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

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Comparison between U.S. GAAP and International Financial Reporting Standards 88 IFRS Equity-settled transactions with employees The entity shall recognise an expense when the services are received (IFRS 2.14-.15). Vesting conditions, other than market conditions, affect the timing of expense recognition (service or performancebased) and the number of equity instruments included in the measurement of the transaction amount (forfeitures). Market conditions shall be taken into account when estimating the fair value of the equity instruments granted (IFRS 2.19-.21). Cash-settled transactions with employees The entity shall recognise an expense for the services received and a liability to pay for those services, as the employees render service. (IFRS 2.32). Equity-settled transactions with nonemployees The entity shall recognise an expense when the entity obtains the goods or as the services are received (IFRS 2.13). Cash-settled transactions with nonemployees The entity shall recognise an expense when the entity obtains the goods or as the services are received. U.S. GAAP Equity-settled transactions with employees The measured compensation cost for share-based awards to employees shall be recognized as those employee services are received. The corresponding credit is an increase in equity (ASC 718-10-35-2). Similar to IFRS, vesting conditions, other than market conditions, affect the timing of expense recognition (service or performancebased) and the number of equity instruments included in the measurement of the transaction amount (forfeitures). Market conditions shall be taken into account when estimating the fair value of the equity instruments (ASC 718-10-25-20 and 25-21, ASC 718-10-30-14 and 30-25 through 30-27; ASC 718-10-35-2 through 35-7). U.S. GAAP permits an entity to make an accounting policy decision to use a straight-line or accelerated attribution method for awards that have graded service requirements regardless of the method used to value the award (ASC 718-10-35-8). Unlike U.S. GAAP, IFRS does not permit the use of a straight-line attribution method. Liability-classified transactions with employees Similar to IFRS, the entity shall recognize an expense for the services received as the employees render service. Equity-settled transactions with nonemployees Similar to IFRS, generally, the entity shall recognize an expense when the entity obtains the goods or as the services are received (ASC 505-50-25-6). Liability-classified transactions with nonemployees Similar to IFRS, the entity shall recognize an expense when the entity obtains the goods or as the services are received. Measurement Equity-settled transactions with employees: • Fair value – the fair value of services received from employees and others providing similar services shall be measured by reference to the fair value of the equity instruments granted at the grant date because it is not possible to reliably estimate the fair value of those services. (IFRS 2.11) The fair value of equity instruments granted shall be based on market prices if available at the measurement date. If market prices are not available, a valuation technique shall be used to estimate fair value (IFRS 2.16-.17). The fair value of equity awards shall not be remeasured in subsequent periods (IFRS 2.23). Equity-settled transactions with employees: • Fair value – similar to IFRS, the fair value of services received from employees shall be determined based on an estimate of the fair value of the share-based instruments that will be issued rather than on a direct measure of the fair value of the employee services the entity will receive in exchange for the share-based instruments (ASC 718-10-30-2) © 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 89 IFRS • Grant date – the grant date is the date on which the fair value of the employee awards is measured. It is the date on which the entity and the employee have a shared understanding of the terms and conditions of the arrangement (IFRS 2, Appendix A) U.S. GAAP • Grant date – similar to IFRS, the grant date is the date on which the fair value of the employee awards is measured. Unlike IFRS, it is the date the entity and the employee have a shared understanding of the terms and conditions of the arrangement and the employee is affected by subsequent changes in the share price (ASC Master Glossary, “Grant Date”). • Intrinsic value – in rare cases in which the fair value of equity instruments cannot be reliably determined at the measurement date, the intrinsic value shall be used with subsequent remeasurement, at the end of each reporting period, until final settlement (IFRS 2.24) Cash-settled transactions with employees Goods or services acquired shall be measured at the fair value of the liability. Until the liability is settled, the fair value shall be remeasured at the end of each reporting period (IFRS 2.30-.33). Equity-settled transactions with nonemployees: • Fair value – goods or services received shall be measured at the fair value of the goods or services received. There is a rebuttable presumption that the fair value of the goods or services received can be estimated reliably. If fair value of the goods or services received cannot be estimated reliably, then their fair value shall be measured by reference to the fair value of the equity instruments granted (IFRS 2.13). • Intrinsic value – similar to IFRS, in rare cases in which the fair value of equity instruments cannot be reliably determined at the measurement date, the intrinsic value shall be used with subsequent remeasurement until final settlement (ASC 718-10-30-4 and 718-10-30-21 and 30-22) • Calculated value – unlike IFRS, nonpublic companies may measure awards based on a calculated value (using historical volatility of an industry index) if the company is unable to reasonably estimate its expected volatility (ASC 718-10-30-4 and 30-20) Liability-classified transactions with employees Share-based payment awards classified as liabilities shall be accounted for under ASC 718’s measurement and recognition provisions for liabilities, which require variable accounting until the award is settled or expires unexercised (ASC 718-30-35-1). ASC 718-10-25-6 through 25-19 provides guidance on whether share-based payment awards shall be classified as liabilities. Unlike IFRS, U.S. GAAP permits nonpublic entities to make an accounting policy election to use intrinsic value for liability classified awards (ASC 718-30-30-2). Equity-settled transactions with nonemployees: • Fair value – unlike IFRS, the transaction shall be measured based on the fair value of the goods or services received or the fair value of the equity instruments issued, whichever is more reliably measurable (ASC 505-50-30-6). Under IFRS, there is a presumption that goods or services received can be reliably measured. • Measurement date – the date the goods or services are received (IFRS 2, Appendix A) • Measurement date – unlike IFRS, the measurement date for awards to nonemployees is generally the earlier of the date at which the counterparty’s performance is complete or the date at which a commitment for performance by the counterparty to earn the equity instruments is reached (ASC 505-50-30-11 through 30-14) © 2011 Grant Thornton LLP All rights reserved U.S. member firm of Grant Thornton International Ltd
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Comparison between U.S. GAAP and International ... - Grant Thornton

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