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

Comparison between U.S. GAAP and International Financial Reporting Standards 76
IFRS
award credits shall be measured by reference to their
fair value (IFRIC 13.6).
Note: Improvements to IFRSs issued in May 2010
amends the Appendix to IFRIC 13 to clarify the fair value
of award credits. The amendment is effective for annual
periods beginning on or after 1 January 2011.
The consideration allocated to the award credits shall be
recognised as follows:
• If the entity supplies the award, revenue shall be
recognised when the credits are redeemed and the
entity fulfills its obligations to supply awards
(IFRIC 13.7)
• If a third party supplies the award, the entity shall
evaluate whether it is collecting the award credits as
the principal or agent in the transaction
U.S. GAAP
some companies apply that guidance by analogy and
allocate revenue to the award credits. Others may follow
an incremental cost approach in which the cost
associated with the award credit is accrued.
If the entity is acting as an agent in the
transaction, revenue shall be measured at the
net amount and recognised when the third
party becomes obliged to supply the awards
and entitled to receive consideration
If the entity is acting as the principal in the
transaction, revenue shall be measured gross
and recognised when it fulfills its obligations for
the awards (IFRIC 13.8)
6.1a Revenue - long-term contracts/construction contracts
IFRS
U.S. GAAP
Relevant guidance: IAS 11; IFRIC 15 Relevant guidance: ASC 605-35
Introduction
IAS 11 applies to the accounting for fixed-price and costplus
construction contracts for a single asset (such as a
building, bridge, ship, or tunnel) or combination of related
assets (such as the construction of refineries and other
complex pieces of plant or equipment) in the financial
statements of contractors (IAS 11.1-.6).
A construction contract is defined as “a contract
specifically negotiated for the construction of an asset or
a combination of assets that are closely interrelated or
interdependent in terms of their design, technology and
function or their ultimate purpose or use.” (IAS 11.3)
According to IAS 11:
• If the outcome of a construction contract can be
As noted in Section 6.1 above, revenue recognition
guidance is included in ASC 605 and other topics in the
Codification, as well as SEC guidance. Industry specific
guidance, such as for real estate, is included in other
ASC topics.
ASC 605-35 applies to accounting for performance
contracts where a customer provides specifications for
the construction of a facility, production of goods, or
provision of services. Guidance is not limited to
construction-type contracts
(ASC 605-35-15-2 through 15-6).
According to ASC 605-35:
• Percentage-of-completion is the preferred method
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