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

Comparison between U.S. GAAP and International Financial Reporting Standards 98
IFRS
U.S. GAAP
convertible debt instruments that have stated terms
permitting settlement on conversion either wholly or
partially in cash or other assets in a manner similar to
IFRS (ASC 470-20-25). When the nondetachable
conversion feature meets the definitions of a derivative
(ASC 815-10-15-83 through 15-99) and does not qualify
for any exceptions (ASC 815-10-15-13 through 15-82)
the embedded conversion feature is treated as a
derivative liability (or asset) (see Section 7.3,
“Recognition and measurement of derivatives”).
Offsetting
A financial asset is offset against a financial liability
when and only when an enterprise (IAS 32.42):
• Has a legally enforceable right to set off the
recognised amounts, and
• Intends either to settle on a net basis or realise the
asset and settle the liability simultaneously
Note: In January 2011, the IASB issued ED/2011/1,
Offsetting Financial Assets and Financial Liabilities,
which proposes to converge with U.S. GAAP the
accounting for offsetting of financial instruments. The
comment period ends 28 April 2011.
Offsetting of financial assets and financial liabilities is
permitted only when (ASC 210-20-45-1 and 45-8 through
45-9):
• The parties owe each other determinable amounts
• There is a right and intention to set-off
• The right of set-off is enforceable by law
Note: In January 2011, the FASB issued an Exposure
Draft, Offsetting, which proposes to converge with IFRS
the accounting for offsetting of financial instruments. The
comment period ends April 28, 2011.
Initial measurement
Financial liabilities and equity instruments are recorded
initially at fair value (which is normally its initial
transaction price unless fair value is evidenced by
comparison to other observable current market
transactions) (IAS 39.43).
Initial recognition for liabilities carried at amortised cost
is net of transaction costs (defined as incremental costs)
(IAS 39.43).
Liabilities and equity instruments are recorded initially at
the fair value of the property, goods, services, or other
consideration received or at the fair value of the financial
instrument issued, whichever is the more clearly
determinable (ASC 835-30-25-10, ASC 505-50-30-6, and
ASC 718-10-30-2).
Debt issue costs are reported in the balance sheet as
deferred charges (ASC 835-30-45-3).
Finance costs and distributions
With some exceptions, finance costs on financial
liabilities are calculated using the effective interest
method (i.e. at a constant rate of charge on the
outstanding liability) (IAS 39.47).
Interest, gains and losses relating to financial
instruments or component parts classed as liabilities are
reported in the profit or loss (IAS 32.35).
Distributions to holders of a financial instrument classed
as an equity instrument are debited directly to equity
(IAS 32.35).
For distributions of assets other than cash as dividends
to owners, IFRIC 17 requires that an entity measure a
liability to distribute non-cash assets as a dividend to its
Similar to IFRS.
Similar to IFRS.
Similar to IFRS.
A distribution of nonmonetary assets to equity holders in
a spin-off or other form of reorganization should be based
on the recorded amount of the nonmonetary assets
distributed (ASC 845-10-30-10).
A non-pro-rata split-off of a business segment is
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