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

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Comparison between U.S. GAAP and International Financial Reporting Standards 14 IFRS An entity shall present current and non-current assets, and current and non-current liabilities, as separate classifications in its statement of financial position in accordance with IAS 1.66-.76, except when a presentation based on liquidity provides information that is reliable and more relevant. When that exception applies, an entity shall present all assets and liabilities in order of liquidity (IAS 1.60). No subtotals are specified in IAS 1. When an entity presents current and non-current assets, and current and non-current liabilities, as separate classifications in its statement of financial position, it shall not classify deferred tax assets (liabilities) as current assets (liabilities) (IAS 1.56). An entity shall classify an asset as current when (IAS 1.66): • It expects to realise the asset, or intends to sell or consume it, in its normal operating cycle. The normal operating cycle where not clearly identifiable is assumed to be 12 months (IAS 1.68). • It holds the asset primarily for the purpose of trading • It expects to realise the asset within 12 months after the reporting period • The asset is cash or a cash equivalent (as defined in IAS 7) unless the asset is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period An entity shall classify all other assets as non-current (IAS 1.66). An entity shall classify a liability as current when (IAS 1.69): • It expects to settle the liability in its normal operating cycle. The normal operating cycle where not clearly identifiable is assumed to be 12 months (IAS 1.70). • It holds the liability primarily for the purpose of trading • The liability is due to be settled within 12 months U.S. GAAP The balance sheets of most enterprises show separate classifications of current assets and liabilities (ASC 210- 10-05-4). However, unlike IFRS, an unclassified balance sheet is commonplace for enterprises in specialized industries for which the distinction is deemed to have little or no relevance (ASC 210-10-15-3). Unlike IFRS, non-SEC reporting entities are required by ASC 210-10-45-5 to present a total of current liabilities if they present a classified balance sheet. As a matter of practice, these non-SEC reporting entities also present a subtotal for current assets as well. SEC rules explicitly require subtotals for current assets and current liabilities (Regulation S-X, Rule 5-02). Unlike IFRS, deferred tax assets and liabilities are separated into current and non-current amounts and the net current deferred tax asset or liability and the net noncurrent deferred tax asset or liability, if any, is shown on the face of the balance sheet (ASC 740-10-45-4). Current assets are cash and other assets or resources commonly identified as those which are reasonably expected to be realized in cash or sold or consumed during the normal operating cycle of the business (ASC Master Glossary, “Current Assets”). In businesses where the period of the operating cycle is more than 12 months, the longer period should be used. Where a particular business has no clearly defined operating cycle, the one-year rule governs (ASC 210-10-45-3). Current liabilities are obligations whose liquidation is reasonably expected to require the use of existing resources properly classifiable as current assets, or the creation of other current liabilities (ASC Master Glossary, “Current Liabilities”). © 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 15 IFRS after the reporting period • The entity does not have an unconditional right to defer settlement of the liability for at least 12 months after the reporting period An entity shall classify all other liabilities as non-current (IAS 1.69). An entity classifies its financial liabilities as current when they are due to be settled within 12 months after the reporting period, even if (IAS 1.72(b)): • The original term was for a period longer than 12 months, and • An agreement to refinance, or to reschedule payments, on a long-term basis is completed after the reporting period and before the financial statements are authorised for issue When an entity breaches a provision of a long-term loan arrangement on or before the end of the reporting period with the effect that the liability becomes payable on demand, it classifies the liability as current, even if the lender has agreed, after the reporting period and before authorisation of the financial statements for issue, not to demand payment as a consequence of the breach. An entity classifies the liability as current because, at the end of the reporting period, it does not have an unconditional right to defer its settlement for at least 12 months after that date (IAS 1.74). An entity shall disclose the amount expected to be recovered or settled after more than 12 months for each asset and liability line item that combines amounts expected to be recovered or settled (IAS 1.61): • No more than 12 months after the reporting date, and • More than 12 months after the reporting period An entity shall not offset assets and liabilities or income and expenses, unless required or permitted by an IFRS (IAS 1.32). U.S. GAAP Unlike IFRS, short-term obligations, other than those arising from transactions in the normal course of business that are due in customary terms, are excluded from current liabilities only if the entity intends to refinance the obligation on a long-term basis and (ASC 470-10-45-14): • Before the balance sheet is issued there is a postbalance sheet issuance of a long-term obligation or equity securities for the purpose of refinancing the obligation on a long-term basis; or • Before the balance sheet is issued the entity has entered into a financing agreement that permits it to refinance the short-term obligation on a long-term basis and certain conditions are met Unlike IFRS, an entity must classify as current a long-term obligation that is or will be callable by a creditor because of the entity’s violation of a provision of the debt agreement at the balance sheet date or because the violation, if not cured within a specified grace period, will make the obligation callable unless (ASC 470-10-45-11): • The creditor has waived or subsequently lost the right to demand repayment for more than one year (or operating cycle, if longer) from the balance sheet date; or • For long-term obligations containing a grace period within which the entity may cure the violation, it is probable that the violation will be cured within that period ASC 470-10-50-1 requires that the combined aggregate amount of maturities and sinking fund requirements for all long-term borrowings be disclosed for each of the five years following the date of the latest balance sheet presented. Unlike IFRS, offsetting is permitted only when (ASC 210-20-45-1): • The parties owe each other determinable amounts • There is a right and intention to set-off • The right of set-off is enforceable by law © 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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