IFRS vs US GAAP Profit or loss and OCI

US GAAP¹

IFRS²

Topic 205 Presentation of financial statements

Topic 220 Income statements OCI

Reg G

Ref S-X

IAS 1 Presentation of financial statements

US GAAP

IFRS

Like IFRS Standards, an entity may present a statement of comprehensive income either as a single statement, or as an income statement followed immediately by a separate statement of comprehensive income (beginning with profit or loss and displaying components of OCI).

A statement of profit or loss and OCI is presented either as a single statement, or as a statement of profit or loss followed immediately by a statement of comprehensive income (beginning with profit or loss and displaying components of OCI).

Unlike IFRS Standards, SEC regulations prescribe the format and minimum line item presentation for SEC registrants.

For non-SEC registrants, there is limited guidance on the presentation of the income statement or statement of comprehensive income, like IFRS Standards.

Although IFRS Standards require certain items to be presented in the statement of profit or loss and OCI, there is no prescribed format.

Revenue comprises inflows or other enhancements of assets and/or settlements of an entity’s liabilities from delivering or producing goods, rendering services or other activities that are the entity’s ongoing major or central operations, like IFRS Standards.

Unlike IFRS Standards, only SEC registrants are required to present revenue as a separate line item in the income statement (or single statement of comprehensive income).

Revenue comprises income arising in the course of an entity’s ordinary activities, and is presented as a separate line item in the statement of profit or loss and OCI.

Unlike IFRS Standards, there is no requirement for expenses to be classified according to their nature or function. SEC regulations prescribe expense classification requirements for certain specialised industries, unlike IFRS Standards.

An analysis of expenses is required, either by nature or by function, in the statement of profit or loss and OCI or in the notes.

Unlike IFRS Standards, the presentation of non-GAAP measures in the financial statements by SEC registrants is prohibited. In practice, non-GAAP measures are also not presented in the financial statements by non-SEC registrants, unlike IFRS Standards.

The presentation of alternative earnings measures is not prohibited, either in the statement of profit or loss and OCI or in the notes to the financial statements.

Unlike IFRS Standards, transactions of an ‘unusual’ nature are defined as possessing a high degree of abnormality and of a type clearly unrelated to, or only incidentally related to, the ordinary and typical activities of the entity.

Unlike IFRS Standards, material events or transactions that are unusual and/ or occur infrequently are presented separately in the income statement or disclosed in the notes.

In general, the use of the terms ‘unusual’ or ‘exceptional’ should be infrequent and reserved for items that justify greater prominence.

Like IFRS Standards, the presentation or disclosure of items of income and expense characterised as ‘extraordinary items’ is prohibited.

The presentation or disclosure of items of income and expense characterised as ‘extraordinary items’ is prohibited.

Like IFRS Standards, items of income and expense generally are not offset unless required or permitted by another Codification topic/subtopic, or if the amounts relate to similar transactions or events that are not material.

However, offsetting is permitted in more circumstances than under IFRS Standards.

Items of income and expense are not offset unless required or permitted by another standard, or if the amounts relate to similar transactions or events that are not material.

US GAAP

IFRS

Like IFRS Standards, ‘comprehensive income’ is the total change in equity during the period, excluding changes that arise from transactions with owners in their capacity as owners.

Comprehensive income comprises net income (profit or loss) and items of ‘other comprehensive income’ (OCI).

‘Comprehensive income’ is the total change in equity during the period, excluding changes that arise from transactions with owners in their capacity as owners.

Comprehensive income comprises profit or loss and items of ‘other comprehensive income’ (OCI). [IAS 1.7]

OCI comprises revenues, expenses, gains and losses that are not recognised in profit or loss, like IFRS Standards.

However, as discussed throughout this publication, there are some differences from IFRS Standards in the specific items that comprise OCI.

OCI comprises items of income and expense that are not recognised in profit or loss, as required or permitted by IFRS Standards. [IAS 1.7]

Various Codification topics/subtopics use the term ‘accumulated OCI’ to refer to the cumulative amount remaining in OCI at a particular point in time, like practice under IFRS Standards.

IFRS Standards do not use the term ‘accumulated OCI’, although in practice it is sometimes used to refer to the cumulative amount remaining in OCI at a particular point in time.

US GAAP

IFRS

Like IFRS Standards, an entity may present comprehensive income in either:

• a single statement of comprehensive income, which includes all components of profit or loss and OCI; or
• an income statement followed immediately by a separate statement of comprehensive income beginning with profit or loss and displaying components of OCI. [220-10-45, 220-10-55]

Profit or loss and OCI may be presented in either:

• a single statement that includes all components of profit or loss and OCI in two separate sections; or
• a statement of profit or loss followed immediately by a ‘statement of comprehensive income’ beginning with profit or loss and displaying components of OCI. [IAS 1.10–10A]

Unlike IFRS Standards, SEC regulations prescribe the format of the income statement and minimum line item presentation for SEC registrants in general and by industry, which include:

• general instructions for financial statements;
• commercial and industrial companies;
• insurance companies; and
• bank holding companies. [Reg S-X Art 3, 5, 7, 9]

For non-SEC registrants, US GAAP has limited guidance on the information to be presented in the income statement or statement of comprehensive income, like IFRS Standards. [220-10-45-7]

Although the format of the statement of profit or loss and OCI is not prescribed, certain items are required to be presented in the statement.

In practice, there is limited flexibility over the order of these items, which tends to follow the order of the items set out in IAS 1. [IAS 1.81A–82A]

US GAAP

IFRS

Revenue comprises inflows or other enhancements of assets of an entity and/or settlements of its liabilities from delivering or producing goods, rendering services or other activities that are the entity’s ongoing major or central operations, like IFRS Standards.

Unlike IFRS Standards, except for SEC registrants, there is no requirement to disclose a separate line item for revenue in an entity’s income statement (or single statement of comprehensive income).

Like IFRS Standards, some types of revenue are required to be disclosed, but this can be done in the notes – e.g. revenue from contracts with customers (see IFRS vs US GAAP Revenue recognition). [Reg S-X 210.5-03(1), 606-10-50-4]

In its statement of profit or loss and OCI, an entity presents a separate line item for revenue, which comprises income arising in the course of its ordinary activities.

Some types of revenue – e.g. interest revenue calculated using the effective interest method (see Classification financial instruments) – are required to be presented separately in the statement of profit or loss and OCI.

Other types – e.g. revenue from contracts with customers (see IFRS vs US GAAP Revenue recognition) – can be disclosed separately in the notes. [IAS 1.82(a), IFRS 15.A, 113]

US GAAP

IFRS

Unlike IFRS Standards, there is no requirement for expenses to be classified according to their nature or function.

SEC regulations prescribe expense classification requirements for certain specialised industries, unlike IFRS Standards, and these may differ from the classifications permitted or required by IFRS Standards. [Reg S-X 210.5-03, 210.7-04, 210.9-04]

An entity presents an analysis of expenses recognised in profit or loss using a classification based on either their nature or their function within the entity, whichever provides information that is reliable and more relevant.

This analysis may be presented in the notes to the financial statements. [IAS 1.99–100]

US GAAP

IFRS

A material event or transaction that is unusual in nature or occurs infrequently is reported as a separate component of income from continuing operations, which may differ from the approach under IFRS Standards.

Like IFRS Standards, additional line items, headings and subtotals may be presented if they improve the understandability of the income statement.

The nature and financial effects of each event or transaction are disclosed in the income statement or in the notes to the financial statements, like IFRS Standards. [220-20-45-1]

An entity presents additional items of income or expense, headings or subtotals if they are relevant to an understanding of the entity’s financial performance.

Factors to consider when determining whether to present additional items include materiality and the nature and function of the components of income and expenses. [IAS 1.85–86]

Unlike IFRS Standards, there is no specific guidance on the presentation of additional subtotals in the income statement that is equivalent to IFRS Standards. However, the general concepts of consistency, clarity and understandability would apply.

When an entity presents additional subtotals in the statement of profit or loss and OCI, the subtotals:

• comprise line items made up of amounts recognised and measured in accordance with IFRS Standards;
• are presented and labelled in a manner that makes the line items that constitute the subtotal clear and understandable;
• are consistent from period to period;
• are displayed with no more prominence than other subtotals and totals presented in the statement of profit or loss and OCI; and
• are reconciled in the statement of profit or loss and OCI with the subtotals and totals required by the standard. [IAS 1.85A–85B, BC38G, BC58B]

Transactions of an unusual nature are defined under US GAAP as events or transactions possessing a high degree of abnormality and of a type clearly unrelated to, or only incidentally related to, the ordinary and typical activities of the entity.

Unlike IFRS Standards, material events or transactions that are of an unusual nature and/or occur infrequently are presented separately in the statement that reports profit or loss or disclosed in the notes. [220-20-45-1]

IFRS Standards do not describe events or items of income or expense as ‘unusual’ or ‘exceptional’. In general, if the description ‘unusual’ or ‘exceptional’ is used, then its use should be infrequent and reserved for items that justify greater prominence than that achieved by separate presentation or disclosure.

Separate presentation in the statement that reports profit or loss should be given only for very significant items when separate reporting is necessary for a fair presentation.

In general, when classifying expenses by nature or function, any amount described as unusual or exceptional should be classified in the same way as usual or non-exceptional amounts of the same function or nature. [IAS 1.17(c), 97]

Like IFRS Standards, US GAAP makes no distinction between ordinary and extraordinary activities.

The presentation, disclosure or characterisation of items of income and expense as ‘extraordinary items’ in the statement of profit or loss and OCI or in the notes to the financial statements is prohibited.

IFRS Standards make no distinction between ordinary and extraordinary activities.

The presentation, disclosure or characterisation of items of income and expense as ‘extraordinary items’ in the statement of profit or loss and OCI or in the notes to the financial statements is prohibited. [IAS 1.87]

US GAAP

IFRS

Like IFRS Standards, entities are permitted, but not required, to provide a subtotal for the results of operating activities before profit or loss for the reporting period.

Like IFRS Standards, US GAAP does not define ‘operating’ and ‘non-operating’, and therefore differences may arise in practice. [CON 6.77]

Entities are permitted, but not required, to provide a subtotal for the results of operating activities before profit or loss for the reporting period.

There is no definition of ‘operating’ and ‘non-operating’ for the purposes of the statement of profit or loss. [IAS 1.82, 85–85A, BC55–BC56]

US GAAP

IFRS

Like IFRS Standards, an investor’s share of profit or loss from equity-method investees is presented as a separate line item in the income statement. [323-10-35-4, 35-18]

An investor’s share of profit or loss of equity-accounted investees is presented as a separate line item in profit or loss (see Equity-method investees/Associates). [IAS 1.82(c), IG6, 28.10]

US GAAP

IFRS

Unlike IFRS Standards, generally all items of OCI are reclassified to profit or loss in the future, and therefore there is no distinction similar to that made under IFRS Standards.

Like IFRS Standards, examples of items of income and expense that are subsequently reclassified to profit or loss include:

• foreign exchange differences on the translation of foreign operations (see consolidation of foreign operations);
• the effects of cash flow hedging;
• unrealised holding gains and losses on available-for-sale debt instruments (see Classification financial instruments); and
• the income tax effect of the above items (see chapter 3.13). [220-10-45-10A]

Unlike IFRS Standards, and depending on the accounting policy chosen, an entity reclassifies gains or losses associated with pension or other post-retirement benefits initially recognised in OCI in the future to profit or loss (see Employee benefits). [715-30-35-4(e)]

An entity presents the items of OCI that may be reclassified to profit or loss in the future if certain conditions are met separately from those that will never be reclassified to profit or loss.

Examples of items of income and expense that may subsequently be reclassified to profit or loss include:

• foreign exchange differences on the translation of foreign operations (see consolidation of foreign operations);
• the effects of cash flow hedging and cost of hedging reserve (see Hedge accounting);
• gains and losses on FVOCI debt instruments (see Recognition and derecognition financial instruments); and
• the income tax effect of the above items (see Income taxes). [IAS 1.82A]

The title of the ‘statement of comprehensive income’ is not mandatory, like IFRS Standards.

The title of the ‘statement of profit or loss and OCI’ and other titles used in the standard are not mandatory. [IAS 1.10]

US GAAP

IFRS

Unlike IFRS Standards, SEC rules define non-GAAP measures as numerical measures of financial performance, financial position or cash flows that:

1.  exclude amounts that are included in the most directly comparable measure calculated and presented in accordance with US GAAP, or
2. include amounts that are excluded from the most directly comparable measure calculated and presented in accordance with US GAAP.

SEC registrants are prohibited from presenting non-GAAP measures in the financial statements. There is no specific guidance for non-SEC registrants; in practice, non-GAAP measures are not presented anywhere in the financial statements.

If presented outside of the financial statements (such as in management’s discussion and analysis), then SEC registrants are required to reconcile the non-GAAP measures to the most directly comparable GAAP measure.

Additionally, SEC registrants may not display non-GAAP measures more prominently than GAAP measures even when presented outside the financial statements. [Reg G, Reg S-K Rule 10(e)]

An entity may wish to present alternative earnings measures in the statement of profit or loss and OCI.

IFRS Standards do not prohibit the presentation of subtotals, including certain alternative earnings measures, if relevant criteria are met.

In general, if a measure (e.g. earnings before interest, taxes, depreciation and amortisation (EBITDA) or EBIT) is made up of amounts recognised and measured in accordance with IFRS Standards, then it may be considered an additional subtotal. [IAS 1.85A–85B, BC38G]

If an entity uses earnings before interest, taxes, depreciation and amortisation (EBITDA) or a similar measure to evaluate an operating segment’s performance, then that information is included in the segment disclosures (see Operating Segment reporting), like IFRS Standards.

Because the segment Codification Topic requires disclosure of the information in that situation, it is not considered a non-GAAP measure. [Reg G, Reg S-K Rule 10(e)]

If an entity uses EBITDA or a similar measure to evaluate an operating segment’s performance, then that information is included in the segment disclosures (see Operating Segment reporting).

Unlike IFRS Standards, EPS amounts for non-GAAP measures cannot be presented anywhere in the financial statements. [260-10-45-6]

EPS amounts for alternative earnings measures cannot be presented on the face of the financial statements but may be presented elsewhere. [IAS 33.73–73A]

US GAAP

IFRS

Like IFRS Standards, items of income and expense are generally not offset unless it is required or permitted by another Codification topic/subtopic, or when the amounts relate to similar transactions or events that are not significant.

However, offsetting is permitted in more circumstances under US GAAP than under IFRS Standards. For example, derivatives executed with the same counterparty under a master netting arrangement may be offset, unlike IFRS Standards. [815-10-45]

Items of income and expense are offset when it is required or permitted by an IFRS standard, or when gains, losses and related expenses arise from the same transaction or event or from similar individually immaterial transactions and events. [IAS 1.32–35]