1 Best Read All IFRS vs US GAAP Leases

IFRS vs US GAAP Leases

1 best read of all comparisons

In 2016, the IASB and FASB issued new standards addressing the accounting for leases (IFRS 16 and ASC 842, respectively). The prior leasing standards (IAS 17 and ASC 840, respectively) were in practice significantly converged. The primary objective of the new standards was to require lessees to recognize assets and liabilities on the balance sheet for most lease contracts. Although the boards accomplished this goal, they did so in different ways.

Thus, while the boards remained largely converged with respect to scope and initial measurement, they significantly diverged on subsequent measurement for lessees: the IASB requires a single measurement model (akin to that for finance leases under U.S. GAAP) while the FASB maintains a two-class system (operating and finance lease classifications).

In addition, while certain presentation and disclosure requirements in IFRS 16 are similar to those in ASC 842, there are also certain differences (quantitative and qualitative) in this area. Other differences between IFRS 16 and ASC 842 may also arise as a result of differences between IFRS Standards and U.S. GAAP in other standards, including those related to (1) impairment of financial instruments and long-lived assets other than goodwill and (2) the accounting for investment properties.

The Lease Standards, effective 2019, requires that leases greater than 12 months are reported on Balance Sheets as Right of Use Assets under both US GAAP and IFRS. US GAAP distinguishes between Operating and Finance Leases (both are recognized on the Balance Sheet), while IFRS does not (any more).

Standards Reference

US GAAP1

IFRS2

ASC 842 Leases

IFRS 16 Leases

Note

The following discussion captures a number of the more significant GAAP differences under both the standards. It is important to note that the discussion is not inclusive of all GAAP differences in this area.

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IFRS vs US GAAP Employee benefits

IFRS vs US GAAP Employee benefits

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 and similarities between U.S. GAAP and IFRS related to accounting for investment property are summarized in the following tables.

Standards Reference

US GAAP1

IFRS2

715 Compensation – Retirement benefits

710-10 Compensation- General – Overall

712-10 Compensation – Nonretirement Postemployment Benefits – Overall

IAS 19 Employee Benefits

IFRIC 14 The limit on a defined benefit asset minimum funding requirements and their interaction

Introduction

The guidance under US GAAP and IFRS as it relates to employee benefits contains some significant differences with potentially far-reaching implications.

This narrative deals with employee benefits provided under formal plans and agreements between an entity and its employees, under legislation or through industry arrangements, including those provided under informal practices that give rise to constructive obligations.

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IFRS vs US GAAP Investment property – Broken in 10 great excellent reads

IFRS vs US GAAP Investment property

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 and similarities between U.S. GAAP and IFRS related to accounting for investment property are summarized in the following tables.

Standards Reference

US GAAP1

IFRS2

360 Property, Plant and equipment

IAS 40 Investment property

Introduction

The guidance under US GAAP and IFRS as it relates to investment property contains some significant differences with potentially far-reaching implications.

Links to detailed observations by subject

Definition and classification Initial measurement Subsequent measurement
Fair value model Cost model Subsequent expenditure
Timing of transfers Measurement of transfers Redevelopment
Disposals

Overview

US GAAP

IFRS

Unlike IFRS Standards, there is no specific definition of ‘investment property’; such property is accounted for as property, plant and equipment unless it meets the criteria to be classified as held-for-sale.

‘Investment property’ is property (land or building) held by the owner or lessee to earn rentals or for capital appreciation, or both.

Unlike IFRS Standards, there is no guidance on how to classify dual-use property. Instead, the entire property is accounted for as property, plant and equipment.

A portion of a dual-use property is classified as investment property only if the portion could be sold or leased out under a finance lease. Otherwise, the entire property is classified as investment property only if the portion of the property held for own use is insignificant.

Unlike IFRS Standards, ancillary services provided by a lessor do not affect the treatment of a property as property, plant and equipment.

If a lessor provides ancillary services, and such services are a relatively insignificant component of the arrangement as a whole, then the property is classified as investment property.

Like IFRS Standards, investment property is initially measured at cost as property, plant and equipment.

Investment property is initially measured at cost.

Unlike IFRS Standards, subsequent to initial recognition all investment property is measured using the cost model as property, plant and equipment.

Subsequent to initial recognition, all investment property is measured under either the fair value model (subject to limited exceptions) or the cost model.

If the fair value model is chosen, then changes in fair value are recognised in profit or loss.

Unlike IFRS Standards, there is no requirement to disclose the fair value of investment property.

Disclosure of the fair value of all investment property is required, regardless of the measurement model used.

Similar to IFRS Standards, subsequent expenditure is generally capitalised if it is probable that it will give rise to future economic benefits.

Subsequent expenditure is capitalised only if it is probable that it will give rise to future economic benefits.

Unlike IFRS Standards, investment property is accounted for as property, plant and equipment, and there are no transfers to or from an ‘investment property’ category.

Transfers to or from investment property can be made only when there has been a change in the use of the property.

IFRS vs US GAAP Investment property IFRS vs US GAAP Investment property IFRS vs US GAAP Investment property

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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

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

IFRS vs US GAAP Intangible assets goodwill

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:

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IFRS vs US GAAP Financial Statement presentation

IFRS vs US GAAP Financial Statement presentation – There are many similarities in US GAAP and IFRS guidance on financial statement presentation. Under both sets of standards, the components of a complete set of financial statements include: a statement of financial position, a statement of profit and loss (i.e., income statement) and a statement of comprehensive income (either a single continuous statement or two consecutive statements), a statement of cash flows and accompanying notes to the financial statements.

Both US GAAP and IFRS also require the changes in shareholders’ equity to be presented. However, US GAAP allows the changes in shareholders’ equity to be presented in the notes to the financial statements, while IFRS requires the changes in shareholders’ equity … Read more

New Lease Standard Comparing IFRS and US GAAP

New Lease Standard Comparing IFRS and US GAAP – The FASB and IASB issued their respective standards in the first quarter of 2016. The issuance of the standards are the culmination of multiple years of deliberating a leasing model with the primary objective of bringing almost all leases onto the balance sheet for lessees. The leases standard was initially intended to be a converged standard; however, the Boards ultimately diverged and as a result there are some differences between the two new standards.

The FASB discussed numerous lease-related questions since issuing ASC 842, and issued five Accounting Standards Updates during 2018 and 2019 relating to: the accounting for easements, certain technical corrections, targeted improvements to the transition provisions, a lessor’s … Read more

IFRS vs US GAAP Business combinations

IFRS vs US GAAP Business combinations – IFRS and US GAAP are largely converged in this area. The business combinations standards under US GAAP and IFRS are close in principles and language. However, some differences remain between US GAAP and IFRS pertaining to (1) the definition of control, (2) recognition of certain assets and liabilities based on the reliably measurable criterion, (3) accounting for contingencies, and (4) accounting for non-controlling interests. Significant differences also continue to exist in subsequent accounting. Different requirements for impairment testing and accounting for deferred taxes (e.g., the recognition of a valuation allowance) are among the most significant.

New definitions of a business were also issued under both US GAAP and IFRS. While the new … Read more

US GAAP vs IFRS Consolidations at-a-glance

US GAAP vs IFRS Consolidations at-a-glance – IFRS provides indicators of control, some of which individually determine the need to consolidate. However, where control is not apparent, consolidation is based on an overall assessment of all of the relevant facts, including the allocation of risks and benefits between the parties. The indicators provided under IFRS help the reporting entity in making that assessment. Consolidation in financial statements is required under IFRS when an entity is exposed to variable returns from another entity and has the ability to affect those returns through its power over the other entity. US GAAP vs IFRS Consolidations at-a-glance

US GAAP has a two-tier consolidation model: one focused on voting rights (the voting interest model) and … Read more

IFRS vs US GAAP Derivatives and hedging

IFRS vs US GAAP Derivatives and hedging – Derivatives and hedging represent some of the more complex and nuanced topical areas within both US GAAP and IFRS. While IFRS generally is viewed as less rules-laden than US GAAP, the difference is less dramatic in relation to derivatives and hedging, wherein both frameworks embody a significant volume of detailed and complex guidance.

Derivatives and embedded derivatives

The definition of derivatives is broader under IFRS than under US GAAP; therefore, more instruments may be required to be accounted for as derivatives at fair value through the income statement under IFRS. There are also differences in the identification of embedded derivatives within both financial and nonfinancial host contracts that should be carefully considered. … Read more

IFRS vs US GAAP Financial liabilities and equity

IFRS vs US GAAP Financial liabilities and equity – Under current standards, both US GAAP and IFRS require the issuer of financial instruments to determine whether either equity or financial liability classification (or both) is required. Although the IFRS and US GAAP definitions of a financial liability bear some similarities, differences exist that could result in varying classification of identical instruments.

As an overriding principle, IFRS requires a financial instrument to be classified as a financial liability if the issuer can be required to settle the obligation in cash or another financial asset. US GAAP, on the other hand, defines a financial liability in a more specific manner. Unlike IFRS, financial instruments may potentially be equity-classified under US GAAP if … Read more