International Financial Reporting Standards
Jose L. Gomez
March 26, 2015
The FASB and IFRS continually improve upon accounting standards and rulings in an effort to converge GAAP with international standards. In fact, several standard and ruling updates are being contemplated at this moment through pending discussions and through exposure drafts (PWC, 2011-2015); we will review a few of these in the next few paragraphs Differences between GAAP and IFRS
First we should address a few differences between GAAP and IFRS standards in order to understand the main reasons for so much change taking place at the present time with the standards and rulings and all the discussions of FASB and IASB. Both authoritative bodies agreed to work together to address the nine most important differences. These are listed in the table below: Difference
Businesses need to choose their financial period ahead of time. The options are calendar or a fiscal year. A calendar year is simply January through December while a fiscal year can start during any month of the year and last 12 months. Comparative disclosures for previously reported amounts are required. (KPMG.com/FIRS, 2013) Presenting the Balance Sheet and Income
No particular layout is requested for the balance sheet and income statement; however, Reg. S-X applies to public companies. No specific layout either is mandated but there are specific minimums for the statements however, the minimums are significantly less than those of Reg. S-X Current and Non-Current Debt presentation requirements
Covenant violation debt is allowed as non-current before the statements are released, so long as a waiver is included in the lender agreement. Unless there is a agreement with the lender prior to balance sheet date, this type of debt must be presented as current.
Classifying Deferred Tax & Liabilities
Allowed as a current or non-current
Classifying expenses for the income statement
The Securities and Exchange Commission requires expenses to be tied to a function. There is flexibility in the presentation of expenses tied to functions. Extraordinary items on the Income statement
Extraordinary items are noted on separate lines on the income statement as net-of-tax and after operating income. Reporting of extraordinary items is prohibited.
Discontinued Operations on the Income statement
Discontinued operations are required to be classified as components held for sale or disposed of; so long as no significant continued cash flow continues to derive from the discontinued operation. Discontinued operations is rather used for the reporting of components held for sale or disposed of when these are noted for separate lines of business or for particular geographic areas or for subsidiaries obtained with the intent to resell Disclosure of performance measures
Certain regulations specify certain aspects of headings and subtotals presentation. Public companies however are prohibited from disclosing non-GAAP measures. There is no specific standard for this.
Third balance sheet
No requirements exist for a third balance sheet.
Required, notes must be (Ernst & Young, 2011).
. The International Convergence
Many of the discussion and standards issuance is centered on the GAAP/IFRS convergence project. “Even the SEC recognizes that a single and widely accepted set accounting standards is of great importance and beneficial to global capital markets and for the US investor” (Gomez, 2015). Therefore many of the current GAAP and/or IFRS standards have been aligned moving us closer to adopting international standards in the US. Some of these discussions and/or changes are noted below.
IFRS-10: CONSOLIDATED FINANCIAL STATEMENT
This is the standard that sets the rule for preparing and presenting the consolidated financial statements when an entity controls one...
References: Ernst & Young. (2011, December). US GAAP versus IFRS. Retrieved February 8, 2015, from http://www.ey.com/Publication/vwLUAssets/US_GAAP_v_IFRS:_The_Basics/$FILE/US%20GAAP%20v%20IFRS%20Dec%202011.pdf
Gomez, J. L. (2015). Adoption of FIRS in The US.
KPMG.com/FIRS. (2013, September). Guide to Annual Financial Statements-Disclosure Checklist. Retrieved February 8, 2015, from KPMG.com: http://www.kpmg.com/Global/en/IssuesAndInsights/ArticlesPublications/IFRS-guide-to-financial-statements/Documents/guide-disclosure-checklist-sept13.pdf
PWC. (2011-2015). IFRS Updates. Retrieved March 23, 2015, from http://www.pwc.com/gx/en/ifrs-reporting/technical-updates.jhtml
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