Wiley dual reporting for equity and other comprehensive income : under IFRSs and U.S. GAAP

460 Pages·2012·8.758 MB·English

by  Bellandi, Francesco

P1:.../... P2:...
JWBK541-fm JWBK541-Bellandi March15,2012 13:56 PrinterName: YettoCome
P1:.../... P2:...
JWBK541-fm JWBK541-Bellandi March15,2012 13:56 PrinterName: YettoCome
WILEY
Dual Reporting for
Equity and Other
Comprehensive
Income
P1:.../... P2:...
JWBK541-fm JWBK541-Bellandi March15,2012 13:56 PrinterName: YettoCome
P1:.../... P2:...
JWBK541-fm JWBK541-Bellandi March15,2012 13:56 PrinterName: YettoCome
WILEY
Dual Reporting
for Equity and
Other
Comprehensive
Income
Under IFRS and U.S. GAAP
By
Francesco Bellandi, CPA, CA, ACCADipIFR, MBA
A John Wiley & Sons, Ltd., Publication
P1: .../... P2: ...
JWBK541-fm JWBK541-Bellandi March 15, 2012 13:56 Printer Name: Yet to Come
This edition first published in 2012
© 2012 Francesco Bellandi
Registered office
John Wiley & Sons Ltd, The Atrium, Southern Gate, Chichester, West Sussex, PO19 8SQ, United Kingdom
For details of our global editorial offices, for customer services and for information about how to apply for permission to
reuse the copyright material in this book please see our website at www.wiley.com.
The right of the author to be identified as the author of this work has been asserted in accordance with the Copyright, Designs
and Patents Act 1988.
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or
by any means, electronic, mechanical, photocopying, recording or otherwise, except as permitted by the UK Copyright,
Designs and Patents Act 1988, without the prior permission of the publisher.
This book contains criticism, contrast and commentary that may have origin in material copyrighted by the IASCF
International Accounting Standards Committee Foundation, Copyright © by the International Accounting Standards
Committee Foundation, material copyrighted by the FAF/FASB the Financial Accounting Foundation and the Financial
Accounting Standards Board, Copyright © by the Financial Accounting Standards Board, or material copyrighted by the
AICPA, Copyright © by the American Institute of Certified Public Accountants, Inc.
A previous version of this book was published as Bellandi, F., 2009. Accounting for Equity and Other Comprehensive Income,
Dual Reporting under U.S. GAAP and IFRSs. [e-book] Rome, Casa Editrice Universita` “La Sapienza”.
Some portions of this Book and some Exhibits are reused or adapted, with permission, from Bellandi, F., The Handbook to
IFRS Transition and to IFRS U.S. GAAP Dual Reporting, John Wiley & Sons Ltd, 2012.
This Book is not a substitution for reading the full text of all IFRSs and U.S. GAAP pronouncements. Complete copies can be
obtained directly from the IASB IASCF Publications Department, 1st Floor, 30 Cannon Street, London EC4M 6XH, United
Kingdom, e-mail: [email protected] Web: www.iasb.org and from the FASB, 401 Merritt 7, P.O. Box 5116 Norwalk, CT
06856-5116, e-mail: www.fasb.org.
While the Publisher and the Author have used their best effort in preparing this book, they make no representations or
warranties with respect to the accuracy or completeness of the contents of this book, and assume no liability or responsibility
for any errors or omissions in the content. The reader should not construe the content of this book as accounting, legal, or
other professional advice. It is not intended to address the circumstances of any particular individual or entity. If specific
professional advice or assistance is required, the services of a competent professional should be sought. Neither the Publisher
nor the Author shall be liable for any loss of profit or any commercial damages, including but not limited to special,
incidental, consequential, or other damages to any person acting or refraining from action as a result of this book. This
material is provided “AS IS” AND WITHOUT WARRANTY OF ANY KIND, EITHER EXPRESSED OR IMPLIED,
INCLUDING BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE AND NON-INFRINGEMENT.
This Book considers accounting literature issued or published up to October 31, 2011.
Wiley also publishes its books in a variety of electronic formats and by print-on-demand. Some content that appears in
standardprintversionsofthisbookmaynotbeavailableinotherformats.FormoreinformationaboutWileyproducts,visitus
at www.wiley.com.
Designationsusedbycompaniestodistinguishtheirproductsareoftenclaimedastrademarks.Allbrandnamesandproduct
namesusedinthisbookaretradenames,servicemarks,trademarksorregisteredtrademarksoftheirrespectiveowners.The
publisherisnotassociatedwithanyproductorvendormentionedinthisbook.Itissoldontheunderstandingthatthe
publisherisnotengagedinrenderingprofessionalservices.
LibraryofCongressCataloging-in-PublicationDataisavailable
ISBN978-1-119-95096-7
978-1-118-31418-0(ebk)
978-1-118-31424-1(ebk)
978-1-118-31430-2(ebk)
AcataloguerecordforthisbookisavailablefromtheBritishLibrary.
Typesetin10/11ptTimesbyAptaraInc.,NewDelhi,India
PrintedinGreatBritainbyTJInternational,Padstow,Cornwall
P1:.../... P2:...
JWBK541-fm JWBK541-Bellandi March15,2012 13:56 PrinterName: YettoCome
Tomysons
thattheymayfollow
myparents’example
ofintellectualhonesty
Nonestvirfortisetstrenuusquilaboremfugit,
nisicrescitillianimusipsadifficultate.
Nonsumuniangulonatus,
patriameatotushicmundusest.
Seneca,AdLucilium,EpistularumLibriI,VII.
P1:.../... P2:...
JWBK541-fm JWBK541-Bellandi March15,2012 13:56 PrinterName: YettoCome
P1:.../... P2:...
JWBK541-fm JWBK541-Bellandi February9,2012 7:52 PrinterName: YettoCome
CONTENTS
Page
Chapter Title No.
Preface ........................................................ xix
AbouttheAuthor ............................................... xxi
1 IntroductionandScopeofBook .................................. 1
1.1 NatureofAccountingLiteratureandPertinent
Pronouncements ........................................... 1
1.2 PerspectivesandMajorImplicationsoftheConcept
ofEquity .................................................. 1
1.3 TheConceptofOtherComprehensiveIncome ................ 3
1.4 TheFinancialStatementPresentationProject ................. 3
1.4.1 ProjectHistory ...................................... 3
1.4.2 ScopeandObjectivesoftheProject ................... 4
1.4.3 WorkingPrinciples .................................. 5
1.4.3.1 Cohesiveness ............................... 5
1.4.3.2 Categorization .............................. 6
1.4.3.3 Liquidity ................................... 6
1.4.3.4 Measurement ............................... 6
1.4.3.5 Disaggregation ............................. 6
1.4.3.6 CashFlowAssessment ...................... 7
1.4.3.7 SelectionofWorkingPrinciplesintheFinancial
StatementPresentationProject ............... 7
1.4.4 InterrelationshipsandConflictsamongWorking
Principles ........................................... 7
1.4.5 LinktotheTopicofThisBook ....................... 8
1.5 MainInterrelationshipswithOtherProjects ................... 8
1.6 SignificanceofEquity ...................................... 9
1.7 ScopeofBook ............................................. 10
2 ViewsonEquityandImplications ................................ 17
2.1 TerminologyandDefinitionsofTerms ....................... 17
2.1.1 Equity .............................................. 18
2.1.2 EquityOwners ...................................... 19
2.1.2.1 Shareholders ............................... 19
2.1.2.2 Owners .................................... 20
2.1.2.3 EquityHolders ............................. 21
2.1.2.4 Beneficiaries ............................... 21
2.1.2.5 EquityInvestors ............................ 21
2.1.2.6 EquityParticipants .......................... 22
2.1.2.7 Interchangeability,Inconsistency,and
Dissimilarity ............................... 22
2.1.3 EquityInstruments .................................. 23
2.1.4 EquityInterest ...................................... 26
2.1.4.1 ResidualInterest ............................ 26
(1) DefinitionofResidualInterest .......... 26
P1:.../... P2:...
JWBK541-fm JWBK541-Bellandi February9,2012 7:52 PrinterName: YettoCome
viii Contents
(2) ImplicationsoftheResidualInterest
Model ................................ 26
(3) TheBalanceSheetApproach ........... 28
2.1.4.2 OwnershipInterest ......................... 31
(1) OwnershipVersusResidualInterest ..... 32
(2) TheInvestedandEarnedEquity
Model ................................ 33
2.1.4.3 EconomicInterest .......................... 33
2.1.4.4 VotingInterest ............................. 35
2.1.4.5 ControllingFinancialInterest ................ 37
2.1.4.6 VariableInterest ............................ 38
2.2 BasicCharacteristicsofEquity .............................. 39
2.2.1 OwnershipRights ................................... 40
2.2.2 DependencyonanEntity’sDynamics ................. 40
2.2.3 RisksandRewardsofOwnership ..................... 41
2.2.4 Subordination ...................................... 43
2.2.5 DiscretiononDistributionstoOwners ................. 45
2.3 MajorImplicationsforCompanies ........................... 47
2.3.1 FinancialImpact .................................... 51
2.3.1.1 FinancialStatementPerformance ............. 51
2.3.1.2 Taxation ................................... 52
2.3.1.3 FinancialAnalysis .......................... 52
2.3.2 StrategicImpact .................................... 53
2.3.2.1 InternationalExpansion ..................... 53
2.3.2.2 BoardDecisions ............................ 56
2.3.2.3 TopManagementRole ...................... 57
2.3.3 BusinessProcessesImpact ........................... 57
2.3.4 ImplementationConsiderations ....................... 58
2.3.4.1 MigrationProjectManagement .............. 58
2.3.4.2 AccountingProcedures ...................... 58
2.3.4.3 ManagementReportingSystems ............. 59
2.3.4.4 InformationSystems ........................ 59
2.3.4.5 InternalControl ............................ 59
2.3.4.6 Auditing ................................... 60
2.3.4.7 HumanResources .......................... 60
2.3.4.8 CommunicationandInvestorRelationship .... 60
3 Reserves ....................................................... 63
3.1 TerminologyandDefinitionsofTerms ....................... 63
3.1.1 U.S.GAAPTerminologyandPractice ................ 63
3.1.2 IFRSTerminology .................................. 64
3.2 Reconciliation ............................................. 65
3.2.1 ReservesVersusProvisions .......................... 65
3.2.2 ReservesVersusOtherComponentsofEquity .......... 65
3.2.3 ReservesVersusAdditionalPaid-InCapital ............ 65
3.2.4 ReservesVersusOtherComprehensiveIncome ......... 66
3.2.5 ReservesVersusRetainedEarnings ................... 67
3.3 TypesofReserves .......................................... 67
3.4 TrackingofEquity ......................................... 69