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

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Comparison between U.S. GAAP and International Financial Reporting Standards 126 IFRS statements (IAS 31.21) • Its share of the jointly controlled assets • Liabilities it has incurred as well as its share of any liabilities incurred jointly with other venturers • Any income from its share of the output of the venture • Any expenses it has incurred as well as its share of any expenses incurred by the venture U.S. GAAP Jointly controlled entities A venturer shall recognise its interest in a jointly controlled entity using proportionate consolidation (benchmark treatment) or the equity method (alternative method) (IAS 31.30 and .38) except when it meets the conditions in paragraph 2 of IAS 31. Proportionate consolidation The following two reporting formats are permitted (IAS 31.34): • Combining line-by-line the share of each asset, liability, income and expense of the jointly controlled entity with that of the venturer • Reporting the share of each asset, liability, income and expense of the jointly controlled entity as a separate line item in the venturer's financial statements A venturer shall discontinue the use of proportionate consolidation when it ceases to have joint control over a jointly controlled entity (IAS 31.36). An investor must first determine whether the joint venture is a variable interest entity. If it is a variable interest entity, the ASC 810-10, “Variable Interest Entities” subsections shall be applied. If the joint venture is not a variable interest entity, the investor shall apply: Proportionate consolidation Unlike IFRS, proportionate consolidation is not appropriate except for unincorporated entities in either the construction or extractive industries (ASC 810-10-45-14). Equity method As an alternative, a venturer can recognise its interest in a jointly controlled entity using the equity method as described in IAS 28 (IAS 31.38). Section 9.1, “Associates and equity method investees” discusses IAS 28. A venturer shall discontinue the use of the equity method when it ceases to have joint control over, or significant influence in, a jointly controlled entity (IAS 31.41). Equity method If the ASC 810-10, “Variable Interest Entities” subsections do not apply, the equity method shall be applied except in the limited situations when proportionate consolidation is permitted or the fair value option is elected in accordance with the requirements of ASC 825, when it is applicable. Section 9.1, “Associates and equity method investees” discusses the equity method of accounting. Held for sale Interests that are classified as held for sale in accordance with IFRS 5, shall be accounted for in accordance with that IFRS and therefore the proportionate consolidation method or equity method shall not be used (IAS 31.42). Held for sale Unlike IFRS, an equity method investee that is held-forsale shall be accounted for under the equity method. Investments accounted for under the equity method are not in the scope of the ASC 360 “Impairment or Disposal of Long-Lived Assets,” subsections (ASC 360-10-15-5). © 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 127 IFRS Contributions by venturers A venturer that contributes nonmonetary assets to a jointly controlled entity in exchange for an equity interest shall recognise in profit or loss for the period the portion of the gain or loss attributable to the equity interests of the other venturers except when (SIC-13.5): • The significant risks and rewards of ownership of the contributed assets have not been transferred to the jointly controlled entity • The gain or loss cannot be measured reliably • The contribution lacks commercial substance as described in IAS 16 U.S. GAAP Contributions by venturers Generally, a venturer that contributes nonmonetary assets to a jointly controlled entity in exchange for an equity interest shall record its investment in the jointly controlled entity at cost and therefore no gain is recognized. However, in certain situations a gain may be recognized for a portion of the appreciated assets transferred to the jointly controlled entity if the other venturer(s) contribute cash for their interest in the jointly controlled entity. Section 9.1, “Associates and equity method investees” discusses the equity method of accounting. Loss of control On loss of joint control, an investor shall account for any remaining investment in accordance with • IFRS 9 and IAS 39, as long as the former jointly controlled entity does not become a subsidiary or associate • IAS 27 and IFRS 3 if the former jointly controlled entity becomes a subsidiary • IAS 28 if the former jointly controlled entity becomes an associate On the date joint control is lost, the investor shall measure any retained investment at fair value and recognise in profit or loss any difference between the following (IAS 31.45): • The fair value of the retained investment and any proceeds from disposing part of its interest • The carrying amount of the investment at the date when joint control is lost The deconsolidation guidance in ASC 810-10 40-3A applies only to the following: • The deconsolidation of a subsidiary or derecognition of a group of assets if the subsidiary or asset group constitutes a business or nonprofit activity • The deconsolidation of a subsidiary or derecognition of a group of assets that does not constitute a business or nonprofit activity if the substance of the transaction is not directly addressed in other authoritative guidance • The transfer of a subsidiary or group of assets that is a business or a nonprofit activity to an equity method or joint venture investee • The exchange of a subsidiary or a group of assets that constitutes a business or nonprofit activity for a noncontrolling interest in the entity receiving the assets, including an equity method investee or joint venture However, the deconsolidation provisions in ASC 810-10 40-3A do not apply if the transaction resulting in an entity’s decreased ownership interest is either the sale of in-substance real estate or the conveyance of oil and gas mineral rights. © 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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