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

Comparison between U.S. GAAP and International Financial Reporting Standards 64
IFRS
implement that plan or announcing its main features
to those affected by it
U.S. GAAP
Onerous contracts
IAS 37.10 defines an onerous contract as a contract in
which the unavoidable costs of meeting the obligations
under the contract exceed the expected economic
benefits. If an entity has an onerous contract, the
present obligation shall be recognised and measured as
a provision (IAS 37.66).
Unless specific U.S. GAAP applies, obligations for
onerous contracts are not recognized.
5.3 Taxation
Note: In March 2009, the IASB issued an Exposure Draft, Income Taxes, to replace IAS 12. The Exposure Draft would
have removed most of the differences in the application of the asset and liability approach between IFRS and U.S.
GAAP. However, as a result of negative feedback from constituents, in March 2010, the IASB decided that the scope
of the project would be scaled back to address practice issues under IAS 12.
The scope of the project includes:
• Uncertain tax positions after changes to IAS 37, Provisions, Contingent Liabilities and Contingent Assets have
been finalized
• Implementation of certain proposals in the Exposure Draft that received general support from respondents
• Deferred tax on remeasurement of investment property – on December 20, 2010, the IASB issued Deferred Tax:
Recovery of Underlying Assets (Amendments to IAS 12). The amendment provides an exception to the principle
that the measurement of deferred tax liabilities and deferred tax assets shall reflect the tax consequences that
would follow from the manner in which the entity expects to recover or settle the carrying amount of its assets and
liabilities. The amendment is limited in scope and provides a practical approach for measuring deferred tax assets
and deferred tax liabilities for investment property measured at fair value in accordance with IAS 40, Investment
Property. The amendment includes a rebuttable presumption related to investment property measured at fair value
in accordance with IAS 40 that the investment property is recovered entirely through sale in determining the
amount of the deferred tax asset or deferred tax liability related to that investment property. The rebuttable
presumption also applies to investment property that is acquired in a business combination if the entity chooses to
measure the investment property at fair value under IAS 40, after the acquisition. The presumption is rebutted if
the investment property is depreciated and the objective of the company’s business model is to recover the
economic benefits from the investment property over time, rather than through its sale. For land that is investment
property, the rebuttable presumption doesn’t apply as land is typically not depreciated and thus the assumed
recovery of land is through its sale.
The amendment also incorporates the provisions of SIC Interpretation 21, Income Taxes – Recovery of Revalued
Non-Depreciable Assets, into IAS 12. SIC 21 required the measurement of a deferred tax asset or deferred tax
liability on a non-depreciable asset measured under the revaluation model in IAS 16, Property, Plant and
Equipment, based on the tax consequences through recovery of the asset through sale. If the tax law specifies a
tax rate to be applied to the sale of an asset that differs from the tax rate that would be applied to the taxable
amount determined through the use of the asset, the tax rate applicable to the sale of the asset is applied in
determining the deferred tax amount.
The amendments are effective for annual periods beginning on or after January 1, 2012. Earlier application is
permitted.
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