to the users of its financial statements, and to help users in their decision making. In October 2008, the IASB and the FASB (the Boards) jointly announced the issuance of their Discussion Papers on the presentation of financial statements. The Discussion Paper, Preliminary Views on Financial Statement Presentation, is an analysis of current issues in financial statement presentation and proposed responses to those issues by the Boards. The objective of the Discussion Paper is to invite comments on a new format for financial statements designed to communicate information to users following three new principles: cohesiveness, disaggregation, and liquidity/financial flexibility. In July 2010, the staff of the IASB and the FASB posted on each Board’s website a Staff Draft of an exposure draft that reflects the Boards’ cumulative tentative decisions on financial statement presentation, through their joint meeting in April 2010. The proposals in that Staff Draft are the basis for the staff outreach activities. As noted in the introduction and summary that accompanied the staff draft, the Boards are not formally inviting comments on the staff draft; however, they welcome input from interested parties. At the October 2010 IASB/FASB joint meeting, the staff updated the Boards on their outreach activities related to the July 2010 staff draft of an exposure draft on financial statement presentation. The IASB and FASB discussed how to proceed with the project. The Boards acknowledged that they do not have the capacity currently to devote the time necessary to consider the information learned during outreach activities and modify their tentative decisions. Accordingly, the Boards decided to not issue an exposure draft in the first quarter 2011 as originally planned. The Boards will return to this project when they have the requisite capacity, which is expected to be after June 2011. 2.1 General IFRS Relevant guidance: IAS 1 Note 1: Additional requirements may be specified by local statute, regulators, or stock exchanges. Note 2: In December 2010, the IASB published an IFRS Practice Statement, Management Commentary, a broad, non-binding framework for the presentation of narrative reporting to accompany financial statements prepared in accordance with IFRS. U.S. GAAP Relevant guidance: Form and content specified by GAAP as set forth in FASB Accounting Standards Codification (ASC) 205, 220, 505 and SEC Regulation S-X, Rules 3-01(a) and 3-02(a); SEC Regulation S-K, Item 303. Unlike IFRS, U.S. GAAP does not have similar management commentary guidance. However, SEC Regulation S-K, Item 303 requires registrants to include management’s discussion and analysis (MD&A) of financial condition and results of operations in their filings with the SEC. © 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 11 IFRS Management commentary fulfils an important role by providing users of financial statements with a historical and prospective commentary on the entity’s financial position, financial performance, and cash flows. It serves as a basis for understanding management’s objectives and strategies for achieving those objectives. The Practice Statement permits entities to adapt the information provided to particular circumstances of their business, including the legal and economic circumstances of individual jurisdictions. This flexible approach will generate more meaningful disclosure about the most important resources, risks and relationships that can affect an entity’s value, and how they are managed. The Practice Statement is not an IFRS. Consequently, an entity need not comply with the Practice Statement to comply with IFRS. An entity shall apply IAS 1 in preparing and presenting general purpose financial statements in accordance with IFRS (IAS 1.2). IAS 1.15-.35 also apply to condensed interim financial statements (IAS 1.4). General purpose financial statements (referred to as “financial statements”) are those intended to meet the needs of users who are not in a position to require an entity to prepare reports tailored to their particular information needs (IAS 1.7). A complete set of financial statements comprises (IAS 1.10): • A statement of financial position as at the end of the period • A statement of comprehensive income for the period. As permitted by IAS 1.81, an entity may present the components of profit or loss either as part of a single statement of comprehensive income or in a separate income statement. When an income statement is presented it is part of a complete set of financial statements and shall be displayed immediately before the statement of comprehensive income (IAS 1.12). • A statement of changes in equity for the period • A statement of cash flows for the period • Notes, comprising a summary of significant accounting policies and other explanatory information • A statement of financial position as at the beginning of the earliest comparative period when U.S. GAAP Financial statements comprise: • Balance sheet • Income statement • A statement of comprehensive income. This statement may be reported separately or combined with the income statement or the statement of changes in stockholders’ equity (ASC 220-10-45-8) • Statement of changes in stockholders’ equity. Alternatively, disclosure of changes in the separate accounts comprising stockholders’ equity (in addition to retained earnings) could be made in the notes to financial statements (ASC 505-10-50-2) • Statement of cash flows (limited exemptions; see Section 2.5, “Statement of cash flows”) • Notes to financial statements • Unlike IFRS, U.S. GAAP does not have a similar requirement for a third balance sheet © 2011 Grant Thornton LLP All rights reserved U.S. member firm of Grant Thornton International Ltd
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Comparison between U.S. GAAP and International ... - Grant Thornton

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