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

Comparison between U.S. GAAP and International Financial Reporting Standards 120
IFRS
• Interchange of managerial personnel
• Provision of essential technical information
An entity loses significant influence when it loses the power
to participate in the financial and operating policy decisions
of the investee, which could occur with or without a change
in ownership levels (IAS 28.10).
Equity method
An investment in an associate shall be accounted for using
the equity method except for the following (IAS 28.1 and
.13):
• Investments classified as held for sale in accordance
with IFRS 5
• Investments in associates for which the exception to
consolidation in paragraph 10 in IAS 27 applies,
discussed in Section 8.1, “Basic requirements for
group accounts”
• All of the following apply:
Investor is a subsidiary of another entity and its
owners do not object to the investor not applying
the equity method;
Investor's debt or equity instruments are not
traded in a public market;
Investor did not file / is not in the process of filing,
its financial statements with a regulatory
organisation for the purpose of issuing any class
of instruments in a public market; and
Ultimate or any intermediate parent of the investor
produces consolidated financial statements
available for public use that comply with
International Financial Reporting Standards
An investor shall discontinue the use of the equity method
when it no longer has significant influence over the
associate (IAS 28.18).
U.S. GAAP
Equity method
An investor that has the ability to exercise significant
influence over the operating and financial policies of
the investee should apply the equity method when it
has an investment in common and/or an investment
that is in-substance common stock except for the
circumstances listed in ASC 323-10-15-4, unless the
fair value option is elected in accordance with the
requirements of ASC 825, when it is applicable
(ASC 825-10-15-4 and ASC 323-10-15-3).
Investments in unincorporated entities, such as
partnerships shall generally apply the equity method if
the investor has the ability to exercise significant
influence over the investee (ASC 323-30-25-1).
Some of the items subject to the guidance in
ASC 323-10 and 323-30 may qualify for application of
the fair value option subsections of ASC 825-10
(ASC 323-10-25 and 323-30-25). Unlike IFRS, an
equity method investee that is held-for-sale shall be
accounted for under the equity method. Investments
accounted for under the equity method are not within
the scope of ASC 360 (ASC 360-10-15-5).
Application of the equity method – initial recognition
An investment shall be initially recorded at cost. Any
difference between the cost of the investment and the
investor’s share of the net fair value of the associate’s
assets and liabilities shall be accounted for either as
(IAS 28.11 and .23):
• Goodwill and included in the carrying amount of the
investment
• Income in the determination of the investor’s share of
the associate’s profit or loss if there is any excess of
the investor’s share of the net fair value of the
Similar to IFRS. Except as provided in the following
sentence, an investment shall be initially measured at
cost in accordance with ASC 323-10-30-2. An investor
shall initially measure, at fair value, a retained
investment in the common stock of an investee
(including a joint venture) in a deconsolidation
transaction in accordance with ASC 810-10-40-3A
through 40-5. A difference between the cost of an
investment and the amount of the underlying net assets
of the investee shall be accounted for as if the investee
were a consolidated subsidiary (ASC 323-10-35-13).
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