...IFRS Income Tax Accounting IFRS for SMEs: A less taxing standard? On July 9, 2009, the IASB published the International Financial Reporting Standard for Small and Medium-sized Entities (“IFRS for SMEs” or “the standard”), a self-contained standard of about 230 pages designed to ease the burden of IFRS reporting for entities that do not have public accountability. Globally, more jurisdictions may be encouraged to replace existing local GAAP with IFRS for SMEs. As a result, it holds important implications for US companies with multinational subsidiaries. The United Kingdom Accounting Standards Board (UK ASB), for example, has already issued a Consultation Paper asking for comments on its proposal to replace existing UK GAAP with IFRS by 2012. 2 PricewaterhouseCoopers Overview of Income Tax Accounting Treatment The Income Tax section of IFRS for SMEs contains several key provisions from the IASB’s Exposure Draft to amend IAS 12 Income Taxes (the “Exposure Draft”). For example, IFRS for SMEs includes the guidance in the Exposure Draft for tax basis, uncertain tax positions and the use of a valuation allowance. IFRS for SMEs also includes several provisions from the existing standard, such as intraperiod allocation, tax rates to apply to distributions and balance sheet classification. A closer look at the provisions in the standard provides insight into the potential for increased complexity and diversity in some areas. Tax basis Under IFRS for SMEs, the tax...
Words: 2378 - Pages: 10
...business from another largely because across most frameworks they are similar. Even though this is the case, the different frameworks, namely International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP), do have notable differences. These differences are significant enough to merit mentioning if only to ensure that investors are able to compare apples to apples. As mentioned earlier cash flow statements under both frameworks are very similar from the format to the content; however, the purpose of this paper is to highlight the similarities and differences by comparing both frameworks under various areas as they relate to cash flow statement preparation. Statement Preparation Methods To begin, we should address the specifics of cash flow preparation under IFRS and GAAP. Under IFRS, businesses are given the option to prepare statement of cash flows either using Direct method or Indirect method. That being said, the IFRS recommends preparing the cash flow statement using direct method but it is not mandatory. A main difference under IFRS is that is does not require businesses to provide schedule of reconciliation between net income and net cash flows from operating activities if the direct method is used to prepare the cash flow statement.. Similarly, GAAP also gives allows for business to prepare cash flow statement using any of the methods mentioned earlier, i.e. Direct or...
Words: 2023 - Pages: 9
...that have legal authority to enforce compliance with financial reporting standards. Difference Between GAAP & IFRS GAAP (FASB) | IFRS (IASB) | Under U.S GAAP firms can choose to report comprehensive income in the statement of shareholder’s equity. | Under IFRS the income statement can be combined with “other comprehensive income” & presented as a single statement of comprehensive income. Alternatively presented separately. | CHAP – 24 GAAP (FASB) | IFRS (IASB) | FASB framework includes revenue, expenses, gains, losses and comprehensive income. | IASB framework lists income and expenses as elements related to performance. | FASB defines an asset as a future economic benefit. It also uses word probable in its definition of assets and liabilities. | IASB defines it as a resource from economic benefit is expected to flow. | FASB does not allow the upward valuation of most assets. | ------------- | U.S GAAP has traditionally been more rules-based, but the common conceptual framework is moving towards an objective-oriented approach. | IFRS is largely a principles-based approach. | Companies must disclose their accounting policies and estimates in the footnotes and Management’s Discussion Analysis. | Companies must disclose their accounting policies and estimates in the footnotes and Management’s Discussion Analysis. | CHAP – 25 GAAP (FASB) | IFRS (IASB) | When the outcome of a long term contract can b reliably estimated, percentage-of –completion...
Words: 1974 - Pages: 8
...US GAAP vs. IFRS The basics March 2010 Table of contents 2 5 7 8 11 13 14 16 18 20 26 28 31 33 35 38 40 42 43 44 46 47 Introduction Financial statement presentation Interim financial reporting Consolidations, joint venture accounting and equity method investees Business combinations Inventory Long-lived assets Intangible assets Impairment of long-lived assets, goodwill and intangible assets Financial instruments Foreign currency matters Leases Income taxes Provisions and contingencies Revenue recognition Share-based payments Employee benefits other than share-based payments Earnings per share Segment reporting Subsequent events Related parties Appendix — The evolution of IFRS Introduction It is not surprising that many people who follow the development of worldwide accounting standards today might be confused. Convergence is a high priority on the agendas of both the US Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) — and “convergence” is a term that suggests an elimination or coming together of differences. Yet much is still made of the many differences that exist between US GAAP as promulgated by the FASB and International Financial Reporting Standards (IFRS) as promulgated by the IASB, suggesting that the two GAAPs continue to speak languages that are worlds apart. This apparent contradiction has prompted many to ask just how different are the two sets of standards? And where differences exist, why do they exist...
Words: 19604 - Pages: 79
...US GAAP versus IFRS The basics December 2011 !@# Table of contents Introduction .....................................................................2 Financial statement presentation......................................4 Interim financial reporting ................................................6 Consolidation, joint venture accounting and equity method investees .............................................................7 Business combinations ...................................................11 Inventory .......................................................................13 Long-lived assets ...........................................................14 Intangible assets ............................................................16 Impairment of long-lived assets, goodwill and intangible assets ............................................................18 Financial instruments .....................................................20 Foreign currency matters ...............................................28 Leases ...........................................................................30 Income taxes..................................................................33 Provisions and contingencies ..........................................35 Revenue recognition.......................................................37 Share-based payments ...................................................39 Employee benefits other than share-based payments ......41 Earnings...
Words: 18710 - Pages: 75
...US GAAP versus IFRS The basics November 2013 Table of contents Introduction..................................................................... 2 Financial statement presentation ..................................... 3 Interim financial reporting................................................ 6 Consolidation, joint venture accounting and equity method investees/associates ........................................... 7 Business combinations................................................... 13 Inventory ....................................................................... 15 Long-lived assets ........................................................... 16 Intangible assets............................................................ 18 Impairment of long-lived assets, goodwill and intangible assets ............................................................ 20 Financial instruments..................................................... 23 Foreign currency matters .............................................. 30 Leases ........................................................................... 32 Income taxes ................................................................. 35 Provisions and contingencies ......................................... 37 Revenue recognition ...................................................... 39 Share-based payments................................................... 41 Employee benefits other than share-based payments .....
Words: 18304 - Pages: 74
...CHAPTER 19 ACCOUNTING FOR INCOME TAXES IFRS questions are available at the end of this chapter. TRUe-FALSe—Conceptual Answer No. Description F 1. Taxable income. F 2. Use of pretax financial income. T 3. Taxable amounts. T 4. Deferred tax liability. F 5. Deductible amounts. T 6. Deferred tax asset. F 7. Need for valuation allowance account. T 8. Positive and negative evidence. F 9. Computation of income tax expense. T 10. Taxable temporary differences. F 11. Taxable temporary difference examples. T 12. Permanent differences. T 13. Applying tax rates to temporary differences. F 14. Change in tax rates. F 15. Accounting for a loss carryback. T 16. Tax effect of a loss carryforward. T 17. Possible source of taxable income. T 18. Classification of deferred tax assets and liabilities. F 19. Classification of deferred tax accounts. F 20. Method used for accounting for income taxes. Multiple Choice—Conceptual Answer No. Description b 21. Differences between taxable and accounting income. c 22. Differences between taxable and accounting income. b 23. Determination of deferred tax expense. a 24. Differences arising from depreciation methods. a P25. Temporary difference and a revenue item. b S26. Effect of future taxable amount. c P27. Causes of a deferred tax liability. d S28. Distinction between temporary and permanent differences. b S29. Identification of deductible temporary difference. c S30. Identification...
Words: 5475 - Pages: 22
...IFRS vs U.S. GAAP Victoria Harris American Public University Acct 610 There are two sets of accounting standards that are used worldwide. One is the International Financial Reporting Standards (IFRS) and the U.S. Generally Accepted Accounting Principles (GAAP). There is a huge desire for there to one set of accounting standards worldwide with the increase of companies performing business in many different countries and global expansion. The International Financial Reporting Standards are issued by the International Accounting Standards Board. These set of accounting standards are international in more than 110 countries and the state how certain transactions and other events should be reported in the preparation of financial statements. This set of standards’ purpose is to make international comparisons easier. This is not an easy task, though, because there is already set rules in every country. U.S. Generally Accepted Accounting Principles are another set of accounting standards that is adopted by the U.S. Securities and Exchange Commission (SEC) and are the rules followed by companies in the United States when compiling financial statements. These set of standards was originally developed by auditors and regulated by the American Institute of Certified Public Accountants (AICPA) historically. The SEC is now considering changing the standards for the United States and going with the International Financial Reporting Standards in order to create a more constant...
Words: 1532 - Pages: 7
...IFRS and US GAAP: similarities and differences IFRS readiness series October 2012 Table of contents The heart of the matter 2 US financial reporting will change significantly within the next several years An in-depth discussion 4 Examining the implications IFRS affects US businesses in multiple ways What this means for your business 6 Anticipate and manage the change What companies can and should do now October 2012 The heart of the matter US financial reporting will continue to change over the next several years Although US companies will not when, and how IFRS might be be permitted to use International incorporated into the US financial Financial Reporting Standards (IFRS) reporting system. for US public filings in the foreseeable • In May 2011, the SEC’s Office of future, IFRS has been affecting US the Chief Accountant published a companies for some time, primarily Staff Paper exploring one possible through engaging in cross-border method to incorporate IFRS merger-and-acquisition (M&A) into the US financial reporting activity, meeting the reporting needs system, involving an active of non-US stakeholders, and assisting Financial Accounting Standards with or monitoring of the IFRS Board (FASB) incorporating IFRS requirements of non-US subsidiaries. into US GAAP over an extended US companies are also becoming period of time (the “endorsement” increasingly aware of IFRS, as key method). Under this method, the aspects of US generally...
Words: 82711 - Pages: 331
...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. We...
Words: 4725 - Pages: 19
...|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...
Words: 3962 - Pages: 16
...Outline Part 1 Background and Overview Part 2 US GAAP and IFRS Part 3 China GAAP and IFRS Part 4 Summary of Convergence Process Part 5 Pros & Cons of Convergence Part 6 The reasons for differences in accounting practice ww.ifrs.org + The International Accounting Standards Board + The International Accounting Standards Committee (IASC) Foundation + Objective – a single set of global financial reporting standards + Aim – convergence between national standards and international standards + IFRS Framework + IFRS SMEs + Supported by the Group of 20 Leaders (G20) who, at their September 2009 meeting in Pittsburgh, US. Country Status for listed companies as of April 2010 Argentina Required for fiscal years beginning on or after 1 January 2011 Australia Brazil Canada Required for all private sector reporting entities and as the basis for public sector reporting since 2005 Required for consolidated financial statements of banks and listed companies from 31 December 2010 and for individual company accounts progressively since January 2008 Required from 1 January 2011 for all listed entities and permitted for private sector entities including not-for-profit organizations Country China Status for listed companies as of April 2010 Substantially converged national standards European All member states of the EU are required to use IFRSs as adopted by the EU for listed Union companies since 2005 France Germany India Indonesia Italy Japan Mexico Required...
Words: 1833 - Pages: 8
...ACCOUNTING CANADIAN GAAP – IFRS COMPARISON SERIES Issue 15: IAS 1 Presentation Of Financial Statements Both IFRS and Canadian GAAP are principle based frameworks, and from a conceptual standpoint, many of the general principles are the same. However, the application of those general principles in IFRS can be significantly different from Canadian GAAP. Therefore, to understand the magnitude of the differences between IFRS and Canadian GAAP, it is essential to look beyond the general principles and look at the detailed guidance provided in the standards. This is our fifteenth issue in a series of publications, which will provide detailed information on the key differences between IFRS and Canadian GAAP. This issue will focus on the significant differences between current Canadian GAAP requirements for financial statement presentation and the IFRS requirements. These differences relate mainly to: • • • • • Presentation of financial position and equity; Presentation of comprehensive income; Presentation of cash flows; Other Presentation Issues; and First Time Adoption Issues related to Presentation of Financial Statements. Be advised that this publication is a guide to the differences between Canadian GAAP and IFRS and is not meant to be a comprehensive manual. Please contact a BDO representative for specific details and information. Introduction The requirements of financial statement structure and content are more prescribed under IFRS than Canadian GAAP; however, fundamentally...
Words: 3010 - Pages: 13
...accounting records in accordance with US GAAP and all required adjustments to reflect results in accordance with US GAAP have already been correctly recorded. As of January 31, 2011, the statement of financial position, the statement of comprehensive income and some related footnotes have been drafted as part of the year-end financial reporting process, but they are still incomplete. The cash flow statement, the statement of changes in equity and certain footnotes are still being prepared by the accounting staff. The details of accumulated other comprehensive income will be reported on the statement of comprehensive income. Current plans are to issue the first set of externally reported financial statements for the year ended December 31, 2010, by March 15, 2011. The owners of BWC have just met with their tax advisors. Due to adverse changes in the income tax laws in the US, BWC’s effective income tax rate for 2010 is 50%. The owners are considering reincorporating BWC in a European country with more favorable income tax laws, resulting in a 30% effective income tax rate. Required Based on the above consideration, as the controller of BWC, the owners of BWC have asked you to perform the following: ► Redraft the 2010 statement of financial position, the statement of comprehensive income and the select footnotes (these are shown following and, additionally, other relevant financial information is provided as well) in accordance with IFRS. You may record your adjusting journal...
Words: 473 - Pages: 2
...Revenue GAAP offers specific guidance regarding how companies report 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...
Words: 1003 - Pages: 5