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

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Comparison between U.S. GAAP and International Financial Reporting Standards 144 IFRS presented shall be adjusted for the effects of errors and adjustments resulting from changes in accounting policies accounted for retrospectively (IAS 33.64 and IAS 8.19-.27). An entity does not restate diluted earnings per share of any prior period presented for changes in the assumptions used in earnings per share calculations or for the conversion of potential ordinary shares into ordinary shares (IAS 33.65). U.S. GAAP Similar to IFRS (ASC 260-10-45-21). 10.4 Events after the reporting period IFRS U.S. GAAP Relevant guidance: IAS 1, 10, and 33; IFRS 3 Relevant guidance: ASC 260, 470, 805, and 855; EITF Topic D-86; SEC SAB Topic 4:C; AICPA AU Section 341; Sarbanes-Oxley Act of 2002 (Section 302) Introduction The objective of IAS 10 is to prescribe (IAS 10.1): • When an entity should adjust its financial statements for events after the reporting period • The disclosures that an entity should give about the date when the financial statements were authorised for issue and about events after the reporting period Events after the reporting period are those events, favourable and unfavourable, that occur between the end of the reporting period and the date when the financial statements are authorised for issue. Two types of events can be identified (IAS 10.3): • Those that provide evidence of conditions that existed at the end of the reporting period (adjusting events) • Those that are indicative of conditions that arose after the reporting period (non-adjusting events) The objective of ASC 855 is to establish principles and requirements for subsequent events. The guidance sets forth (ASC 855-10-05-1): • The period after the balance sheet date during which management of a reporting entity shall evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements • The circumstances under which an entity shall recognize events or transactions that occurred after the balance sheet date • The disclosures that an entity shall make about events or transactions that occurred after the balance sheet date Subsequent events are events or transactions that occur after the balance sheet date but before financial statements are issued or are available to be issued. There are two types of subsequent events (ASC 855-10-20-Glossary): • Recognized subsequent events: events or transactions that provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements • Nonrecognized subsequent events: events that provide evidence about conditions that did not exist at the date of the balance sheet but arose © 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 145 IFRS U.S. GAAP subsequent to that date Financial statements are issued: financial statements are considered issued when they are widely distributed to shareholders and other financial statement users for general use and reliance in a form and format that complies with U.S GAAP (See EITF Topic D-86 for SEC staff views about the issuance of financial statements.) (ASC 855-10-20-Glossary). Financial statements are available to be issued: financial statements are considered available to be issued when they are complete in a form and format that complies with U.S. GAAP and all approvals necessary for issuance have been obtained, for example, from management, the board of directors, and/or significant shareholders. The process involved in creating and distributing the financial statements will vary depending on an entity’s management and corporate governance structure as well as statutory and regulatory requirements (ASC 855-10-20-Glossary). Revised financial statements: financial statements are revised only for either of the following conditions (ASC 855-10-20-Glossary): • Correction of an error • Retrospective application of U.S. GAAP Date through which events after the reporting period are evaluated Events after the reporting period are required to be evaluated through the date that the financial statements are authorised for issue (IAS 10.7). Unlike IFRS, U.S. GAAP requires that an entity that meets either of the following criteria shall evaluate subsequent events through the date that the financial statements are issued (ASC 855-10-25-1A): • It is an SEC filer • It is a conduit bond obligor for conduit debt securities that are traded in a public market (a domestic or foreign stock exchange or an over-thecounter market, including local or regional markets) An entity that meets neither criteria in the preceding paragraph shall evaluate subsequent events through the date that the financial statements are available to be issued (ASC 855-10-25-2). Recognition and measurement Adjusting events after the reporting period An entity shall adjust the amounts recognised in its financial statements to reflect adjusting events after the reporting period (IAS 10.8). IAS 10.9 provides examples of adjusting events after the reporting period that require an entity to adjust the amounts recognised in its financial statements, or to Recognized subsequent events An entity shall recognize in the financial statements the effects of all subsequent events that provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements (ASC 855-10-25-1). © 2011 Grant Thornton LLP All rights reserved U.S. member firm of Grant Thornton International Ltd
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