GAAP IFRS

Approach “Rules” based “Principle” Based

Basic F/S FASB: 10 elements IASB: 5 elements Assets, Liabilities, Equity, Income,
Elements Expense

Current Obligation is due on demand within Financial liability due to be settled within 12 months.
Liability the longer of 1 year or the operating --even if the original term>12 months
cycle. --intend to refinance or reschedule payments

Long term obligation callable due to

the violation of debt agreement and
it’s not cured within the specific
period
Non Current Short term obligation intends to Entity that expects and has discretion to refinance and
Liability refinance on a long term basis, and roll over the liability under an existing agreement-
demonstrates the ability to non current
consummate such financing before
B/S issued.

If the debt is paying from non-current

assets(LT repayments), then the
liability for bond payable next period
is non current liability
Discontinued Intraperiod tax allocation is required. NO Extraordinary items
operation or
Extraordinary In discontinued operation sections list
items separately for income or loss from
operation of the unit, and income tax
expense or benefit

Extraordinary items—net of tax

OCI

Statement of 1-Interest received, interest paid, and 1. Interest revenue and dividend revenue can be
Cash Flows dividend received: operating reported as either operating activity or investing
activities activity. Most commonly shown as investing
activity.
2-Dividend Paid: financing activities
2. Interest and dividend paid can be reported as either
operating activity or as a financing activity. They
are most commonly shown as a financing activity.
Equity Method
Inventory Temp decline or planned varainces
-not recognized for interim periods.
Permanent decline or unanticipated
varainces –recognized.
Recovery of loss on the same
inventory later in the FY is
recognized as gains.
It can only recognize the gain to the
extent of previous loss recognized.
1-LIFO is OK
2-Impairment Loss not reversible??
3-LCM vs Cost
Fixed Assets 1. There is no such a thing
Revaluation of assets
2. For assets are “held and used ”,
written down because of impairment,
it cannot be written back up
Measuring at the lower of carrying
Equity Method is not required if
1. The investment is classified as held for sale
2. Is acquired solely to be disposed of within 12
months
3. Conditions exist similar to those that would
exempt an entity from preparing consolidated
statements.
***No LIFO
Inventory may be written up to the lower cost or NRV.
Loss must be recognized for the interim periods, even
if the recovery is expected for the year.
1. Revaluation of assets is permitted if elected but
must be done an entire class of assets. Decrease in
value reduces net income; increase in value
increases accumulated OCI.
2. Assets is impaired when it’s carrying amount
exceed its recoverable amount. Recoverable amt is
the greater of the Fair Value minus cost to sell or
 amt or FV. value in use. Value in use= PV of the asset’s
If Carrying amt > undiscounted expected cash flow.
future cash flow, then Loss =
Carrying amt – FV Loss=carrying amt-recoverable amt

For assets are “held for sale”, a loss

is recognized for written down to 3. Biological assets are a separate category .
(FV-cost for sell ). It can only (Agricultural assets are living animals or plants)
recognize the gain to the extent of
previous loss recognized. 4. Reversal of impairment loss OK

3.Impairement loss is not reversible 5. If the major components of an asset have

significantly different patterns of economic benefits,
they must be depreciated separately.

4. NO Biological assets

Goodwill Three steps to test impairment One step only—Goodwill is from business
combination and allocated to cash generating units.
(CGU)
Carrying amt of the CGU (including good will in the
carrying amt) > its recoverable amt.
Intangible Cannot reverse the previous Intangible Assets may be revalued if they are traded in
Assets recognized impairment loss active market.

Startup, Organization cost: expensed

Financial
Stockholders’ 1-Extraordinary
1-Two methods items requiredStocks: 1-NO
for Treasury extraordinary
1-Three methods foritems allowed
Treasury Stocks: Par value, Cost
Equity Par Value, Cost methods method, Constructive Retirement

EPS 1- EPS based on Extraordinary Items 1-EPS based on Extraordinary Items are NOT reported
are reported
Revenue 1. Percentage of completion and 1. Completed Contract Method is NEVER allowed.
Recognition of completed contract methods OK If certain criteria met, Percentage of completion
Construction method is used.
Contracts

Pension 1. Use the projected unit credit method to calculate

Present Value Defined Benefit Obligation
2. GAAP Accumulated benefit obligation= IFRS
accrued benefit obligation
3. Netting pension plan assets and liability is OK
under some circumstances
4. Past Service cost is recognized immediately to the
extent it’s vested or expensed on the straight line
basis over avg. period to vesting

Deferred Taxes 1- Deferred taxes recognized full 1-Deferred taxes are recognized only to the extent it is
minus valuation allowances probable they will be realized
2- On B/S net current and Non-
current deferred tax liability 2-All deferred taxes are NON-Current on statement of
financial position, only net if they are due to same tax
authority

Patent Defense 1-Successful defense; capitalize Even successfully defended patent cost must be
2-Unsuccessful defense; expense EXPENSED

Contingency Contingency is existing condition Provision= liability of uncertain timing or amt.

involving uncertainty Recognition of provisions when
1. the entity has legal or constructive present
1. Probable Loss Contingency: Must obligation from the past event ( sure thing)
be accrued 2. it’s probable that an outflow of economic benefits
two conditions will be necessary to settle the obligation
--probable that at a B/S date, the 3. the amt can be reasonably estimated
assets impaired or liability incurred
--the amount of the loss can be Contingency Liability
reasonably estimated: the minimum Possible obligation arising from the past event
of the range should be accrued—if no NOT recognized. But Should be disclosed unless
most likely amt known outflow of resource is remote.

2. Reasonably Possible Loss:--

Disclosed
Guarantee must be disclosed.

3. Remote Loss:--normally not

disclosed.

If guarantee is non contingent

obligation to perform after the
occurrence of a triggering event or
condition-recognition of liability at
inception of a guarantee is required.
@ greater of FV or contingent
liability amt.

Gain Contingency: only recognized

when it’s realized.