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

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Comparison between U.S. GAAP and International Financial Reporting Standards 150 IFRS U.S. GAAP company statements also are consolidated or combined in a complete set of financial statements and both the separate company statements and the consolidated or combined statements are included in the same financial report, but does apply if their statements are issued separately (ASC 280-10-15-3). Differences remaining between IFRS 8 and ASC 280 See U.S. GAAP discussion. The differences remaining between ASC 280 and IFRS 8 are as follows (IFRS 8, BC60): • Unlike IFRS 8, ASC 280 indicates that the FASB staff believes that long-lived assets (as used in ASC 280-10-50-41 implies hard assets that cannot be readily removed, which would appear to exclude intangibles. Whereas non-current assets as used in IFRS 8 include intangibles (see IFRS 8, BC56 and 57) • Unlike IFRS 8, ASC 280 does not require disclosure of a measure of segment liabilities. The FASB had concluded that the value of information about segment liabilities in assessing the performance of the segments was limited. IFRS 8 requires disclosure of segment liabilities if such a measure is regularly provided to the chief operating decision maker (see IFRS 8, BC36-38) • Unlike IFRS 8, ASC 280 requires an entity with a matrix form of organization to determine operating segments based on products and services. IFRS 8 requires such an entity to determine segments by reference to the core principle of IFRS 8 (see IFRS 8, BC27) Operating segments An operating segment is a component of an entity (IFRS 8.5): • That engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity) An operating segment is a component of an enterprise (ASC Master Glossary, “Operating Segment”: Similar to IFRS. • Whose operating results are regularly reviewed by the entity’s chief operating decision maker to make decisions about resources to be allocated to the segment and asses its performance • For which discrete financial information is available An operating segment may engage in business activities for which it has yet to earn revenues, for example, start-up Similar to IFRS (ASC 280-10-50-3). © 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 151 IFRS operations may be operating segments before earning revenues (IFRS 8.5). The term chief operating decision maker identifies a function, not necessarily a manager with a specific title. The function is to allocate resources to and asses the performance of the operating segments of an entity (IFRS 8.7). Matrix form of organisation: an entity with business components that are managed in more than one way and the Chief Operating Decision Maker reviews all of the information provided (IFRS 8.10). With respect to a matrix form of organization, the IASB decided that the use of components based on products and services was inconsistent with the management approach. Accordingly, IFRS 8 requires the identification of operating segments to be made by reference to the core principle of IFRS 8 (IFRS 8.10 and BC27). U.S. GAAP Similar to IFRS (ASC 280-10-50-5). The characteristics above may apply to two or more overlapping sets of components for which managers are held responsible. That structure is sometimes referred to as a matrix form of organization. For example, in some enterprises, certain managers are responsible for different product and service lines worldwide, while other managers are responsible for specific geographic areas. The chief operating decision maker regularly reviews the operating results of both sets of components, and financial information is available for both. Unlike IFRS 8, in that situation, the components based on products and services would constitute the operating segments (ASC 280-10-50-9). Reportable segments Aggregation criteria Two or more operating segments may be aggregated into a single operating segment if aggregation is consistent with the core principle of IFRS 8, the segments have similar economic characteristics, and the segments are similar in each of the following respects (IFRS 8.12): • The nature of the products and services • The nature of the production processes • The type or class of customer for their products and services • The methods used to distribute their products or provide their services • If applicable, the nature of the regulatory environment, for example, banking, insurance or public utilities Quantitative thresholds An entity shall report separately information about an operating segment that meets any of the following quantitative thresholds (IFRS 8.13): • Its reported revenue, including both sales to external customers and intersegment sales or transfers, is 10 per cent or more of the combined revenue, internal and external, of all operating segments • The absolute amount of its reported profit or loss is 10 per cent or more of the greater, in absolute Aggregation criteria Similar to IFRS (ASC 280-10-50-11). Quantitative thresholds Similar to IFRS (ASC 280-10-50-12 through 50-19). © 2011 Grant Thornton LLP All rights reserved U.S. member firm of Grant Thornton International Ltd
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