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

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Comparison between U.S. GAAP and International Financial Reporting Standards 134 IFRS including when the cumulative inflation rate over three years is approaching, or exceeds, 100%. The financial statements of an entity whose functional currency is the currency of a hyperinflationary economy, whether they are based on a historical cost approach or a current cost approach shall be stated in terms of the measuring unit current at the end of the reporting period (e.g. general price level index). The corresponding figures for the previous period required by IAS 1 and any information in respect of earlier periods shall also be stated in terms of the measuring unit current at the end of the reporting period. For the purpose of presenting comparative amounts in a different presentation currency, IAS 21.42(b) and .43 apply (IAS 29.8). When an entity’s functional currency is the currency of a hyperinflationary economy, the entity shall restate its financial statements in accordance with IAS 29 (see section above) before applying the translation method set out in IAS 21.42, except for comparative amounts that are translated into a currency of a non-hyperinflationary economy (see IAS 21.42(b)) (IAS 21.43). The results and financial position of an entity whose functional currency is the currency of a hyperinflationary economy shall be translated into a different presentation currency using the following procedures (IAS 21.42): U.S. GAAP percent or more over a 3-year period (ASC 830-10-45-11). See ASC 830-10-45-11 and 45-17. Unlike IFRS. U.S. GAAP requires that the financial statements be remeasured as if the functional currency were the reporting currency, with translation gains and losses recognized in profit or loss (ASC 830-10-45-11). In a highly inflationary economy the reporting currency is used as the functional currency (ASC 830-10-45-11). • All amounts including comparatives shall be translated at the closing rate as of the date of the most recent statement of financial position • When amounts are translated into the currency of a non-hyperinflationary economy, comparative amounts shall be those that were presented as current year amounts in the relevant prior year financial statements (i.e. not adjusted for subsequent changes in the price level or subsequent changes in exchange rates) Hedges of a net investment in a foreign operation Hedges of a net investment in a foreign operation, including a hedge of a monetary item that is accounted for as part of the net investment (see IAS 21), shall be accounted for similarly to cash flow hedges (IAS 39.102). Similar to IFRS (see ASC 815-20-25-66 and ASC 815-35-35-1 through 35-2). IFRIC 16 applies to an entity that hedges the foreign currency risk arising from its net investments in foreign operations and wishes to qualify for hedge accounting in accordance with IAS 39. For convenience IFRIC 16 refers to such an entity as a parent entity and to the financial statements in which the net assets of foreign operations are included as consolidated financial statements © 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 135 IFRS (IFRIC 16.7). IFRIC 16.9 addresses the following issues: • The nature of the hedged risk and the amount of the hedged item for which a hedging relationship may be designated • Where in a group the hedging instrument can be held • What amounts should be reclassified from equity to profit or loss as reclassification adjustments on disposal of the foreign operation U.S. GAAP 10.2 Government grants and disclosure of government assistance IFRS Relevant guidance: IAS 8, 20, 37, and 39; SIC-10 U.S. GAAP Relevant guidance: Government grants to business enterprises are not specifically addressed by U.S. GAAP. Introduction IAS 20 shall be applied in the accounting for, and in the disclosure of, government grants and in the disclosure of other forms of government assistance (IAS 20.1). Government refers to government, government agencies and similar bodies whether local, national, or international (IAS 20.3). Government grants are assistance by government in the form of transfers of resources to an entity in return for past or future compliance with certain conditions relating to the operating activities of the entity. They exclude those forms of government assistance which cannot reasonably have a value placed upon them and transactions with government which cannot be distinguished from the normal trading transactions of the entity (IAS 20.3). Government assistance is action by the government designed to provide an economic benefit specific to an entity or range of entities qualifying under certain criteria. Government assistance for the purpose of this Standard does not include benefits provided only indirectly through action affecting general trading conditions, such as the provision of infrastructure in development areas or the imposition of trading constraints on competitors (IAS 20.3). U.S. GAAP does not define government grants and there are no specific standards applicable to government grants. Government grants Government grants, including non-monetary grants at fair value, shall not be recognised until there is reasonable assurance that the entity will comply with the conditions General revenue recognition principles should be considered in accounting for government grants. Accrual basis of accounting is used. Under U.S. GAAP, © 2011 Grant Thornton LLP All rights reserved U.S. member firm of Grant Thornton International Ltd
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