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

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Comparison between U.S. GAAP and International Financial Reporting Standards 114 IFRS not probable that an outflow of resources embodying economic benefits will be required to settle the obligation at the acquisition date (IFRS 3.23). Other than contracts accounted for under IAS 39, a contingent liability recognised in a business combination must be measured subsequently at the higher of either (IFRS 3.56): The amount that would be recognised under IAS 37 The amount initially recognised less cumulative amortisation recognised under IAS 18, if appropriate • Any liability or asset for employee benefit arrangements shall be recognised and measured in accordance with IAS 19 (IFRS 3.26) • Tax assets and liabilities in connection with a business combination shall be accounted for in accordance with IAS 12 (IFRS 3.24) • Indemnification assets are recognised at the same time that the acquirer recognises the indemnified item. Therefore, an indemnification asset would be recognised as of the acquisition date only if the indemnified item is recognised as of the acquisition date. An indemnification asset is measured on the same basis as the indemnified item subject to the need of a valuation allowance (IFRS 3.27-.28). • Reacquired rights are recognised as an identifiable intangible asset and measured based on the remaining contractual term of the related contract without consideration of potential contract renewals. In addition, if the contract is favorable or unfavorable compared to similar current market transactions, the acquirer recognises a gain or loss on the effective settlement of a preexisting relationship (IFRS 3.29 and B35-.36). • Replacement share-based payment awards shall be measured in accordance with IFRS 2 (IFRS 3.30). Note: Improvements to IFRSs May 2010, amends the measurement principle in IFRS 3 for exceptions to the measurement principle. The amendment U.S. GAAP be recognized if both of the following criteria are met: Information that is available before the end of the measurement period indicates that it is probable that an asset existed or that a liability had been incurred at the acquisition date The amount of the asset or liability can be reasonably estimated (ASC 805-20-25-20) Assets and liabilities arising from contingencies shall be subsequently measured and accounted for using a systematic and rational basis (ASC 805-20-35-3). • Employee benefits shall be accounted for following the guidance in other ASC Topics for the acquisitiondate measurement and recognition of assets and liabilities related to the acquiree’s employee benefit arrangements for deferred compensation, compensated absences, termination, pension, postretirement, and postemployment benefits (ASC 805-20-25-22 through 25-26 and ASC 805-20- 30-14 through 30-17) • Deferred taxes and uncertain tax positions shall be accounted for in accordance with ASC 740 and ASC 805-740 (ASC 805-740-25-2 and 30-1) • Indemnification assets, similar to IFRS (ASC 805-20-25-27 through 25-28 and ASC 805-20-30-18 through 30-19) • Reacquired rights, similar to IFRS (ASC 805-20-25- 14 through 25-15 and 30-20) • Replacement share-based payment awards shall be measured in accordance with ASC 718 (ASC 805-20-30-21) © 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 115 IFRS clarifies that the guidance for the replacement of unexpired awards is the same for awards that are replaced voluntarily by the acquirer and those that the acquirer is obliged to replace. The amendment is effective for annual periods beginning on or after 1 July 2010. • Assets held for sale shall be measured in accordance with IFRS 5 at fair value, less cost to sell (IFRS 3.31). Note: To the extent that other IFRS and U.S. GAAP apply to the recognition, classification, and measurement of certain identifiable assets and liabilities assumed in a business combination, differences in existing guidance might result in differences in the amounts recognised in a business combination as well as the subsequent accounting for these items. U.S. GAAP • Assets held for sale shall be measured in accordance ASC 360 at fair value, less cost to sell (ASC 805-20-30-22). Goodwill or gain on a bargain purchase The acquirer measures and recognises either goodwill or a gain on a bargain purchase as a residual amount, which is the difference between the following (IFRS 3.32): • The total acquisition-date value of the acquiree (see below), and • The net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed in the combination, measured and recognised according to the provisions of IFRS 3 Goodwill is not amortised. Instead, it is tested for impairment annually or more frequently if indications of impairment exist. See Section 4.4, “Impairment” for a discussion of the goodwill impairment test. A bargain purchase is defined as a business combination in which (a) the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed in the combination, measured and recognised according to the provisions of IFRS 3, exceeds (b) the total acquisition-date value of the acquiree (IFRS 3.34). Acquisition-date value of the acquiree equals the sum of the following (IFRS 3.32): • The acquisition-date value of consideration transferred by the acquirer (generally fair value, but see below) • The acquisition-date fair value of any equity interests in the acquiree held by the acquirer immediately before the acquisition • The amount of any noncontrolling interests The acquirer measures and recognizes either goodwill or a gain on a bargain purchase as a residual amount, which is the difference between the following (ASC 805-30-30-1): • The total acquisition-date value of the acquiree (see below), and • The net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed in the combination, measured and recognized according to the provisions of ASC 805 Similar to IFRS, goodwill is not amortized. See Section 4.4, “Impairment” for a discussion of the goodwill impairment test. Similar to IFRS (ASC 805-30-25-2 through 25-4). Acquisition-date value of the acquiree equals the sum of the following (ASC 805-30-30-1): • The acquisition-date value of consideration transferred by the acquirer (generally fair value, but see below) • The acquisition-date fair value of any equity interests in the acquiree held by the acquirer immediately before the acquisition • The acquisition-date fair value of any noncontrolling © 2011 Grant Thornton LLP All rights reserved U.S. member firm of Grant Thornton International Ltd
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