Professional Documents
Culture Documents
1. Briefly describe some of the similarities and differences between U.S. GAAP and IFRS
with respect to the accounting for investments.
1. The accounting and reporting under IFRS and U.S. GAAP are for the most part very
similar, although the criteria used to determine the accounting is often different. For
example, among the notable similarities are: (1) the accounting for trading,
availablefor-
sale, and held-to-maturity securities is essentially the same between IFRS and
U.S. GAAP; (2) both IFRS and U.S. GAAP use the same test to determine whether
the equity method of accounting should be used – that is, significant influence with a
general guide of over 20% ownership. IFRS uses the term associate investment rather
than equity investment to describe its investment under the equity method; (3)
reclassifications of securities from one category to another generally follow the same
accounting under the two GAAP systems. Reclassification in and out of trading
securities is prohibited under IFRS. It is not prohibited under U.S. GAAP, but this type
of reclassification should be rare.