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

Comparison between U.S. GAAP and International Financial Reporting Standards 132
IFRS
• Income and expenses shall be translated at
exchange rates at the dates of the transactions (or an
average rate as an approximation)
• All resulting exchange differences shall be
recognised in other comprehensive income
Translation of a foreign operation
The results and financial position of a foreign operation
follow normal consolidation procedures except that an
intragroup monetary asset or liability cannot be eliminated
against the corresponding intragroup liability or asset
without showing the results of currency fluctuations in the
consolidated financial statements. Any exchange
difference is recognised in profit or loss unless IAS 21.32
applies in which case it is recognised in other
comprehensive income (IAS 21.45).
IAS 21.46 provides guidance for when the foreign
operation has a different reporting date than the reporting
entity.
Goodwill arising on the acquisition of a foreign operation
and any fair value adjustments to the carrying amounts of
assets and liabilities arising on the acquisition of that
foreign operation shall be treated as assets and liabilities
of the foreign operation and shall be translated at the
closing rate (IAS 21.47).
U.S. GAAP
numerous revenues, expenses, gains, and losses are
recognized is generally impractical, an appropriately
weighted average exchange rate for the period may be
used to translate those elements (ASC 830-30-45-3
through 45-5 and ASC 830-10-55-10 through 55-11).
If an entity’s functional currency is a foreign currency,
translation adjustments result from the process of
translating that entity’s financial statements into the
reporting currency. Translation adjustments shall not be
included in determining net income but shall be
reported in other comprehensive income
(ASC 830-30-45-12).
Translation of a foreign operation
Similar to IFRS, normal consolidation procedures apply
(ASC 830-10-15-5, and ASC 830-30-45-10 and 45-17).
After a business combination accounted for by the
purchase method, the amount assigned at the
acquisition date to the assets acquired and the liabilities
assumed (including goodwill or the gain recognized for
a bargain purchase) should be translated in conformity
with the requirements of ASC 830. Accumulated
translation adjustments attributable to noncontrolling
interests should be allocated to and reported as part of
the non-controlling interest in the consolidated
enterprise (ASC 830-30-45-17).
Disposal or partial disposal of a foreign operation
An entity may dispose or partially dispose of its interest in
a foreign operation through sale, liquidation, repayment of
share capital or abandonment of all, or part of, that entity
(IAS 21.49).
On the disposal of a foreign operation, the cumulative
amount of the exchange differences relating to that
foreign operation recognised in other comprehensive
income and accumulated in the separate component of
equity shall be reclassified from equity to profit or loss (as
a reclassification adjustment) when the gain or loss on
disposal is recognised (IAS 21.48).
On the partial disposal of a subsidiary that includes a
foreign operation, the entity shall re-attribute the
proportionate share of the cumulative amount of the
exchange differences recognised in other comprehensive
income to the non-controlling interests in that foreign
Upon sale or upon complete or substantially complete
liquidation of an investment in a foreign entity, the
amount attributable to that entity and accumulated in
the translation adjustment component of equity shall be
removed from the separate component of equity and
shall be reported as part of the gain or loss on sale or
liquidation of the investment for the period during which
the sale or liquidation occurs (ASC 830-30-40-1).
Unlike IFRS, U.S. GAAP does not remove any amount
from the separate component of equity when there is a
partial return of investment to the parent (i.e. dividend).
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