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

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Comparison between U.S. GAAP and International Financial Reporting Standards 118 IFRS An in-process research and development project of the acquiree shall be recognised as an intangible asset if the project meets the definition of an intangible asset. That is when it meets the definition of an asset and is identifiable (IAS 38.34). Fair value Fair value is defined as “the amount to which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction.” Note: The IASB and the FASB are working on a joint project on fair value measurements. The objective of the project is to ensure that fair value has the same meaning under IFRS and U.S. GAAP. In connection with this project, the IASB issued an exposure draft in May 2009, Fair Value Measurement, which was developed based on the requirements in ASC 820. In June 2010, the FASB issued a proposed ASU to amend ASC 820, Fair Value Measurements and Disclosures, to take into consideration some of the comments the IASB received on its May 2009 exposure draft. In August 2010, the IASB posted on its website a staff draft of a forthcoming IFRS on fair value measurement that reflects the tentative decisions made to date by the IASB and FASB. The Boards anticipate issuing a final standard in the first quarter of 2011. U.S. GAAP Tangible and intangible assets used in research and development shall be recognized at their acquisition-date fair values. An intangible asset used in research and development activities that is recognized in a business combination shall be accounted for as an indefinite-lived asset until the associated research and development efforts are completed or abandoned (ASC 805-20-35-5). Fair value Fair value is defined as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” © 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 119 9. Associates, equity method investees, and joint ventures 9.1 Associates and equity method investees Note: Certain sections of IAS 28 have been amended as a result of amendments to IAS 27. The amendments are effective for annual periods beginning on or after July 1, 2010. If an entity applies IAS 27 for an earlier period, the amendments must be applied for that earlier period. If an entity applies the amendments before July 1, 2010 it must disclose that fact. Refer to paragraphs 41B and 41E of IAS 28 for information on effective dates for the amended sections of IAS 28. IFRS U.S. GAAP Relevant guidance: IAS 1 and 28 Relevant guidance: ASC 323, 360, 805, 810, 825, and 970; SEC Regulation S-X, Rules 4-08(g), 10- 01(b), and 3-09 Introduction IAS 28 shall be used to account for investments in associates except for investments in associates held by venture capital organisations, mutual funds, unit trusts, and similar entities that on initial recognition are designated as at fair value through profit or loss or are classified as held for trading and accounted for in accordance with IAS 39, Financial Instruments: Recognition and Measurement An associate is defined as “an entity, including an unincorporated entity such as a partnership, over which the investor has significant influence and that is neither a subsidiary nor an interest in a joint venture” (IAS 28.2). Significant influence An investor is presumed to have significant influence if the investor holds, directly or indirectly, 20 percent or more of the voting power of the investee unless it can be clearly demonstrated that is not the case (IAS 28.6). The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether an entity has significant influence (IAS 28.8). Significant influence is normally evidenced by one or more of the following (IAS 28.7): • Representation on the board of directors or equivalent governing body of the investee • Participation in policy-making processes including participation in decisions about dividends or other distributions • Material transactions between the investor and investee ASC 323-10, Investments-Equity Method and Joint Ventures -Overall, applies to investments in common stock or in-substance common stock except for the circumstances listed in ASC 323-10-15-4. This section focuses primarily on those entities within the scope of ASC 323-10 unless specifically noted. Significant influence Similar to IFRS, however, the existence and effect of potential voting rights that are currently exercisable or convertible shall not be considered when assessing whether an entity has significant influence (ASC 323-10-15-6 through 15-11). © 2011 Grant Thornton LLP All rights reserved U.S. member firm of Grant Thornton International Ltd
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