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

Comparison between U.S. GAAP and International Financial Reporting Standards 40
IFRS
shall be recognised in profit or loss to the extent that it
reverses a revaluation decrease of the same asset
previously recognised in profit or loss (IAS 16.39).
If an asset’s carrying amount is decreased as a result of a
revaluation, the decrease shall be recognised in profit or
loss. However, the decrease shall be recognised in other
comprehensive income to the extent of any credit balance
existing in the revaluation surplus in respect of that asset.
The decrease recognised in other comprehensive income
reduces the amount accumulated in equity under the
heading of revaluation surplus (IAS 16.40).
The revaluation surplus included in equity in respect of an
item of property, plant and equipment may be transferred
directly to retained earnings when the asset is
derecognised. This may involve transferring the whole of
the surplus when the asset is retired or disposed of.
However, some of the surplus may be transferred as the
asset is used by an entity. In such a case, the amount of
the surplus transferred would be the difference between
depreciation based on the revalued carrying amount of
the asset and depreciation based on the asset’s original
cost. Transfers from revaluation surplus to retained
earnings are not made through profit or loss (IAS 16.41).
U.S. GAAP
Unlike IFRS, revaluation is not permitted except for
impairment (see Section 4.4, “Impairment”). Restoration
of a previous impairment loss is prohibited.
Unlike IFRS, revaluation is not permitted except for
impairment (see Section 4.4, “Impairment”). Restoration
of a previous impairment loss is prohibited.
Depreciation
Depreciation is recognised as long as the asset's residual
value does not exceed its carrying amount in which case
the depreciation charge is zero unless its residual value
subsequently decreases to an amount below the asset’s
carrying amount (IAS 16.52-.54). Land is generally not
depreciated (IAS 16.58).
The residual value and the useful life of an asset shall be
reviewed at least at each financial year-end and, if
expectations differ from previous estimates, the change(s)
shall be accounted for as a change in an accounting
estimate in accordance with IAS 8 (IAS 16.51).
The asset management policy of the entity may involve
the disposal of assets after a specified time or after
consumption of a specified proportion of the future
economic benefits embodied in the asset. Therefore, the
useful life of an asset may be shorter than its economic
life. The estimation of the useful life of the asset is a
matter of judgement based on the experience of the entity
with similar assets (IAS 16.57).
Component depreciation is required whereby each part of
an item of property, plant and equipment with a cost that
Tangible fixed assets (less estimated salvage value)
are depreciated over their expected useful lives. Land is
not depreciated.
Initially, residual value is based on price levels in effect
when the asset is acquired. Such values are
subsequently reviewed and revised to recognize
changes in conditions other than inflation
(SEC SAB Topic 5: CC).
Unlike IFRS, there is no requirement that residual
values and useful life be reviewed annually.
ASC 360-10-35-4 requires depreciation over the
expected useful life of the facility in such a way as to
allocate it as equitably as possible to the periods during
which services are obtained from the use of the facility.
Unlike IFRS, component depreciation is not required
but is allowed. Depreciation method must be systematic
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