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

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Comparison between U.S. GAAP and International Financial Reporting Standards 36 IFRS U.S. GAAP 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 and the Liquidation Basis of Accounting (formerly Going Concern). 3.2 Changes in accounting policy and correction of errors Note: In October 2010, the IASB and the FASB each published documents seeking views on when new financial reporting standards resulting primarily from their work to improve and achieve convergence of IFRS and U.S. GAAP should become effective. When finalizing an IFRS, the IASB will identify a date from which entities will be required to start applying the new requirements (known as the effective date). This date is often 12-18 months after the date the IFRS is published. This allows time for entities to prepare for the change and for jurisdictions to implement the IFRS into their legal or regulatory regime. The IASB also specifies in each IFRS, how the new requirements should be implemented. The IASB is working to complete a number of projects that will lead to new IFRS or improvements to existing IFRS. Some of these projects are being addressed jointly with the FASB. Through this Request for Views, Effective Dates and Transition Methods, the IASB is seeking views on how it can best help those that will be affected by the improvements to financial reporting, manage both the pace and cost of change. The FASB Discussion Paper, Effective Dates and Transition Methods invites comments on the same issues raised in the IASB Request for Views. The comment period ended January 31, 2011. IFRS U.S. GAAP Relevant guidance: IAS 8 and 33 Relevant guidance: ASC 250, 260; SEC SAB Topic 11:M Introduction Change in accounting policy: • A change in accounting policy shall be made if (a) it is required by a standard or interpretation, or (b) the change will result in the financial statements providing reliable and more relevant information about the effects of transactions, other events, or conditions on the entity’s financial position, financial performance, or cash flows (IAS 8.14) Change in accounting principle: • Similar to IFRS, a change in accounting principle shall be made only if (a) the change is required by a newly issued accounting pronouncement or (b) the entity can justify the use of an allowable alternative accounting principle on the basis that it is preferable (ASC 250-10-45-2) • The initial application of a policy to revalue assets under IAS 16 (fixed assets) or IAS 38 (intangibles) is a change in an accounting policy. However, that change is accounted for under IAS 16 and IAS 38 and not IAS 8 (IAS 8.17). • Unless an individual standard specifies otherwise, a change in accounting policy shall be applied • Unlike IFRS, fixed assets and intangibles shall not be revalued in a manner similar to that provided by IAS 16 or IAS 38 • Similar to IAS 8 (ASC 250-10-45-5 through 45-8). ASC 250-10-45-9 through 45-10 lists the conditions © 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 37 IFRS retrospectively (IAS 8.19 and .22) except to the extent that it is impracticable to determine either the period-specific or cumulative effects of the change, in which case the policy is applied from the earliest date practicable (IAS 8.23-.27). IAS 8.5 contains a definition of impracticable and IAS 8.50-.53 contains further guidance. • Unless an individual standard specifies otherwise, or the impracticability criteria apply, a change in accounting policy shall be accounted for by adjusting the relevant opening equity balance and prior-period comparative amounts (IAS 8.22) • IAS 8.30 requires disclosure of standards issued but not yet effective, together with their reasonably estimable effect Material errors shall be corrected in the same way as accounting policy changes, i.e. retrospective restatement unless impracticability criteria apply (IAS 8.42-.48). Changes in estimates shall be accounted for prospectively (IAS 8.36-.38). Basic and diluted earnings per share of all periods presented must be adjusted for the effects of errors and adjustments resulting from changes in accounting policies accounted for retrospectively (IAS 33.64). When an entity applies an accounting policy retrospectively or makes a retrospective restatement of items in its financial statements or when it reclassifies items in its financial statements, it shall present a third statement of financial position (IAS 1.39). U.S. GAAP that must be met before an entity can conclude that it is impracticable to apply the effects of a change in accounting principle retrospectively • Similar to IAS 8, except that ASC 250 specifically addresses the accounting for and disclosure of the indirect effects of a change in accounting principle (ASC 250-10-45-5 and 45-8) • SEC SAB Topic 11:M contains similar disclosure requirements for SEC registrants Correction of material errors in previously issued financial statements shall be reported as prior-period adjustments by restating the prior-period financial statements (ASC 250-10-45-23). Unlike IAS 8, the impracticability exception does not apply to correction of material errors. Similar to IAS 8 (ASC 250-10-45-17). Similar to IAS 33 (ASC 260-10-55-15 through 55-16). Unlike IFRS, a statement of financial position at the beginning of the earliest period is not required. © 2011 Grant Thornton LLP All rights reserved U.S. member firm of Grant Thornton International Ltd
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