1. Provide a summary of differences between the IFRS income statement and a typical income statement prepared using U.
S. GAAP.Summary of differences between the IFRS income statement and a typical income statement prepared using U.S. GAAP:1.
Financial periods presented by: a) U.S. GAAP Generally, comparative financial statements are presented.
Public companies are required to present two years for the balance sheet and three years for all other financial statements. b) IFRS Comparative information must be presented for all amounts reported in the financial statements.2. Income statement a) U.S. GAAP Presentation Presented either as a single- step or multiple step format.
Expenditures are usually listed by function. b) IFRS IFRS does not prescribe a format, but expenditures are listed either by function or nature.3.
Extraordinary items a) U.S. GAAP These are unusual and infrequent. These items are reported separately, but occur rarely.
b) IFRS This is prohibited.4. Deferred taxes classified a) U.S.
GAAP Deferred taxes are presented as current or non-current based on the nature of the related asset or liability. b) IFRS Deferred taxes are presented as non-current.5. Unusual items a) U.
S. GAAP Individually significant items are reported on the face of the income statement and disclosed in the notes. b) IFRS Separate disclosure is required, but may be reported on the income statement.6. Earnings per share a) U.S.
GAAP (EPS) Basic and diluted earnings per share for both continuing operations and net income are presented on the face of the income statement. Entities with an extraordinary item also must present EPS data for those line items. b) IFRS Basic and diluted earnings per share for both continuing operations and net income are presented on the face of the income2. Provide a summary of differences between the IFRS balance sheet and a typical balance sheet prepared using U.S.
GAAP.Summary of differences between the IFRS balance sheet and a typical balance sheet prepared using U.S. GAAP:1. Inventory a) U.S. GAAP Carried at the lower of cost or market, where market is current replacement cost (if not greater than selling price less costs to complete or if not less than net realizable value less a normal profit).
LIFO permitted. b) IFRS Carried at lower of cost or realizable value. Realizable value is the best estimate of the amount expected to be realized considering the business purpose (may not always be fair value).
LIFO is prohibited.2. Reversal of inventory write-downs a) U.S. GAAP Write-downs of inventory to lower of cost or market create a new cost basis. Reversals of previously written down amounts are prohibited. b) IFRS Previously written down amounts can be reversed up to the original impairment loss if the reason for impairment no longer exists.3.
Development costs a) U.S. GAAP Both research and development costs are expenses as incurred unless addressed by a separate standard. (In the case of computer software, development costs are capitalized once technological feasibility is established. b) IFRS Development costs are capitalized when technical and economic feasibility can be demonstrated with specific criteria.4. Property, Plant, and Equipment a) U.S.
GAAP Historical cost is used. Revaluations are not allowed. b) IFRS Historical cost or revalued amounts are used. Regular revaluation of assets is required once the revaluation option is chosen.
5. Reviews for impairment of long- lived assets a) U.S. GAAP Performed whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. b) IFRS Performed at each reporting date.6.
Method for determining long-lived asset impairment. a) U.S. GAAP A two-step approach is used. If the recoverability test is not met, then the impairment test is performed (the amount that the carrying value exceeds it fair value). b) IFRS A one-step approach is used, measured as the amount by which the carrying value exceeds its recoverable amount. The recoverable amount is the higher of the fair value less costs to sell or the present value of future cash flows less costs to dispose.
7. Provisions for liabilities a) U.S.
GAAP Recorded if probably and can be reasonable estimated. Probable is interpreted as likely. b) IFRS A present obligation (with uncertain timing or uncertain amount) that is recorded if probably (???more likely than not??™) and can be reasonable estimated.8. Contingent liability a) U.
S. GAAP If probably and can be estimated, the liability is recognized in the financial statements. Otherwise, the obligation is footnoted (unless remote). b) IFRS A possible obligation that will be confirmed by uncertain future events. Not recognized in the financial statements.
Disclosed if not remote.9. Measurement of provision??”range of outcomes a) U.
S. GAAP Most likely outcome should be accrued. When no outcome is more likely, accrue the minimum range of outcomes. b) IFRS Best estimate of obligation (typically the expected value) should be used.
If any outcome is as likely, use the midpoint of the estimates.10. Balance sheet presentation a) U.S.
GAAP Entities may present either a classified or a non-classified balance sheet. Items on the balance sheet are listed in order of decreasing liquidity. Public companies must follow Reg S-X. b) IFRS IFRS does not prescribe a format, but generally requires a current/non-current format be used and listed in order of increasing liquidity unless a liquidity format is more relevant and reliable.3.
Discuss three advantages of using IFRS accounting with financial statements to an end user.Three advantages of using IFRS accounting with financial statements to an end user include:1. In deciding whether a particular accounting policy should be disclosed, management considers whether disclosure would assist users in understanding how transactions, other events and conditions are reflected in the reported financial performance and financial position. Disclosure of particular accounting policies is especially useful to users when those policies are selected from alternatives allowed in Standards and Interpretations.2. Each entity considers the nature of its operations and the policies that users of its financial statements would expect to be disclosed for that type of entity. It is also appropriate to disclose each significant accounting policy that is not specifically required by IFRSs, but that is selected and applied in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors.3.
Revenue recognition model. This would be a special section that summarizes those views. The proposed model would apply to contracts with customers where a contract is an agreement between two or more parties that creates enforceable obligations (does not need to be in writing). A customer is a party that has contracted with an entity to obtain an asset (such as a good or a service) that represents an output of the entity??™s ordinary activities. The boards are considering a ???customer-consideration (allocation)??™ model.
For example, users will be able to assess how changes in operating assets and liabilities generate operating income and cash flows. 4. Discuss three disadvantages of using IFRS accounting with financial statements to an end user. 1. Too much complication for end user of financial statements of weak accounting back ground. All details of explanation of financial statements to the end user will not be comprehendible by the average investor. 2. Providing a lot of numerical figures will put the end user under a lot of pressure in order to try to analyze and compare between two companies or more.
3. Most end users are accustomed to the U.S.
GAAP standards, so it will take some time for them to adapt to the new reporting standards.References:- www.pwc.com- www.grantthornton.com- www.kpmg.com- www.bdointernational.com- www.iaspus.com/fs/fs.htm- www.ey.com/global