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

Comparison between U.S. GAAP and International Financial Reporting Standards 78
IFRS
measured. An expected loss on a contract should be
recognised as an expense immediately
(IAS 11.22 and .36).
If the outcome of a contract cannot be estimated reliably,
contract revenue and contract costs shall be recognised
as follows (IAS 11.32):
• Revenue shall be recognised only to the extent of
contract costs incurred that it is probable will be
recoverable.
• Contract costs shall be recognised as an expense in
the period incurred.
According to IAS 11.33, during the early stages of a
contract it is possible that the outcome of the contract
cannot be estimated reliably; however, it may be probable
that the entity will recover contract costs. In this situation,
contract revenue shall be recognised only to the extent of
costs incurred that are expected to be recoverable.
An expected loss on a contract should be recognised as
an expense immediately (IAS 11.32 and .36).
Contract revenue includes (IAS 11.11):
• Initial amount of revenue agreed in the contract
• Contract variations and claims to extent that they are
probable of resulting in revenue and capable of being
reliably measured
The amount of claims that can be included in contract
revenues is subject to a high level of uncertainty.
Therefore, IAS 11.14 provides that claims are
included in contract revenue only when both of the
following conditions are met:
Customer negotiations have reached an
advanced stage such that it is probable that the
customer will accept the claim
The probable amount acceptable to the
customer can be measurable reliably
U.S. GAAP
25-69). If reasonable estimates cannot be made, the
completed contract method is used (ASC 605-35-25-61
and 25-94).
Similar to IFRS, contract revenues include the basic
contract amount and other contract variations and
claims if certain criteria are met. For example:
• Contract revenue and costs should be adjusted to
reflect change orders when their scope and price
have been approved by the customer and
contractor. ASC 605-35-25-28 includes guidance
for unpriced change orders
(ASC 605-35-25-25 through 25-28).
• Generally, recognition of additional contract
revenue resulting from claims is appropriate only if
it is probable that the claim will result in additional
revenue and the amount can be reliably estimated,
which generally requires specific criteria to be met.
Revenue should be recognized only to the extent
that contract costs relating to the claim have been
incurred (ASC 605-35-25-30 through 25-31).
6.2 Employee benefits
Note: In March 2008, the IASB issued a Discussion Paper, Preliminary Views on Amendments to IAS 19 Employee
Benefits. This Discussion Paper was the first step in a comprehensive project on the accounting for post-employment
benefits. The input received on the discussion paper was considered by the IASB in developing its Exposure Draft,
Defined Benefit Plans: Proposed amendments to IAS 19, issued in April 2010. The Exposure Draft includes proposed
amendments on the recognition, presentation, and disclosure of defined benefit plans. The purpose of the proposed
amendment is to address certain perceived deficiencies in IAS 19 related to recognition, classification, and disclosure
of defined benefit plans. The IASB is continuing its discussions on the Exposure Draft and expects to issue
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