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

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Comparison between U.S. GAAP and International Financial Reporting Standards 52 IFRS Intangible assets other than goodwill and other long-lived assets shall be tested for impairment using a one-step approach. If the carrying amount of the asset exceeds its recoverable amount, an impairment loss shall be recognised. If it is not possible to estimate the recoverable amount of an individual asset, an entity shall determine the recoverable amount of the CGU to which it belongs. If the carrying amount of the unit exceeds the recoverable amount of the unit, an impairment loss shall be recognised and allocated following IAS 36.104. U.S. GAAP reporting unit over the amounts assigned to identifiable assets and liabilities is the implied fair value of goodwill. Note: In December 2010, Accounting Standards Update (ASU) 2010-28, When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts: a consensus of the FASB Emerging Issues Task Force, was issued to modify the goodwill impairment testing for reporting units with a zero or negative carrying amount. Under the new guidance, an entity must consider whether it is more likely than not that goodwill impairment exists for each reporting unit with a zero or negative carrying amount. To make that determination, an entity should consider whether there are adverse qualitative factors that could impact the amount of goodwill, including those listed in ASC 350-20-35-30. If it is more likely than not that goodwill impairment exists, the second step of the goodwill impairment test in 350-20-35 must be performed to measure the amount of goodwill impairment loss, if any. The amended guidance in ASU 2010-28 is effective for public entities for fiscal years, and for interim periods within those years, beginning after December 15, 2010, with early adoption prohibited. For nonpublic entities, the guidance is effective for fiscal years, and for interim periods within those years, beginning after December 15, 2011. Nonpublic entities may elect to adopt the new guidance early using the effective date for public entities. Upon adoption an entity with reporting units that have carrying amounts that are zero or negative would assess whether it is more likely than not that the reporting units’ goodwill is impaired. If it is more likely than not that the goodwill is impaired, the entity performs Step 2 of the goodwill impairment test for those reporting unit(s). Any goodwill impairment is recorded as a cumulative-effect adjustment to beginning retained earnings in the period of adoption. Goodwill impairments occurring after the initial adoption are included in earnings per ASC 350-20-35. Intangible assets other than goodwill and other longlived assets are tested for impairment as follows: • Indefinite-lived intangible assets are tested for impairment using a one-step process like IFRS. An impairment loss shall be recognized if the carrying amount of the asset exceeds its fair value (ASC 350-30-35-18). • Intangible assets that are amortized and other long-lived assets (a long-lived asset or asset © 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 53 IFRS If an intangible asset with an indefinite useful life or an intangible asset not yet available for use was initially recognised during the current annual period or some or all of goodwill allocated to a CGU was acquired in a business combination during the current annual period, the intangible asset and/or CGU shall be tested for impairment before the end of the current annual period (IAS 36.10(a) and .96). U.S. GAAP group) are tested for impairment using a two-step process. If the carrying amount of the asset or group is not recoverable and it is greater than its fair value, an impairment loss shall be recognized. The first step determines if the asset or group is recoverable. If the carrying amount of the asset or group exceeds the sum of the undiscounted cash flows expected from the use and eventual disposition of the asset or group, it is not recoverable. The second step measures the impairment loss as the difference between the fair value of the asset or group and its carrying amount (ASC 360-10-35-17). There is no similar requirement under U.S. GAAP. Reversing an impairment loss An impairment loss for assets other than goodwill shall be reversed provided certain conditions are met (IAS 36.109-.125). Reversals of impairment losses are not permitted (ASC 350-20-35-13, ASC 350-30-35-20, and ASC 360-10-35-20). 4.5 Inventories IFRS U.S. GAAP Relevant guidance: IAS 2 and 23 Relevant guidance: ASC 330 and 835 Introduction The objective of IAS 2 is to prescribe the accounting treatment for inventories. A primary issue in accounting for inventories is the amount of cost to be recognised as an asset and carried forward until the related revenues are recognised. IAS 2 provides guidance on the determination of cost and its subsequent recognition as an expense, including any write-down to net realisable value. It also provides guidance on the cost formulas that are used to assign costs to inventories (IAS 2.1). Inventories are assets (IAS 2.6): • Held for sale in the ordinary course of business • In the process of production for such sale; or • In the form of materials or supplies to be consumed in Whenever the operation of a business includes the ownership of a stock of goods, it is necessary for adequate financial accounting purposes that inventories be properly compiled periodically and recorded in the accounts. Such inventories are required both for the balance sheet and for the periodic measurement of income (ASC 330-10-05-1 through 05-3). Similar to IFRS, the term inventory is used to designate the aggregate of those items of tangible personal property which are (ASC Master Glossary, “Inventory”): • Held for sale in the ordinary course of business © 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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