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

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Comparison between U.S. GAAP and International Financial Reporting Standards 156 IFRS Related party transactions and outstanding balances with other entities in a group are disclosed in an entity’s financial statements. Intragroup related party transactions and outstanding balances are eliminated in the preparation of consolidated financial statements of the group (IAS 24.4). U.S. GAAP financial statements are presented in the same financial report (ASC 850-10-50-4). Disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements (ASC 850-10-50-1). Disclosure of relationships between parents and subsidiaries Relationships between parents and subsidiaries shall be disclosed irrespective of whether there have been transactions between those related parties. An entity shall disclose the name of the entity’s parent and, if different, the ultimate controlling party. If neither the entity’s parent nor the ultimate controlling party produces financial statements available for public use, the name of the next most senior parent that does so must also be disclosed (IAS 24.12). The identification of related party relationships between parents and subsidiaries is in addition to the disclosure requirements in IAS 27, IAS 28, and IAS 31, which require an appropriate listing and description of significant investments in subsidiaries, associates, and jointly controlled entities (IAS 24.14). If the reporting enterprise and one or more other enterprises are under common ownership or management control and the existence of that control could result in operating results or financial position of the reporting enterprise significantly different from those that would have been obtained if the enterprises were autonomous, the nature of the control relationship must be disclosed even though there are no transactions between the enterprises (ASC 850-10-50-6). The name of the related party should be disclosed if necessary to the understanding of the relationship (ASC 850-10-50-3). Disclosure of key management personnel compensation An entity shall disclose key management personnel compensation in total and for each of the following categories (IAS 24.16 and BC4-BC7): • Short term employee benefits (IAS 19.7 and .8-.23) • Post-employment benefits (IAS 19.7 and .24-.125) • Other long term benefits (IAS 19.7 and .126-.131) • Termination benefits (IAS 19.7 and .132-.143) • Share-based payment (IFRS 2) Unlike IFRS, ASC 850 does not require disclosure of compensation arrangements, expense allowances, and other similar items in the ordinary course of business (ASC 850-10-50-1). SEC Regulation S-K, Item 402 requires disclosure of executive compensation. Such disclosures are outside of the entity’s basic general purpose financial statements and are not required by U.S. GAAP. Disclosure of transactions and outstanding balances If there have been transactions between related parties, an entity shall disclose the nature of the related party relationship as well as information about the transaction and outstanding balances necessary for an understanding of the potential effect of the relationship on the financial statements. These disclosures are in addition to the requirements in IAS 24.16 to disclose key management personnel compensation. At a minimum, disclosures shall include (IAS 24.17): • Amount of the transactions ASC 850 requires disclosure of material related party transactions, including (ASC 850-10-50-1): • Nature of the relationship • Description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each period for which income statements are presented • Such other information deemed necessary to an understanding of the effects of the transactions on the 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 157 IFRS • Amount of the outstanding balances The terms and conditions, including whether they are secured, and the nature of consideration to be provided in settlement Details of any guarantees given or received • Provisions for doubtful accounts related to the amount of outstanding balances • The expense recognised during the period with respect to bad or doubtful debts due from related parties The disclosures required by IAS 24.27 are made separately for the following categories (IAS 24.18): • The parent • Entities with joint control or significant influence over the entity • Subsidiaries • Associates • Joint ventures in which the entity is a venturer • Key management personnel of the entity or its parent • Other related parties U.S. GAAP • Amount of the transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period • Amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement • An entity that is a member of a group that files a consolidated tax return must disclose in its separately issued financial statements (ASC 740-10-50-17): The amount of any tax-related balances due to or from affiliates as of the date of each balance sheet Principal provisions of the method by which the consolidated amount of current and deferred tax expense is allocated to members of the group and the nature and effect of any changes in that method (and in determining related balances to or from affiliates) Unlike IFRS, there is no specific requirement in U.S. GAAP to disclose allowances for doubtful accounts related to the amount of related party outstanding balances. Disclosure of items of a similar nature Items of a similar nature may be disclosed in aggregate except where separate disclosure is necessary for an understanding of the effects of related party transactions on the financial statements of the entity (IAS 24.22). In some cases, aggregation of similar transactions by type of related party may be appropriate (ASC 850-10-50-3). Other IAS 24 does not require that related party transactions be disclosed on the face of the financial statements. Similar to IFRS, U.S. GAAP does not require that related party transactions be disclosed on the face of the financial statements. However, SEC registrants are required to disclose related party transactions on the face of their financial statements (SEC Regulation S-X, Rule 4-08(k)). © 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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