...Stanley from: Christopher Michael Yelvington subject: IFRS v. US GAAP: Business COMBINATIONS and Financial Statements. date: April 21, 2015 ------------------------------------------------- Dr. Stanley, When acquiring a foreign subsidiary, there are accounting differences that one must consider. Looking at the big picture U.S. GAAP is more rule based and IFRS is more principles based. Under IFRS, more emphasis is on the substance of transactions and more judgment is used. In this memo, I have identified key differences in U.S. GAPP v. IFRS with regards to the acquisition of a foreign entity and the financial statements. The following are the assumptions regarding your aquisition I have used in my analysis: 1. 80% Single Step Equity Purchase 2. Foreign entity currently reports under IFRS 3. Parent does not meet the definition of a investment entity under IFRS 4. Foreign entity’s functional currency is the Euro You as the parent company can continue to report your financials under US GAAP. Likewise, the foreign subsidiary will continue to report their financial statements under IFRS. For the reporting periods following the date of acquisition, you are required to consolidate the foreign subsidiary’s financial statements with the parent entities financial statements under US GAAP (Gannon & Ashwal, 2004). The consolidation model under US GAAP and IFRS differs. To start, the definition of control varies. Under US GAAP, control is based on controlling financial interested...
Words: 1829 - Pages: 8
...Comparing IFRS to GAAP Michaela Lyons ACC/290 03/28/2016 Sharon Powers Comparing IFRS to GAAP This collaborative team experience has been quite motivating and has really pushed me to research the information extensively to ensure my personal understanding. My team didn’t exactly connect easily and it really pushed me to develop my understanding on my own. Although that isn’t the ideal outcome in a team setting, however in my opinion it actually helped me push further. GAAP is the US Generally Accepted Accounting Principles, the accounting standard used in the United States, while IFRS the International Financial Reporting Standards is used in a vast amount of countries around the world (Tilea, D. M., Bleotu, V., & Serban, A. A. M. (2013)). The Contrast IFRS does not command an exact order or classification of accounts on the statement of financial position. In most cases, companies report assets in reverse order of liquidity. GAAP explicitly requires that all accounts be ordered based on their degree of liquidity. Consequently, cash is usually reported first and non-current assets will be reported last. GAAP and IFRS sustain comparable perspectives on the neutrality of monetary data. It’s contracted that economic reporting data should be pertinent and loyally signified. Material that is pertinent is anything that could be viewed as useful in the eyes of an investor, creditor, or regulator. Material that is loyally signified...
Words: 836 - Pages: 4
...the investors in doing their business. International Financial Reporting Standards (IFRS) and US generally accepted accounting principles (GAAP) are two main accounting principles that is widely used in the majority of the companies. However, there will be still conflict in the interpreting and understanding each other financial statements due to these two different approaches. Therefore, to overcome this problem, International Accounting Standards Board (IASB) and Financial Accounting Standards Board (FASB) are working on it by taking the necessary steps as time passes to close down the gap and standardised the accounting principles globally making it easier for all parties. (157 words) 1.0 Introduction In the world of globalization, a number of countries had been experiencing the convergence of their local GAAP and IFRS in order to apply the international accounting standard to suit the growing business world. This does not left out the people of the United States who are also trying to converge the accounting standards of US GAAP and IFRS in order to close down the gap between the accounting standards. FASB and IASB are the main international bodies assisting the Securities and Exchange Commission (SEC) to achieve this goal. 2.0 Benefits 2.1 Facilitate international business and economy growth There are a number of benefits that people can gain from the convergence of US GAAP and IFRS. For example, the convergence of these accounting standards will...
Words: 2197 - Pages: 9
...Primary benefits Obviously, the IFRS adoption will bring a great deal of benefit to Japan. At first, the IFRS adoption will assist Japanese corporations especially those large MNCs embracing the global capital market in fast speed. As world’s third large economy, Japan houses a great number of prestigious international corporations, such as Toyota, Sharp, Sony and Toshiba etc. However, the discrepancy between local GAAP and IFRS to some extent hinders those Japanese MNCs from entering into the global market. In this condition, the adoption of IFRS by Japan is to eliminate this discrepancy and improve the understandability of financial statement of those MNCs, which is determinant for global investors for their capital investment decision (IASPUS, 2016). Secondly, the adoption of IFRS by Japan is going to enhance the compatibility of financial statements provided by Japanese corporations. The survey of IFRS in 2015 indicates that over 174 jurisdictions, as well as large entities in the world, have already taken IFRS for their corporate disclosure (IFRS, 2015). Therefore, it seems to be extremely urgent for Japan to adopt IFRS as it determines the acceptability of its large entities to the global GAAP. The financial report prepared in accordance with IFRS is taken as more compatible, which is beneficial for its stakeholders to understand and compare before their decision making. Thirdly, the IFRS adoption by Japan is going to improve nation’s capital market, making it more international-standardized...
Words: 950 - Pages: 4
...Disclosures in IFRS Evidence from Infosys financial statements Abstract: INTRODUCTION: To reassure the position of a globalised economy, India is all set to implement IFRS .This paper attempts to show cause the disclosures as per the new accounting standard IFRS. Infosys, the software giant is one of the early movers in India to prepare the financial statements as per IFRS. This company has carved a niche in itself in good practices in financial reporting. Though India has missed the earlier deadline of converging to IFRS from April 2011, has shown its commitments to implement IFRs compliant accounting standards once few ambiguities are addressed to The main thrust of IFRS prepared by IASB (internal Accounting standard Board) is the “fair value accounting and detailed disclosures to make the financial statements more useful for the stakeholders. With the paradigm shift in the accounting standard there might be volatilities of the numbers reported. Right from the classification of assets, liabilities, equities until principle differences of asset valuations, revenue recognitions IFRS differ from existing GAAP. There were inquisitive analysts, accounting experts who would want to capture the transition difference of the two accounting standards. Hence, it will be of academic interest to study the difference between local GAAP and IFRS. This paper analyses the IFRS statement of Infosys from Financial year 2009 and makes comparisons with the Indian GAAP numbers. This study...
Words: 4318 - Pages: 18
...study seeks to examine the impact of Australian equivalents to international financial reporting standards (A-IFRS) on the accounts of small-, medium- and large-sized firms. Design/methodology/approach – For 135 listed Australian entities, the half-yearly accounts ended 30 June 2005 are examined to identify the effects of A-IFRS. Data are gathered on the change in major balance sheet and income statement elements, the major reconciling items and earnings variability. Findings – Findings show that more than half of small firms have no change in net income or equity from A-IFRS, and that there is an increase in the number of adjustments to net income and equity with firm size. The study also finds that A-IFRS has increased net income for small- and medium-sized firms. Equity has increased (decreased) under A-IFRS for small (large) firms. Small firms experience higher earnings variability than medium-sized or large firms under A-IFRS. Research limitations/implications – The sample is limited to 31 December reporting date firms and not all A-IFRS must be complied with when firms restate their comparatives. Practical implications – Analysts, auditors and other account users should be aware that the effects of A-IFRS are correlated with firm size. Originality/value – This is the first Australian empirical paper on the effects of A-IFRS. It raises doubts about the contentions of some that A-IFRS will have widespread adverse effects on firms’ accounts. Keywords Financial reporting, Accounting...
Words: 7633 - Pages: 31
...result, it takes a lot of work to keep record of its carrying value; 2. PP&E makes up a large percentage of the total assets, especially for manufacturing companies, and is expected to be long-term assets held for use in production; 3. Mostly they are carried on the Balance Sheet based on the cost no matter how much their actual values are. So it is possible for companies to inflate or write down the value of PP&E by managers. Therefore, the investors have to pay attention to the policy of the PP&E and in this memo we tend to analyze the account deeply and understand how to the amount is reported on financial statement. In order to find the differences between IFRS and U.S GAAP on this subject, summaries of the requirements of GAAP and IFRS separately will lay a foundation for the comparison. IFRS: IAS 16 An entity may choose 2 accounting models for its property plant and equipment: an entity shall apply the same model to the entire class of PP&E (IAS 16-29: An entity shall choose either the cost model in paragraph 30 or the revaluation model in paragraph 31 as its accounting policy and shall apply that policy to an entire class [Refer: paragraph 37] of property, plant and equipment.) 1. Cost model (IAS 16-30: After recognition [Refer: paragraph 7] as an asset, an item of property, plant and equipment shall be carried at its cost less any accumulated depreciation [Refer: paragraphs 6 (definition of depreciation) and 43–62] and any accumulated impairment losses...
Words: 1456 - Pages: 6
...Accounting Principles (U.S. GAAP) are required throughout the United States, other countries utilize other methods of classifying their financial statement items. While the standards of accounting differ among many countries, there has recently been an effort to attain a universal set of standards under International Financial Reporting Standards (IFRS). While this has not yet been achieved, multiple countries have made an effort to converge their standards with IFRS. This paper attempts to illustrate the diversity that currently exists throughout the accounting world, briefly comparing several key differences of U.S. GAAP to the standards used in Hong Kong, China, Mexico, and the United Kingdom. Hong Kong With a few minor exceptions, Hong Kong has officially converged its financial reporting standards with IFRS effective January 1, 2005 (AdoptIFRS.org). Hong Kong’s primary GAAP-required statements are known as Hong Kong Financial Reporting Standards (HKFRSs), including their interpretations (Deloitte Global Services Limited, 2013). Other mandated GAAP requirements are found in Hong Kong’s Companies Ordinance as well as its Listing Rules (Deloitte Global Services Limited, 2013). The following paragraphs briefly highlight key financial statement items and their differing treatments by Hong Kong under IFRS and U.S. GAAP. The Balance Sheet While U.S. GAAP only provides a small amount of direction when clarifying how assets and liabilities should be offset, IFRS gives specific directions...
Words: 2220 - Pages: 9
...organization is reporting under the IFRS standard while their branch in the United States is using US-GAAP. While the differences do not outweigh the similarities, GAAP and IFRS standards have caused some concerns in financial reporting. These concerns have led to the evaluation of these two reporting standards and the discussion on whether to move IFRS worldwide. This paper will outline a few of the differences between GAAP and IFRS as well as review the discussion of standardized reporting using IFRS. Introduction Historically, accounting and reporting standards in the United States have been set by the AICPA (American Institute of Certified Public Accounts) as laid out by the regulations set by the Securities and Exchange Commission (SEC). In 1973, the Financial Accounting Standards Board (FASB) was developed by the AICPA as a council for establishing standards for reporting for all United States companies. Under FASB, GAAP was reorganized into approximately 90 accounting standards offering concise methods to follow for financial reporting. This not only allowed for ease of access when reading US financials statements, but also allowed for comparison of documentation for investments, credits, and other financial decisions. On the other hand, the International Financial Reporting Standards (IFRS) were developed by the International Accounting Standards Board (IASB) based in London. Currently, about 120 nations require the use of IFRS for financial reporting by public companies...
Words: 3687 - Pages: 15
...the convergence of IFRS and GAAP because it believes that doing so will benefit U.S investors. The incorporation of IFRS in GAAP will protect the investors, maintain the fair representation of financial statements and increase comparability and material information for investors to make better decisions. The primary benefit will be the reduction in discrepancies in financial statements among different countries around the world. “SEC, with convergence, wants to reduce regulatory impediments to cross-border capital transactions that result from disparate national accounting standards.” [3] As noted on pages 5 and 8, paragraph 2 and 3 respectively, some additional benefits are: ● “Greater comparability for investors across firms and industries on a global basis; ● Reduced listing costs for companies with multiple listings; ● Increased competition among exchanges; ● Better global resource allocation and capital formation; ● Lowered cost of capital ● A higher global economic growth rate ● Improved financial statement comparability among companies worldwide; ● Streamlined accounting processes for multinational companies; and ● Easier access to foreign capital and improved liquidity, leading to a reduced cost of capital” [5,8] 1B. Areas of concern within the SEC’s work plan before execution of the use of IFRS by us issuers: “A Work Plan was made to identify the areas of concerns within the roadmap of the proposed convergence of IFRS and GAAP, which included: ...
Words: 3330 - Pages: 14
...Property, Plant and Equipment Property, Plant and Equipment I- Nature of Accounting Issues Businesses purchase and use a variety of fixed assets, such as equipment, furniture, tools, machinery, buildings, and land. These fixed assets are long-term or relatively permanent assets. Also, they are tangible assets because they exist physically. They are owned and used by the business and are not offered for sale as part of normal operations. Perhaps the most descriptive titles these assets are known under are plant assets or property, plant and equipment. Depending on the industry, the plant assets of a business can be a significant part of its total assets. That is why the accounting for these long-term assets has important implications for a company’s reported results. In this paper, we discuss the proper accounting for the acquisition, use, and disposition of property, 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...
Words: 4741 - Pages: 19
...contribution of IFRS to UK accounting standards Name Institutional Affiliation INTRODUCTION International Financial Reporting Standards (IFRS) are principles based on standards and the interpretations implemented by the Board of International Accounting Standards as the global financial reporting framework. IFRS are guidelines and definitions that require to be applied in the preparation of financial statements by the international companies. Before IFRS was referred to as International Accounting Standards (IAS), then in 2001 the board of the international accounting standards (IASB) took the control of setting the IAS. Then the IASB developed the standard known as IFRS. According to (Shim, Siegel, Shim & Shim, 2012), the designing of IFRS is done as a common language to be used by business affairs so that the accounts of the company are comparable and understandable across the international boundaries. They result from the rapidly growing trade and international shareholding, and they offer best solutions to the companies trading in several countries. Many different national accounting standards are progressively being replaced by the IFRS. They provide set rules to be followed by the accountants in the provision and maintenance of the accounts books which are reliable, comparable, relevant and understandable as per the users external and internal. IFRS was adopted in the UK in 2005, and all the public companies were required to use the IFRS policies for their...
Words: 3874 - Pages: 16
...Rechnungslegung und Wirtschaftsprüfung IFRS 13 – Kritische Würdigung |Name, Vorname : |Reimers, René | | |Matrikel-Nr: |1677578 | | |Semester: |1. Mastersemester | | | | | | |Adresse: |Josef-Kindshoven Str. 5 | | | |96052 Bamberg | | | |0951 8011252 | | | |rene.reimers84@gmx.de | | |Betreuer: |Andreas Weik, M.Sc. | | | | |Bamberg, 18. November 2011 | Inhaltsverzeichnis Seite Inhaltsverzeichnis I Abkürzungsverzeichnis II 1 Einleitung 1 2 Intention des IFRS 13 sowie Meilensteine in der Entwicklung...
Words: 6260 - Pages: 26
...Work Plan for the Consideration of Incorporating International Financial Reporting Standards into the Financial Reporting System for U.S. Issuers A Comparison of U.S. GAAP and IFRS A Securities and Exchange Commission Staff Paper November 16, 2011 OFFICE OF THE CHIEF ACCOUNTANT UNITED STATES SECURITIES AND EXCHANGE COMMISSION This is a paper by the Staff of the U.S. Securities and Exchange Commission. The Commission has expressed no view regarding the analysis, findings, or conclusions contained herein. TABLE OF CONTENTS I. II. Introduction..........................................................................................................................1 Methodology ........................................................................................................................2 A. Scope of the Analysis...............................................................................................2 B. MoU and Other Joint Projects..................................................................................3 C. SEC Rules and Regulations .....................................................................................8 D. General Observations and Clarifications .................................................................8 Comparison of Requirements ............................................................................................11 A. Accounting Changes and Error Corrections...
Words: 24926 - Pages: 100
...gtgifrs.com: 1 IFRS IMPLEMENTATION AND CHALLENGES IN INDIA By Vandana Saxena Poria, OBE CEO, Get Through Guides Published in MEDC Monthly Economic Digest – August 2009 issue Need for universal GAAP In recent times, capital markets have become global and continue to expand. Moreover, there has been significant globalisation of production and trade. Investors can trade shares and securities worldwide. Entities are in a position to access the funds globally in the most advantageous markets. For this, investors from all over the world rely upon financial statements before taking decisions. They need to be convinced that the financial statements are true and fair and what they understand from the statements is what the person preparing them intends to convey. However, different countries adopt different accounting treatments and disclosure patterns with respect to the same economic event. This may create confusion among the users while interpreting the financial statements. Financial statements that are based on a single, universally accepted and used GAAP will enable the world to exchange financial information in a meaningful and trustworthy manner. This will accelerate the globalisation of finance. Adoption of IFRS worldwide and in India The use of International Financial Reporting Standards (IFRS) as a universal financial reporting language is gaining momentum across the globe. Several countries have implemented IFRS and converged their national GAAP to IFRS. More than 100 countries...
Words: 2877 - Pages: 12
