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

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Comparison between U.S. GAAP and International Financial Reporting Standards 116 IFRS measured in accordance with IFRS 3. 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) (IFRS 3.19). Note: Improvements to IFRSs May 2010, amends the measurement principle in IFRS 3 for noncontrolling interests. See the section on Recognising and measuring identifiable assets acquired, liabilities assumed, and noncontrolling interests above. Consideration transferred for the acquiree: • Includes assets transferred, liabilities incurred by the acquirer to former owners of the acquiree, and equity interests issued by the acquirer in consideration for its interest in the acquiree (IFRS 3.37) • Includes the acquisition-date fair value of any contingent consideration (IFRS 3.39) • Is measured at its acquisition-date fair value, with the following exceptions (IFRS 3.30 and .38): U.S. GAAP interests Consideration transferred for the acquiree (ASC 805-30-25-5 and 30-7 through 30-13): • Similar to IFRS • Similar to IFRS • Similar to IFRS, is measured at its acquisition-date fair value, with the following exceptions: Replacement share-based payment awards are measured in accordance with IFRS 2 Replacement share-based payment awards are measured in accordance with ASC 718 Transfers of assets or liabilities that remain within the combined entity after the acquisition are measured at their carrying amounts immediately before the acquisition date • Does not include acquisition-related costs or other amounts transferred in transactions that are not part of the business combination (IFRS 3.51-.53) Contingent consideration (IFRS 3.40 and .58): • Initial classification – the amount recognised for a contingent obligation to pay additional consideration is classified as either a liability or equity based on the definition of an equity instrument and a financial liability in applicable IFRS • Subsequent measurement changes that are not measurement period adjustments are accounted for as follows: Transfers of assets or liabilities that remain within the combined entity after the acquisition are measured at their carrying amounts immediately before the acquisition date • Similar to IFRS (ASC 805-10-25-20 through 25-23) Contingent consideration: • Initial classification – the amount recognized for a contingent obligation to pay additional consideration is classified as either a liability or equity in accordance with applicable generally accepted accounting principles (ASC 805-30-25-5 through 25-7) • Subsequent measurement changes that are not measurement period adjustments are accounted for as follows (ASC 805-30-35-1): Contingent consideration classified as equity shall not be remeasured. The settlement of contingent consideration classified as equity will be accounted for within equity. Contingent consideration classified as equity will not be remeasured. The settlement of contingent consideration classified as equity will be accounted for within equity. © 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 117 IFRS Contingent consideration classified as an asset or a liability that is a financial instrument and within the scope of IAS 39 shall be measured at fair value with any gain or loss recognised in profit or loss or other comprehensive income as appropriate Contingent consideration classified as an asset or a liability that is not within the scope of IAS 39 shall be accounted for in accordance with IAS 37 or other applicable IFRS Note: Improvements to IFRSs May 2010 Amends IFRS 3 to clarify that contingent consideration balances arising from business combinations that occurred before an entity's date of adoption of IFRS 3 (revised 2008) shall not be adjusted on the adoption date. The amendment provides guidance on the subsequent accounting for such contingent consideration balances. The amendment is effective for annual periods beginning on or after 1 July 2010. U.S. GAAP Contingent consideration classified as an asset or a liability will be adjusted to fair value at each reporting date through earnings (or other comprehensive income for certain hedging instruments under ASC 815 ) until the contingency is resolved. Subsequent measurement under IFRS follows the guidance in IAS 39 or IAS 37 which could differ from the guidance in U.S. GAAP. Other matters Business combination achieved in stages (step acquisition) An acquirer may obtain control of an acquiree in which the acquirer had an equity interest before the acquisition date. IFRS 3 requires that any equity interest in the acquiree held by the acquirer immediately before the acquisition date be adjusted to acquisition-date fair value. Any resulting gain or loss will be recognised in earnings. In prior reporting periods, the acquirer may have recognised changes in the value of its equity interest in the acquiree in other comprehensive income. If so, the amount that was recognised in other comprehensive income shall be recognised on the same basis as would be required if the acquirer had directly disposed of the previously held equity interest. (IFRS 3.42, before IFRS 9 amendment). Reverse acquisition If a business combination is effected primarily by an exchange of equity interests, the entity that issues its equity interests is usually the acquirer. However, in a reverse acquisition the entity that issues securities to effect a combination (the legal acquirer) is determined to be the acquiree for accounting purposes, and the entity whose equity interests are acquired (the legal acquiree) is the acquirer for accounting purposes (IFRS 3.B19). Research and development Business combination achieved in stages (step acquisition) Similar to IFRS (ASC 805-10-25-9 through 25-10). Reverse acquisition Similar to IFRS (ASC 805-10-55-12). Research and development © 2011 Grant Thornton LLP All rights reserved U.S. member firm of Grant Thornton International Ltd
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