IFRS compared to US GAAP : An overview - KPMG US

125 Pages·2014·1.47 MB·English

IFRS
IFRS compared
to US GAAP:
An overview
November 2014
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IFRS compared to US GAAP : An overview | 1
DIVERGENCE IS WHAT WE SEE
In May 2014, the IAS B and the FAS B published a oj int standard on revenue from contracts
with customers. aH ving a fully converged standard in an area of accounting that affects
virtually every company is in itself a maoj r achievement. For other maoj r oj int proej cts,
however, it appears that full convergence will not be achieved – e.g. with respect to loan loss
impairment, insurance contracts and, as it currently stands, leases. In addition, differences
in eix sting standards continue. So from where we are now, it seems reasonable to epx ect
that IFRS and US GAAP will continue to be the two predominant – and separate – fnancial
reporting frameworks globally.
At the same time, while the advance of IFRS across the globe continues at pace, the SCE
has not yet decided whether to epx and the use of IFRS in the US beyond foreign private
issuers. oH wever, the SCE s’ chief accountant has stated publicly that we can epx ect
movement in the coming months on whether the SCE intends to further incorporate IFRS
into the US fnancial reporting system.
All of this means that an understanding of the differences between IFRS and US GAAP will
continue to be important and of keen interest to preparers and users of fnancial statements
under these fnancial reporting frameworks. With this in mind, we are pleased to publish our
comparison of IFRS and US GAAP as at 2oN �5 vember 2014.
uJ lie Santoro Mark M. iB elstein
KPMG International Standards Group Department of Professional Practice,
KPMG LLP

© 2014 KPMG LLP, a Delaware limited liability partnership and the U.S. member frm of the KPMG network of
independent member frms affliated with KPMG International Cooperative, a Swiss entity. All rights reserved.
© 2014 KPMG IFRG Limited, a UK company, limited by guarantee. All rights reserved.
2 | IFRS compared to US GAAP : An overview
CONTENTS
IFRS compared to US GAAP: An overview 4
How to navigate this overview 5
1 Background 6
1.1 Introduction 6
1.2 hT e Conceptual Framework 7
2 General issues 8
2.1 aB sis of preparation of fnancial statements 8
2.2 Form and components of fnancial statements 10
2. 3 Statement of cash o� ws 12
2.4 Fair value measurement 14
2. 5 Consolidation 17
2. 6 uB siness combinations 22
2. 7 Foreign currency translation 25
2. 8 Accounting policies, errors and estimates 28
2. 9 vE ents after the reporting date 03
2.10 yH perina� tion 13
3 Statement of fnancial position 32
.3 1 General 23
.3 2 Property, plant and euq ipment 3
.3 3 Intangible assets and goodwill 53
.3 4 Investment property 73
.3 5 Associates and the euq ity method uqE( itym- ethod investees ) 93
.3 6 oJ int arrangements I( nvestments in oj int ventures ) 42
.3 7 oN[ t used]
.3 8 Inventories 43
.3 9 iB ological assets 45
.3 10 Impairment of nonf- nancial assets 46
.3 11 oN[ t used]
.3 12 Provisions, contingent assets and liabilities R( ecognised contingencies and other
p‘ rovisions )’ 49
.3 1 3 Income taex s 25
4 Specifc items of proft or loss and OCI 56
4.1 General 65
4.2 Revenue 85
© 2014 KPMG LLP, a Delaware limited liability partnership and the U.S. member frm of the KPMG network of
independent member frms affliated with KPMG International Cooperative, a Swiss entity. All rights reserved.
© 2014 KPMG IFRG Limited, a UK company, limited by guarantee. All rights reserved.
IFRS compared to US GAAP : An overview | 3
4.2A Revenue from contracts with customers 16
4. 3 Government grants 46
4.4 mE ployee benefts 56
4. 5 Shareb- ased payments 96
4. 6 oB rrowing costs F( inancial income and epx ense ) 37
5 Special topics 74
.5 1 Leases 47
.5 2 pO erating segments 7
.5 3 aE rnings per share 97
.5 4 oN nc- urrent assets held for sale and discontinued operations 28
.5 4A Discontinued operations 48
.5 5 Related party disclosures 58
.5 6 Investment entity consolidation ecx eption I( nvestment company consolidation
ecx eption ) 78
.5 7 oN nm- onetary transactions 98
.5 8 Accompanying fnancial and other information 09
.5 9 Interim fnancial reporting 19
.5 10 oN[ t used]
.5 11 txE ractive activities 29
.5 12 Service concession arrangements 49
.5 12A Service concession arrangements 69
.5 1 3 Common control transactions and eN wco formations 9
6 [Not used]
7 Financial instruments 101
.71 Scope and defnitions 101
.72 Derivatives and embedded derivatives 102
.7 3 uqE ity and fnancial liabilities 104
.74 Classifcation of fnancial assets and fnancial liabilities 107
.7 5 Recognition and derecognition 109
.7 6 Measurement and gains and losses 111
.7 7 eH dge accounting 113
.7 8 Presentation and disclosure 115
8 Insurance contracts 117
.8 1 Insurance contracts 117
Keeping you informed 119
© 2014 KPMG LLP, a Delaware limited liability partnership and the U.S. member frm of the KPMG network of
independent member frms affliated with KPMG International Cooperative, a Swiss entity. All rights reserved.
© 2014 KPMG IFRG Limited, a UK company, limited by guarantee. All rights reserved.
4 | IFRS compared to US GAAP : An overview
IFRS COMPARED TO US GAAP: AN OVERVIEW
hT e purpose of our publication IFRS compared to US GAAP, from which this overview has
been etx racted, is to assist you in understanding the signifcant differences between IFRS
and US GAAP.
Although it does not discuss every possible difference, the publication provides a summary
of those differences that we have encountered most freuq ently, resulting from either a
difference in emphasis or specifc application guidance.
In general, the publication addresses the types of businesses and activities that IFRS
addresses. So, for eax mple, biological assets are included in the publication, but accounting
by notf- orp- roft entities is not. In addition, the publication focuses on consolidated fnancial
statements – separate i( .e. unconsolidated ) fnancial statements are not addressed.
hT e reuq irements of IFRS are discussed on the basis that the entity has adopted IFRS
already. hT e special transitional reuq irements that apply in the period in which an entity
changes its GAAP to IFRS are discussed in our publication Insights into IFRS, KPMGs’
practical guide to International Financial Reporting Standards.
Although we have highlighted what we regard as signifcant differences, we recognise that
the signifcance of any difference will vary by entity. Some differences that appear maoj r
may not be relevant to your business ; by contrast, a seemingly minor difference may cause
you signifcant additional work.
© 2014 KPMG LLP, a Delaware limited liability partnership and the U.S. member frm of the KPMG network of
independent member frms affliated with KPMG International Cooperative, a Swiss entity. All rights reserved.
© 2014 KPMG IFRG Limited, a UK company, limited by guarantee. Al rights reserved. Home
IFRS compared to US GAAP : An overview | 5
HOW TO NAVIGATE THIS OVERVIEW
hT is overview is an etx ract from our more etx ensive publication IFRS compared to
US GAAP, which is available from your usual KPMG contact.
hT is overview provides a uq ick summary of signifcant differences between IFRS and
USG� AAP. It is organised by topic, following the typical presentation of items in the fnancial
statements.
hT is edition is based on IFRS and US GAAP that is mandatory for an annual reporting period
beginning on 1 aJ nuary 2014 – i.e. ignoring standards and interpretations that might be
adopted before their effective dates.
Additionally, the following forthcoming reuq irements are the subej ct of separate chapters :
4.2A R‘ evenue from contracts with customers,’ .5 4A D‘ iscontinued operations ’ and .5 12A
S‘ ervice concession arrangements.’
hT e following abbreviations are used in this overview.
PE S aE rnings per share
CN I oN nc- ontrolling interests
CO I tO her comprehensive income
SCE US Securities and cxE hange Commission
© 2014 KPMG LLP, a Delaware limited liability partnership and the U.S. member frm of the KPMG network of
independent member frms affliated with KPMG International Cooperative, a Swiss entity. All rights reserved.
© 2014 KPMG IFRG Limited, a UK company, limited by guarantee. Al rights reserved. Home
IFRS US
1 Background
1.1 Introduction 1.1 Introduction
(IFRS Foundation Constitution, IASB and IFRS (ASC Topic 105, ASC Master Glossary, SEC Rules and
Interpretations Committee Due Process Handbooks, Regulations)
Preface to IFRSs, IAS 1)
‘IFRS’ is the term used to indicate the whole body of IASB ‘US GAAP’ is the term used to indicate the body of authoritative
authoritative literature. literature that comprises accounting and reporting standards in the
US. Rules and interpretative releases of the SEC under authority of
federal securities laws are also sources of authoritative GAAP for
SEC registrants.
Individual standards and interpretations are developed and Authoritative US GAAP is primarily developed and maintained by the
maintained by the IASB and the IFRS Interpretations Committee. FASB and the Emerging Issues Task Force.
IFRS is designed for use by proft-oriented entities. Unlike IFRS, US GAAP is designed for use by both proft-oriented and
not-for-proft entities, with additional Codifcation topics that apply
specifcally to not-for-proft entities.
Any entity claiming compliance with IFRS complies with all standards Like IFRS, any entity claiming compliance with US GAAP complies
and interpretations, including disclosure requirements, and makes an with all applicable sections of the Codifcation, including disclosure
explicit and unreserved statement of compliance with IFRS. requirements. However, unlike IFRS, a statement of explicit and
unreserved compliance with US GAAP is not required.
The overriding requirement of IFRS is for the fnancial statements to Unlike IFRS, the objective of fnancial statements is fair presentation
give a fair presentation (or a true and fair view). in accordance with US GAAP.
oH me
6 | IFRS compared to US GAAP: An overview
© 2014 KPMG LLP, a Delaware limited liability partnership and the U.S. member frm of the KPMG network of
independent member frms affliated with KPMG International Cooperative, a Swiss entity. All rights reserved.
© 2014 KPMG IFRG Limited, a UK company, limited by guarantee. All rights reserved.
1.2 The Conceptual Framework 1.2 The Conceptual Framework
(Conceptual Framework for Financial Reporting) (ASC Topic 105, ASC para 250-10-S99-1, ASC para 250–
10-S99-2, CON 5, CON 6, CON 7, CON 8, SAB Topics
1.M, 1.N)
The Conceptual Framework is used in developing and maintaining Like IFRS, the Conceptual Framework establishes the objectives and
standards and interpretations. concepts that the FASB uses in developing guidance.
The Conceptual Framework is a point of reference for preparers of Unlike IFRS, the Conceptual Framework is non-authoritative guidance
fnancial statements in the absence of specifc guidance in IFRS. and is not referred to routinely by preparers of fnancial statements.
Transactions with shareholders in their capacity as shareholders are Like IFRS, transactions with shareholders in their capacity as
recognised directly in equity. shareholders are recognised directly in equity.
oH me
IFRS US
IFRS compared to US GAAP: An overview | 7
© 2014 KPMG LLP, a Delaware limited liability partnership and the U.S. member frm of the KPMG network of
independent member frms affliated with KPMG International Cooperative, a Swiss entity. All rights reserved.
© 2014 KPMG IFRG Limited, a UK company, limited by guarantee. All rights reserved.
IFRS US
2 General issues
2.1 Basis of preparation of fnancial 2.1 Basis of preparation of fnancial
statements statements
(IAS 1) (ASC Subtopic 205-30, ASC Subtopic 855-10, AU 341,
AU-C 570)
Financial statements are prepared on a going concern basis, unless Unlike IFRS, fnancial statements are generally prepared on a going
management intends or has no realistic alternative other than to concern basis (i.e. the usual requirements of US GAAP apply) unless
liquidate the entity or to stop trading. liquidation is imminent.
If management concludes that the entity is a going concern, but there Unlike IFRS, there is no specifc guidance under US GAAP regarding
are nonetheless material uncertainties that cast signifcant doubt on the assessment of going concern or the required disclosures.
the entity’s ability to continue as a going concern, then the entity However, the US auditing literature requires the auditor to consider
discloses those uncertainties. whether there is substantial doubt about the entity’s ability to
continue as a going concern, like IFRS.
In carrying out its assessment of going concern, management Unlike IFRS, this assessment is for a period of time not to exceed
considers all available information about the future for at least, but one year beyond the date of the fnancial statements being audited,
not limited to, 12 months from the reporting date. This assessment which does not exceed one year from the issuance date of the
determines the basis of preparation of the fnancial statements. fnancial statements. Unlike IFRS, this assessment is for the purpose
of determining whether the disclosures in the fnancial statements
are appropriate, and the basis of preparation is not affected unless
liquidation is imminent.
oH me
8 | IFRS compared to US GAAP: An overview
© 2014 KPMG LLP, a Delaware limited liability partnership and the U.S. member frm of the KPMG network of
independent member frms affliated with KPMG International Cooperative, a Swiss entity. All rights reserved.
© 2014 KPMG IFRG Limited, a UK company, limited by guarantee. All rights reserved.