Focus on IFRS 16 Leases
(Source https://www.bdo.global/en-gb/services/audit-assurance/ifrs/ifrs-at-a-glance)
GAAP
1 best complete exercise – Common control transactions v Newco formation
Common control transactions v Newco formation
are two different events, that sometimes interact
- Common control transactions represent the transfer of assets or an exchange of equity interests among entities under the same parent’s control. “Control” can be established through a majority voting interest, as well as variable interests and contractual arrangements. Entities that are consolidated by the same parent—or that would be consolidated, if consolidated financial statements were required to be prepared by the parent or controlling party—are considered to be under common control.Determining whether common control exists requires judgment and could have broad implications for financial reporting, deals and tax. Just a few examples are:
- A reporting entity charters a newly formed entity to effect a transaction.
- A ‘Never-Neverland‘-domiciled company transfers assets to a subsidiary domiciled in a different jurisdiction.
- Two companies under common control combine to form one legal entity.
- Prior to spin-off of a subsidiary by a parent entity, another wholly owned subsidiary transfers net assets to the “SpinCo.”
- As part of a reorganization, a parent entity merges with and into a wholly owned subsidiary.
- Newco formations may be used in Business Combinations or businesses controlled by the same party (or parties). Just a few examples are: Common control transactions v Newco formation
- A Newco can be formed by the controlling party (for example, to facilitate subsequent disposal of the newly created group through an initial public offering (IPO) or a spin-off or by a third-party acquirer (for example to raise funds to effect the acquisition); Common control transactions v Newco formation
- A Newco can pay cash or shares to effect an acquisition; and
- A Newco can be formed to acquire just one business or more than one business.
1 Ultimate Guide – IFRS vs US GAAP Intangible assets goodwill
IFRS vs US GAAP Intangible assets goodwill
– The comparison starts with an overview of the differences and similarities between IFRS and US GAAP, and followed by more detailed differences and similarities on a reporting line level.
Standards Reference
| US GAAP1 | IFRS2 |
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Topic 35o Intangibles-Goodwill and Other Subtopic 610-20 Other income – Gains and losses from the Derecognition of Nonfinancial Assets Subtopic 720-15 Other expenses – Start-up costs Subtopic 720-35 Other expenses = Advertising costs Topic 730 Research and development arrangements Subtopic 985-20 Software – Costs of software to be sold, leased or marketed |
IAS 38 Intangible assets
SIC-32 Intangible assets – Web site costs
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Note
The following discussion captures a number of the more significant GAAP differences ans similarities under both the above mentioned standards. It is important to note that the discussion is not inclusive of all GAAP differences in this area.
In overview the similarities and differences are as follows:
Beware of COVID 19 Rent concessions IFRS accounting
Beware of COVID 19 Rent concessions IFRS accounting
IFRS 16 amendments Corona Rent concessions provide relief to lessees in accounting for rent concessions.
IFRS 16 Rent concession amendments in a nutshell
The lessee perspective
The amendments to IFRS 16 add an optional practical expedient that allows lessees to bypass assessing whether a rent concession that meets the following criteria is a lease modification:
- it is a direct consequence of COVID-19; Beware of COVID 19 Rent concessions IFRS accounting
- the revised lease consideration is substantially the same as, or less than, the original lease consideration;
- any reduction in the lease payments applies to payments originally due on or before June 30, 2021; and
- there is no substantive change to the other terms and conditions of the lease.
Lessees who elect this practical expedient account for qualifying rent concessions in the same way as changes under IFRS 16 that are not lease modifications. The accounting will depend on the nature of the concession, but one outcome might be to recognize negative variable lease payments in the period in which the lessor agrees to an unconditional forgiveness of lease payments.
Lessees are required to apply the practical expedient consistently to similar leases and similar concessions. They must also disclose if they elected the practical expedient and for which concessions, as well as the amount recognized in profit and loss in the reporting period to reflect changes in lease payments that arise from rent concessions to which they have applied the practical expedient.
The amendments are effective for reporting periods beginning after June 1, 2020, with early application permitted.
Best read Impairment long lived assets IAS 36 vs ASC 360
Impairment long lived assets IAS 36 vs ASC 360
Standards Reference
|
US GAAP1 |
IFRS2 |
Note
The following discussion captures a number of the more significant GAAP differences under both the impairment standards. It is important to note that the discussion is not inclusive of all GAAP differences in this area.
The significant differences between U.S. GAAP and IFRS related to accounting for the impairment of goodwill, indefinite-lived intangible assets and long-lived assets to be held and used are summarized in the following tables.
Goodwill Impairment of assets IAS 36 vs ASC 360
Goodwill allocation
Narrative reporting the right way
Narrative reporting
– whether in the form of an Operating and Financial Review (OFR), Management Discussion and Analysis (MD&A), a Business Review or other management commentary – is vital to corporate transparency. Key performance indicators (KPIs), both financial and non-financial, are an important component of the information needed to explain a company’s progress towards its stated goals, for all of these types of narrative reporting.
But despite this fact, KPIs are not well understood. What makes a performance indicator “key”? What type of information should be provided for each indicator? And how can it best be presented to provide effective narrative business reporting?
Setting the stage – two quotes
| Although narrative reporting requirements remain fluid, reporting on KPIs is here to stay. I welcome any publication as a valuable contribution to helping companies choose which KPIs to report and what information will provide investors with a real understanding of corporate performance. | Using management’s own measures of success really helps deepen investors’ understanding of progress and movement in business. Whether contextual, financial or non-financial, these data points make the trends in the business transparent and help keep management accountable. The illustrations of good practice reporting on KPIs shown here bring alive what is required in a practical and effective way. |
KPIs – a critical component
Regulatory environment
The specific requirements for narrative reporting have been a point of debate for several years now. However one certainty remains: the requirement to report financial and non-financial key performance indicators.
IFRS 13 The best Fair value fundamentals
IFRS 13 The best Fair value fundamentals discusses the key concepts in the fair value standards, including the definition of fair value, inputs to fair value measurements, and the Read more
Best start with IFRS and US GAAP
Best start with IFRS and US GAAP – Many of the world’s capital markets now require IFRS, or some form thereof, for financial statements of public-interest entities.
The remaining major capital markets without an IFRS mandate are: 
- The US, with no current plans to change Best start with IFRS and US GAAP
- Japan, where voluntary adoption is allowed, but no mandatory transition date has been established
- India, where regulatory authorities have made public statements about the intention to adopt from 2016-2017
- China, which intends to fully converge at some undefined future date
Continued global adoption affects multinational businesses, as additional countries permit or require IFRS for statutory reporting purposes and public filings. IFRS requirements elsewhere in the world also impact … Read more
IAS 8 Best summary policies estimates and errors
IAS 8 Best summary policies estimates and errors comprises a high level summary of the three items in this standard:
- Accounting policies,
- Accounting Estimates
- Errors
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1. Accounting policies |
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Definition: Accounting policies are the specific principles, bases, conventions, rules and practices applied by an entity in preparing and presenting financial statements. |
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Selection and application of accounting policies:
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Loss allowance
Loss allowance is an approach for the prudence or conservatism principle. Assets should not be overstated, liabilities not understated. Better save than sorry!