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

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Comparison between U.S. GAAP and International Financial Reporting Standards 146 IFRS recognise items that were not previously recognised. Non-adjusting events after the reporting period An entity shall not adjust the amounts in its financial statements to reflect non-adjusting events after the reporting period (IAS 10.10). An example of a non-adjusting event after the reporting period is a decline in market value of investments between the end of the reporting period and the date when the financial statements are authorised for issue (IAS 10.11). Financial statements are not adjusted for a stock dividend declared after the reporting period U.S. GAAP ASC 855-10-55-1 provides examples of recognized subsequent events. Nonrecognized subsequent events An entity shall not recognize subsequent events that provide evidence about conditions that did not exist at the date of the balance sheet but arose after the balance sheet date but before financial statements are issued or are available to be issued (ASC 855-10-25-3). ASC 855-10-55-2 provides examples of nonrecognized subsequent events. Unlike IFRS, public entities retroactively adjust the financial statements for a stock dividend declared after the balance sheet date (SEC SAB Topic 4: C). Cash dividends declared If an entity declares dividends to holders of equity instruments (as defined in IAS 32) after the reporting period, the entity shall not recognise those dividends as a liability at the end of the reporting period (IAS 10.12). Similar to IFRS (ASC 855-10-25-3). If dividends are declared after the reporting period but before the financial statements are authorised for issue, the dividends are not recognised as a liability at the end of the reporting period because no obligation exists at that time. Such dividends are disclosed in the notes (IAS 10.13; IAS 1.137). Going concern An entity shall not prepare its financial statements on a going concern basis if management determines after the reporting period that either it intends to liquidate the entity or to cease trading, or that it has no realistic alternative but to do so (IAS 10.14). Financial statements should not be prepared on the going concern basis if subsequent to the balance sheet date, but before issuance of the financial statements, liquidation appears imminent (AU Section 341, fn. 1). Note: In October 2008, the FASB issued an Exposure Draft of a proposed Statement, Going Concern that would provide guidance on the preparation of financial statements as a going concern. Similar to IFRS, the proposed guidance would require management to prepare financial statements on a going concern basis unless management intends to liquidate or cease operations, or has no realistic alternative but to do so. At the December 2010 meeting, the FASB discussed a summary of key issues raised by external reviewers on a preliminary staff draft of a proposed Accounting Standards Update for this project. Because this project may overlap with rules and standards of other agencies, the Board directed the staff to obtain input from the staffs at the SEC, AICPA, and PCAOB on the revised draft and any conflict with existing and/or pending guidance related to this topic. This project is now referred to as Disclosure about Risks and Uncertainties © 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 147 IFRS U.S. GAAP and the Liquidation Basis of Accounting (formerly Going Concern). Date of authorisation for issue – disclosure An entity shall disclose the date when the financial statements were authorised for issue and who gave that authorisation. If the entity’s owners or others have the power to amend the financial statements after issue, the entity shall disclose that fact (IAS 10.17). The process involved in authorising the financial statements for issue will vary depending upon the management structure, statutory requirements, and procedures followed in preparing and finalizing the financial statements (IAS 10.4). If an entity is not an SEC filer, then the entity shall disclose both of the following (ASC 855-10-50-1): • The date through which subsequent events have been evaluated • Whether that date is either of the following: The date the financial statements were issued The date the financial statements were available to be issued Unless the entity is an SEC filer, an entity shall disclose in the revised financial statements the dates through which subsequent events have been evaluated in both of the following (ASC 855-10-50-4): • The issued or available-to-be-issued financial statements • The revised financial statements CEO and CFO of SEC registrants must certify financial statements (Sarbanes-Oxley Act of 2002 (Section 302)). The certification is outside of basic general purpose financial statements and not required by U.S. GAAP. Non-adjusting events after the reporting period – disclosure If non-adjusting events after the reporting period are material, non-disclosure could influence the economic decisions that users make on the basis of the financial statements. Accordingly, an entity shall disclose the following for each material category of non-adjusting event after the reporting period (IAS 10.21): • The nature of the event; and • An estimate of its effect, or a statement that such an estimate cannot be made IAS 10.22 provides examples of non-adjusting events after the reporting period that would generally result in disclosure. Some nonrecognized subsequent events may be of such a nature that they must be disclosed to keep the financial statements from being misleading. For such events, an entity shall disclose the following (ASC 855-10-50-2): • The nature of the event • An estimate of its financial effect, or a statement that such an estimate cannot be made Reissuance of financial statements Reissuance of financial statements is not specifically addressed in IAS 10. However, IFRS recognises only one date through which events after the reporting period are An entity may need to reissue financial statements, for example, in reports filed with the SEC or other regulatory agencies. After the original issuance of the © 2011 Grant Thornton LLP All rights reserved U.S. member firm of Grant Thornton International Ltd
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