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

More documents

Recommendations

Info

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. © 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 65 IFRS U.S. GAAP Relevant guidance: IAS 12 Relevant guidance: ASC 740, 805-740 Introduction The objective in accounting for income taxes is to recognise the amount of taxes currently payable or refundable and deferred tax liabilities and assets. Therefore, income tax expense is equal to the current tax expense (or recovery) plus the change in deferred taxes during the period, net of tax arising from a business combination or recorded outside profit or loss. Taxes for current and prior periods are, to the extent unpaid, recognised as a liability. If the amount already paid exceeds the amount due for those periods, the excess is recognised as an asset. The benefit relating to a tax loss that can be carried back to recover current tax of a previous period is also recognised as an asset (IAS 12.12-.13). In general, deferred taxes are recognised using an asset and liability approach which focuses on temporary differences arising between the tax base of an asset or liability and its carrying amount in the statement of financial position. Deferred taxes are recognised for the future tax consequences of events that have been recognised in an entity’s financial statements or tax returns (IAS 12.IN2 and .15-.33). Deferred taxes are not recognised for the following items: • The initial recognition of goodwill (IAS 12.15) The objective in accounting for income taxes is similar to IFRS. The approach to calculating current taxes is similar to IFRS with some exceptions, such as the treatment of taxes on the elimination of intercompany profits which is discussed below. Although U.S. GAAP also follows an asset and liability approach to calculating deferred taxes, there are some differences in the application of the approach from IFRS. Deferred taxes are not recognized for the following items: • Goodwill for which amortization is not deductible for tax purposes (ASC 740-10-25-3(d)) • The initial recognition of an asset or liability in a transaction that is not a business combination and at the time of the transaction neither accounting profit nor taxable profit (tax loss) is affected (IAS 12.15 and .24) • Taxable temporary differences associated with investments in subsidiaries, branches and associates, and interests in joint ventures in which (IAS 12.39): The parent, investor, or venturer is able to control the timing of the reversal of the temporary difference; and It is probable that the temporary difference will not reverse in the foreseeable future • Unlike IFRS, U.S. GAAP does not have a similar exception • An excess of the amount for financial reporting over the tax basis of an investment in a foreign subsidiary or a foreign corporate joint venture as defined in ASC 323 that is essentially permanent in duration, unless it becomes apparent that those temporary differences will reverse in the foreseeable future (ASC 740-30-25-18 through 25-19). Unlike IFRS, this exception does not apply to domestic subsidiaries and corporate joint ventures and investments in equity investees. Deferred taxes shall be recognised for temporary • Unlike IFRS, U.S. GAAP prohibits recognition of © 2011 Grant Thornton LLP All rights reserved U.S. member firm of Grant Thornton International Ltd
Page 1 and 2:
Comparison between U.S. GAAP and In
Page 3 and 4:
Page 5 and 6:
Page 7 and 8:
Page 9 and 10:
Page 11 and 12:
Page 13 and 14: Comparison between U.S. GAAP and In
Page 63: Comparison between U.S. GAAP and In
Page 115 and 116:
Page 117 and 118:
Page 119 and 120:
Page 121 and 122:
Page 123 and 124:
Page 125 and 126:
Page 127 and 128:
Page 129 and 130:
Page 131 and 132:
Page 133 and 134:
Page 135 and 136:
Page 137 and 138:
Page 139 and 140:
Page 141 and 142:
Page 143 and 144:
Page 145 and 146:
Page 147 and 148:
Page 149 and 150:
Page 151 and 152:
Page 153 and 154:
Page 155 and 156:
Page 157 and 158:
Page 159 and 160:
Page 161 and 162:
Page 163 and 164:
Page 165 and 166:
Page 167 and 168:
Page 169 and 170:
show all

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

Create successful ePaper yourself

Delete template?

Save as template?