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

Comparison between U.S. GAAP and International Financial Reporting Standards 80
IFRS
The accrual shall be measured at the amount of the
additional payments that are expected to arise from
the unused benefit that accumulates.
• Non-accumulating – those that do not carry
forward. A liability shall be recognised when the
absences occur.
Bonus and profit-sharing
The expected cost shall be recognised when, and only
when (IAS 19.17):
• There is a present legal or constructive obligation to
make payments as a result of past events, and
• A reliable estimate of the obligation can be made
A present obligation exists, when and only when, an
entity has no realistic option but to make the payments.
Postemployment benefits are employee benefits (other
than termination benefits) payable after completion of
employment (IAS 19.7). The recognition and
measurement depends on whether they are classified
as defined contribution or defined benefit.
U.S. GAAP
• The employer's obligation relating to employees'
rights to receive compensation for future absences is
attributable to employees' services already rendered
• The obligation relates to rights that vest or
accumulate
• Payment of the compensation is probable
• The amount can be reasonably estimated
An employer is not required to accrue a liability for
nonvesting accumulating rights to receive sick pay
benefits (ASC 710-10-25-6 and 25-7).
Bonus and profit-sharing
A bonus that is not formula-based shall be accrued if it is
probable that it will be paid. A bonus based on attaining a
specific goal over a period of time shall be accrued based
on the results achieved to date.
Postemployment preretirement benefits
Employers shall accrue a liability for postemployment
preretirement benefits if all of the conditions in ASC 710-
10-25-1 (listed above) are met (ASC 712-10-25-1).
Postemployment preretirement benefits that do not meet
the conditions in ASC 710-10-25-1 shall be accounted for
under ASC 450 (ASC 712-10-25-4 and 25-5). Therefore, if
it is probable that a liability for the benefit has been
incurred at the balance sheet date and the amount can be
reasonably estimated a liability shall be recognized
(ASC 450-20-25-2).
Post-employment benefits – defined contribution plans
Defined contribution plans are plans in which the entity’s
legal or constructive obligation is limited to the amount
that it agrees to contribute to the fund. Actuarial risk and
investment risk are borne by the employee not the entity
(IAS 19.25).
Recognition and measurement
An entity shall recognise a contribution payable when an
employee has rendered service to the entity during a
period in exchange for that service. If contributions do
not fall due within 12 months after the end of the period
in which the services have been rendered, the amount
A defined contribution plan is defined as “a plan that
provides an individual account for each participant and
provides benefits that are based on all of the following: (a)
amounts contributed to the participant’s account by the
employer or employee, (b) investment experience, (c) any
forfeitures allocated to the account, less any
administrative expenses charged to the plan.” Actuarial
risk and investment risk are borne by the employee, not
the entity (ASC Master Glossary).
Recognition and measurement
If a plan's defined contributions to an individual's account
are to be made for periods in which that individual renders
services, the net pension cost for a period shall be the
contribution required in that period. If contributions are
required in periods after an individual retires or
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