...analysis There are many similarities between IFRS and pre-IFRS Canadian GAAP, however there are also significant differences. They are both similar in terms of style and the form of the individual standards because they are based on similar conceptual frameworks. The main objective of both IFRS and pre-IFRS Canadian GAAP is for financial statements to give a fair presentation. When there is a choice of accounting policies, the one that can reflect the most accurate economic portrait should be selected. Since Extract Tar Sands it traded publicly, included in its stakeholders are international investors. It’s compliance with IFRS is necessary to be a global competitor. IFRS will allow easier financial performance benchmarking amongst competing companies. This in turn will provide better access to capital. With the adoption of IFRS it will also eliminate Extract’s need to reconcile information reported under different national standards while providing consistent information for decision making purposes. The two areas with IFRS that represent the greatest change for Extract tar sands are: 1. Impairment: With IFRS impairments are usually triggered more frequently and unlike pre-IFRS Canadian GAAP, impairments under IFRS can be reversed. 2. Revaluations: Some IFRS including Property, Plant and Equipment, Investment Property and Intangibles allow the revaluation of assets under certain circumstances. This is quite a change from pre-IFRS Canadian GAAP which has no such provision...
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...the accounting profession and how I see them affecting me in the future with regards to IFRS companies submitting IFRS on US stock exchanges? Macdonald Felix Rusoto Muchemedzi Student Kaplan University As the Stock exchange affords different investors the opportunity to actively trade in the non-US companies and also provide an avenue for non-US companies to raise capital will the investment and accounting community be able to fully understand the information and make rational and informed decisions. In this discussion paper I will discuss the key requirement that participants should be financial bilingual to fully understand both sets of financial reports (IFRS and USGAAP) in order to be able to compare them, thus comparability is the main challenge facing the accounting profession and harmonization/convergence is a current and future requirement to ensure comparability, other factors will come into play as will be discussed later. My future has already started to be affected as I work in a US subsidiary in South Africa and we are required to provide USGAAP reconciliation from our IFRS financial reports and with greater convergence I strongly believe my work will be less as there will be no longer a need to be financially bilingual as there will be one set of financial reports. Literature review Both IFRS and USGAAP financial reporting standards are developed from the conceptual framework, hereafter IFRS conceptual framework referred to as CFW and the USGAAP conceptual...
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...how your company’s financial statement would differ if they reported under IFRS. Be as specific as possible and discuss any costs and benefits to the company. There are many similarities in US GAAP and IFRS. Convergence continued to be a high priority for both the US Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB). However, the convergence process is designed to address only the most significant differences. While standards will be more similar, differences will continue to exist. In general, US GAAP tends to have more specific rules while IFRS rules are more flexible and requires more interpretation. The materiality of the reporting difference to a company’s financial statements depends on a variety of factors, including the nature of the company, the details of the transactions and interpretation of rules. Discussed below are some major aspects that would change if Colgate reports under IFRS. 1. Classification of deferred tax assets and liabilities on balance sheet Under US GAAP, for deferred tax asset, current or non-current classification is required. In the perspective of IFRS reporting rules, all deferred tax asset amounts should be classified as non-current in balance sheet. Referring to the footnote on Income Taxes (page 80 of 10k), Colgate included 284 of deferred tax asset in other current asset in compliance with US GAAP, while under IFRS, the 284 current deferred tax asset should be reclassified as non- current...
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... Executive summary • Despite the similar approaches to accounting for taxation under IFRS and US GAAP, deferred taxation is one of the most common areas where differences arise. The reason is that a high proportion of transactions recognized in either the statement of income or balance sheet will have consequential effects on deferred taxes. • US GAAP, deferred tax asset is recognized in full. It is then reduced by a valuation account if it is more likely than not that all or a portion of the deferred tax asset will not be realized. IFRS requires a one-step approach that provides for recognition of the deferred tax assets only to the extent it is probable that they will be realized. 2 Executive summary • IFRS classifies deferred tax assets and liabilities as noncurrent in a classified balance sheet while US GAAP classifies these items based on the classification of the related asset or liability, or for tax losses and credit carryforwards, based on the expected timing of realization. • IFRS offsets deferred tax assets and liabilities when specific conditions are met which includes when an entity has a legally enforceable right to offset and when the taxes are levied by the same taxing authority for the same taxable entity. US GAAP offsets these balances and reports them net by current and noncurrent classification. 3 Primary pronouncements US GAAP IFRS • • IAS 12, Income Taxes ASC740, Income Taxes • IAS 37, Provisions, Contingent ...
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...revenue. In many cases, the guidance depends on the type of business. For example, a software company may follow different guidelines for reporting revenue than a construction company would. IFRS offers somewhat less guidance than GAAP. Companies have a little more flexibility in reporting revenue. For example, businesses following GAAP amortize, or allocate, revenue gradually over a period of time instead of all at once when it is earned like they would with IFRS. Under both GAAP and IFRS, you do not recognize revenue until it is earned. GAAP guidance has separate rules for specific industries, according to an Ernst & Young summary of the differences between the two standards. A single standard -- International Accounting Standard 18 -- exists under IFRS, which contains general principles and examples. Under U.S. GA, publicly traded companies recognize revenue when product or service delivery occurs, which means that ownership risks and benefits transfer from seller to buyer. Revenue should consist of a fixed and determinable fee, and there should be reasonable assurance that the seller will collect the sale proceeds from the buyer. Specific rules also exist for service revenues, especially those associated with software and long-term construction and production contracts. Under IFRS, revenue recognition occurs when ownership transfers from seller to buyer and when the revenue can be measured reliably. Companies can recognize partial completions of service contracts when...
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...considering the option to adopt IFRS for all U.S. Issuers as a means to have central reporting standards for U.S. to International Company offerings. While the FASB and IASB work on key projects such as revenue recognition, leasing standards, and financial instruments, the SEC continues to analyze this progress and weigh the benefits and concerns with adopting IFRS for U.S. companies. This paper will focus on the concerns of SEC in fully implementing IFRS, what steps some companies are taking to prepare for the adjustment to IFRS, and the outlook of the possibility of a convergence to IFRS in the future. Two major concerns for the SEC in adopting IFRS are the costliness for U.S. companies along with the timeliness of the process. Some of the costs include funding the IASB, maintenance of IFRS, application and enforcement, and tax implications. Meanwhile, companies are preparing for a convergence with IFRS in advance because of some of the complex changes and significant impact to financial reporting for revenue recognition and leasing standards. Also, some companies, such as Ford Motor Company, are adopting IFRS before an official convergence to save time and money. While some standards would be easy to converge with IFRS, others would require many companies to change accounting systems, controls, and procedures, costing companies time and significant costs. Although no official decision has been made on the convergence of U.S. GAAP to IFRS by the SEC, U.S. companies...
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...|FRAMEWORK | | |U.S. GAAP |IFRS |Similarities | |Purpose of Framework |The FASB framework resides lower in hierarchy. |Management is explicitly required to |Both the frameworks are similar in | | |Management is not required to prioritize it if no|prioritize the IASB framework if there is |their purpose to assist in developing| | |standard is available. |no standard or interpretation available. |and assisting standards. | |Objectives of |It provides different objectives for business |It gives one objective for different |Both frameworks have a broad focus to| |financial statement |entities versus non business entities. |business entities. |provide relevant information to a | | | | |wide range of users. | |Underlying assumptions|Although it recognizes, but not given much |Give importance to accrual and going | | | |prominence is given to accrual and going concern |concern basis...
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... 2008). This decline in market value has led to strong arguments for rethinking the measurement and treatment for intangibles assets. International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP) have created significant differences in the accounting treatment of intangible assets. Both IFRS and GAAP view intangible assets as a non-monetary asset that do not have physical substance but can be identified. This paper will review the similarities and differences within GAAP and IFRS regarding the following: intangible asset impairments, research and development (R&D), advertising cost, and goodwill impairment. Intangible Asset Impairment Testing IFRS and GAAP contain similar indicators for testing impairment of intangible assets. Differences arise in testing, recognition and presentation. GAAP requires a two-step impairment test for intangible assets. Step one requires companies to determine if the carrying amount of the assets exceeds undiscounted future cash flows. If it meets this requirement, step two can be used to calculate the necessary impairment loss. An impairment loss is measured as the difference between the carrying amount and fair value. Under GAAP, fair value is defined as the price that would be received to sell an asset. IFRS requires a one step approach, the recoverable amount exceeds the carrying amount this excess is the impairment loss. The recoverable amount is either the asset’s fair value less costs...
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...Financial Reporting Standards (IFRS). The SEC began looking into switching in 2010 when the formed a committee to look into the matter and now, two years later, they are still weeks away from issuing report and possibly an additional year away from presenting a formal recommendation. This has led to some frustration from accounting firms, business and stakeholders around the world as they wait for final word. The frustration of IASB is noted in the second follow up article. The decision has wide ranging effects which is what has everyone waiting, some impatiently, for a decision. The US currently adheres to Generally Accepted Accounting Principles, GAAP, which have a few fundamental differences from IFRS and is generally more restrictive than IFRS. Because of the differences, a change to IFRS would result in changes to how companies record financial information as well as how it is reported. This would necessitate not only practicing companies making changes, but how accounting firms audit and in the US as well as how institutions educate future accounting students. The International Accounting Standards Board, which oversees IFRS, is growing impatient as it awaits the SEC decision. It was hoping that the committee report would be accompanied by a recommendation so as to resolve the issue which has been ongoing for 2 and half years now. The article briefly mentions a separate project in which the IASB and FASB are working jointly to make GAAP and IFRS more compatible. This may...
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...IFRS 3 BUSINESS COMBINATIONS | HISTORY OF IFRS 3 | 1 April 2001 | Project carried over from the old IASC | July 2001 | Project added to IASB agenda | 5 December 2002 | Exposure Draft Business Combinations and related exposure drafts proposing amendments to IAS 36 and IAS 38 | 31 March 2004 | IFRS 3 Business Combinations and related amended versions of IAS 36 and IAS 38 IFRS 3 supersedes IAS 22 | 1 April 2004 | Generally: Business combinations agreed to after 31 March 2004. Special provisions for previously recognised goodwill, negative goodwill, intangible assets, and equity accounted investments. | 29 April 2004 | Exposure Draft of Proposed Amendments to IFRS 3 Combinations by Contract Alone or Involving Mutual Entities. After considering comments on this ED, the Board decided to include the issues addressed in the ED in the 30 June 2005 exposure draft. | RELATED INTERPRETATIONS | * Issues Relating to This Standard that IFRIC Did Not Add to Its Agenda | AMENDMENTS UNDER CONSIDERATION BY IASB | 30 June 2005 | Exposure Draft of substantial revisions to IFRS 3 | SUMMARY OF IFRS 3 | | Deloitte has published an 84-page book Business Combinations: A Guide to IFRS 3. The guide: * Outlines the key features of IFRS 3. * Provides illustrative examples to assist in applying the standard. * Discusses the requirements of IAS 36 Impairment of Assets and IAS 38 Intangible Assets as they relate to business combinations. * Includes guidance on...
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...Tax IFRS Readiness Series The uncertain future of LIFO* The uncertain future of LIFO This paper was authored by Christine Turgeon, a partner; Scott Rabinowitz, a director; Helen Poplock, a director; and Sean Pheils, a senior associate with PricewaterhouseCoopers’ Washington National Tax Services (WNTS) practice. For over 70 years, US taxpayers have been able to value the cost of their inventories using the last-in, first-out inventory method of accounting (LIFO). In general, to use LIFO for federal income tax purposes, taxpayers must also use LIFO for financial reporting purposes (herein referred to as the LIFO conformity requirement). The use of LIFO for financial reporting purposes is not permitted under International Financial Reporting Standards as promulgated by the International Accounting Standards Board (IFRS). As a result, a conversion from US generally accepted accounting principles (GAAP) to IFRS likely will eliminate a taxpayer’s ability to use LIFO for federal income tax purposes. Moreover, the fact that LIFO is not permissible under IFRS has led many policymakers to debate whether LIFO should be permitted for tax purposes, irrespective of IFRS conversion. As a result, Congress and the Obama Administration are considering a repeal of LIFO, while taxpayers and practitioners are defending the merits of LIFO as sound tax policy and are seeking an administrative exception to the LIFO conformity requirement. The transition from LIFO to an alternate inventory...
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...plant, and equipment. Before going over a brief overview of the nature of accounting issues, we ought to take a deeper look at what plant assets really are. The major characteristics of property, plant, and equipment are as follows: * They are acquired for use in operations and not for resale. Only assets used in normal business operations are classified as property, plant, and equipment. For example, an idle building is more appropriately classified separately as an investment. Also, land developers or sub dividers classify land as inventory. * They are long-term in nature and usually depreciated. Property, plant, and equipment yield services over a number of years. Companies allocate the cost of the investment in these assets to future periods through periodic depreciation charges. The exception is land, which is depreciated only if a material decrease in value occurs, such as a loss in fertility of agricultural land because of poor crop rotation, drought, or soil erosion. *...
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...Beswick's “condorsement” idea would infuse IFRS into U.S. Generally Accepted Accounting Principles by endorsing international standards one at a time while also continuing to converge them to GAAP. The Financial Accounting Standards Board would follow some established endorsement protocol for folding newly issued or amended international standards into GAAP, while also having the authority to modify or supplement them as the boards deems necessary. That would lead to a more gradual transition to IFRS with differences between IFRS and GAAP eliminated over time through further U.S. standard setting. “Condorsement” - An Alternative Framework for IFRS in the United States by Tim Foley When the SEC discusses International Financial Reporting Standards (“IFRS”) and the future of U.S. GAAP, it rarely talks about adoption of IFRS or conversion to IFRS. Instead, the SEC refers to the possibility of incorporation of IFRS into the financial reporting system utilized in the U.S. The former suggests a wholesale change, a full commitment. The latter suggests assimilation. However, with its release of a May 26, 2011 Staff Paper, the SEC is now providing more direct insight into some more innovative thinking regarding the future of IFRS in the U.S. This staff paper, entitled Exploring a Possible Method of Incorporation, outlines one of several possible approaches to the use of IFRS in the U.S. Additional staff papers are expected in the coming weeks. This first paper explores an approach...
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...Financial Reporting Standards" (2011). CMC Senior Theses. Paper 165. http://scholarship.claremont.edu/cmc_theses/165 This Open Access Senior Thesis is brought to you by Scholarship@Claremont. It has been accepted for inclusion in this collection by an authorized administrator. For more information, please contact scholarship@cuc.claremont.edu. CLAREMONT McKENNA COLLEGE THE EFFECT OF CULTURE ON THE IMPLEMENTATION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS SUBMITTED TO PROFESSOR MARC MASSOUD AND DEAN GREGORY HESS BY MITCHELL SKOTARCZYK FOR SENIOR THESIS SPRING 2011 2 Table of Contents I. Introduction…………………….……………………………………………………………….4 II. Literature Summary………………………………………...………………...….……………..5 III. IFRS……………………...……………………………………………………..……………11 IV. Carve-outs…………………………………………………………………………………....18 V. Culture and Accounting………………………………………………………………………25 VI. Conclusion………………………………………………………………...…………………30 Appendix………………………………………………………………………………………...32 Bibliography……………………………………………………………………………………..37 3 I. Introduction As globalization increases at a blistering pace, more and more business entities continue to get involved in cross-border capital investments. A considerable cost can be applied to these types of transaction for the translation of financial statements prepared under dissimilar accounting guidelines into a comparable form. There exist a multiple number of accounting systems that create these dissimilarities...
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...Medium Size Entities: IFRS FOR SMEs 1- Introduction Now days the word has become one global market where there is no border for business to operate. To help facilitate that globalization, businesses have to present their financial statement on the same basis as its foreign competitors, making comparisons easier. That why the use of the International Financial Reporting Standards (IFRS) which is a set of accounting standard is necessary and has for goal to provide a global framework for how public companies to prepare and disclose their financial statements is necessary to be implement. Furthermore, companies with subsidiaries in countries that require or permit IFRS may be able to use one accounting language company-wide. But because of their size and the context of the financial statement small and medium size entities SMEs cannot use the same IFRS as the public companies thought the also aspire to the globalization due to the cost of that full IFRS which may overcome their profit. The use of a special IFRS is welcome. To show that, we are going to talk about the appropriateness, necessity and experience of an IFRS for SMEs by in one hand describing the IFRS for SMEs in insisting on the description of the SMEs; and in another hand by stating the need for an IFRS for SMEs and emphasis in the South Africa context. The IFRS for SMEs will be introduce and in detail with more focus on the application of IFRS for south Africa SMEs 2- International...
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