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Accounting Treatment and Difference in US GAAP and IFRS

US GAAP IFRS

Assets
Receivables Securities B/S: Reported at Amortized Cost No changes in subsequent reporting periods I/S: Interest Received Realized Gain/Loss B/S: Reported at Fair Value I/S: Unrealized Gain/Loss Realized Gain/Loss Interest/Dividends Received B/S: Reported at Fair Value E/S: Unrealized Gain/Loss under Other Comprehensive Income I/S: Realized Gain/Loss Interest/Dividends Received B/S: Reported at Net Realizable Value. (Based on Management's Estimate of Collectibility)

Held to Maturity

Held for Trading

Available for Sale Inter Corporate Investments

Same Treatment

Less than 20% Holdings

Passive Investment. Could be classified under 'Trading Securities' or 'Available for Sale' and treated accordingly. Equity Method Used. I/S: Prorated NI from Holdings reported B/S: Initial Investment reduced by any Dividends Received Consolidation Method Used. All Assets and Liabilities of Holding Firm reported. Proportionate Consolidation NOT ALLOWED. Equity Method to be used.

Between 20% and 50% Holdings Greater than 50% Holdings

Joint Control

Proportionate Consolidation Preferred. Prorated Assets and Liabilities reported.

Inventory PP&E

B/S: Reported at lower of Cost or Market Range for Market Value: Upper Bound: NRV (after deducting any sales costs) Lower Bound: NRV - Normal Profit I/S: Losses from Write Downs WRITE UP NOT ALLOWED (except for some commodities)

B/S: Reported at lower of Cost or Net Realizable Value I/S: Losses from Write Downs. Write Up ALLOWED, to the extent of previous Write Down. B/S: Reported at Historical Cost Minus Accumulated Depreciation. However, Revaluations CAN be done. In case of Revaluation: B/S: Reported at Fair Value minus any Depreciation since Revaluation Date. Losses from Revaluation: Reported in I/S. Gains from Revaluation: 1) Reported in I/S to the extent of previous losses 2) Excess gains go to adjustment of Equity. Same Treatment

B/S: Reported at Historical Cost Minus Accumulated Depreciation Tangible Assets Identified Intangible with Definite Life Upward Revaluations NOT ALLOWED. B/S: Reported at Historical Cost Minus Accumulated Amortization.

Goodwill from acquisitions reported on B/S. Goodwill not amortized. However, tested for Impairment atleast Annually. If Impaired: Unidentified Intangible 1) B/S: Reported at reduced value. with Indefinite Life. 2) I/S: Losses reported in Income Statement Goodwill

Same Treatment

Revenue & Expenses


If Revenues and Costs can be reasonably estimated Percentage Completion Method is used If not then Revenue recognized to the extent of Costs incurred Profits to be recognized at Contract Completion Revenue MUST be recognized at Fair Value, from similar non-barter transactions from unrelated parties.

Construction Contracts across multiple Accounting Periods

If Revenues and Costs can be reasonably estimated Percentage Completion Method is used If not then Completed Contract Method is used Revenue CAN be recognized at Fair Value, ONLY if the firm has historically received cash payments for such services. FIFO and LIFO methods are permitted. If LIFO is used, LIFO Reserves MUST be mentioned in footnotes.

Barter Transactions

COGS

LIFO is NOT PERMITTED. DOES NOT differentiate between Losses and Expenses. Losses NOT related to Primary Business are reported as Expenses.

Operating Expenses

Differentiates between Losses and Expenses

Any Allocation Method CAN be chosen. Depreciation is based on Estimates like 1) Useful Life 2) Salvage Value Any changes in these estimates, to be reported PROSPECTIVELY. MUST Capitalize Construction Interest Costs.

Chosen Allocation Method SHOULD reflect the Consumption Pattern of that Asset. Rest is the same as US GAAP. Could CHOOSE to Capitalize Interest Expense Costs, else Expensed in I/S.

Depreciation Interest Expense

Income Tax

1. Difference in Taxes between Accounting Books and Tax Returns MUST be 1. Same Treatment recognized as Deferred Tax Assets/Liabilities. 2. Taxes Paid are under CFO. But if their associated expenses are under CFI or CFF, 2. ALL Taxes paid are reported under then any corresponding Taxes Paid would CFO. go under CFI or CFF respectively. Gain/Losses Reported in I/S from 1) Discontinued Operations: Reported separately, before Taxes. 2) Unusual OR Infrequent Transactions Reported separately, before Taxes. 3) Extra-Ordinary Items: Unsual AND Infrequent Transactions Reported in I/S, net of taxes, after Taxes Line.

Non Recurring Items

NO Extra-Ordinary Classification in IFRS. Recurring / Non Recurring Information MUST be disclosed in footnotes.

Equity
Interest & Dividends Paid Interest & Dividends Received Interest Paid: Reported as CFO Dividend Paid: Reported as CFF Interest Received: Reported as CFO Dividend Received: Reported as CFO Interest Paid: CFO OR CFF Dividend Paid: CFO OR CFF Interest Received: CFO OR CFI Dividend Received: CFO OR CFI