ifrss and us gaap a pocket comparison - ias plus

An IAS Plus guideJuly 2008

IFRSs and US GAAPA pocket comparison

26357 bd IFRS US GAAP:26357 IFRS US GAAP bd 18/9/08 12:21 Page a

ContactsGlobal IFRS leadership team

IFRS global office

Global IFRS leaderKen [email protected]

IFRS centres of excellence

Americas

Robert [email protected]

Asia-Pacific

Hong Kong MelbourneStephen Taylor Bruce [email protected] [email protected]

Europe-Africa

Johannesburg LondonGraeme Berry Veronica [email protected] [email protected]

Copenhagen ParisJan Peter Larsen Laurence [email protected] [email protected]

Deloitte’s www.iasplus.com website provides comprehensive information aboutinternational financial reporting in general and IASB activities in particular.Unique features include:

• daily news about financial reporting globally.

• summaries of all Standards, Interpretations and proposals.

• many IFRS-related publications available for download.

• model IFRS financial statements and disclosure checklists.

• an electronic library of several hundred IFRS resources.

• all Deloitte Touche Tohmatsu comment letters to the IASB.

• links to nearly 200 IFRS-related websites.

• e-learning modules for each IAS and IFRS – at no charge.

• information about adoptions of IFRSs around the world.

• updates on developments in national accounting standards.

26357 bd IFRS US GAAP:26357 IFRS US GAAP bd 18/9/08 12:21 Page b

IFRSs and US GAAPWorking towards a single set of global standards

The story so farFor the past several years, the International Accounting Standards Board (IASB)and the US Financial Accounting Standards Board (FASB) have been workingtogether to achieve convergence of International Financial Reporting Standards(IFRSs) and generally accepted accounting principles in the United States (US GAAP). In 2002, as part of the Norwalk agreement, the Boards issued a Memorandum of Understanding (MOU) formalising their commitment to:

• making their existing financial reporting standards fully compatible as soon as practicable; and

• co-ordinating their future work programmes to ensure that, once achieved,compatibility is maintained.

Memorandum of Understanding (2008)On 11 September 2008, an updated MOU was published, which sets outpriorities and milestones to be achieved on major joint projects by 2011.The Boards have acknowledged that, although considerable progress has beenachieved on a number of designated projects, achievements on other projectshave been limited for various reasons, including differences in views over issuesof agenda size and project scope, differences in views over the most appropriateapproach, and differences in views about whether and how similar issues inactive projects should be resolved consistently. As a result, the scopes andobjectives of many of the projects have been or are expected to be revised.

In updating the MOU, the Boards noted that the major joint projects will takeaccount of the ongoing work to improve and converge their respectiveConceptual Frameworks. Also, the Boards will consider staggering effective datesof standards to ensure an orderly transition to new standards. Consistent with itscurrent practice, the IASB will consider permitting early adoption of its Standards.

The following major joint projects are part of the MOU.

Consolidation Leases

Derecognition Liabilities and equity

Fair value measurement guidance Post-employments benefits (including pensions)

Financial statement presentation Revenue recognition

Financial instruments

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SEC recognition of IFRSs for foreign private issuersOf the approximately 15,000 companies whose securities are registered with theSecurities and Exchange Commission (SEC), over 1,100 are foreign companies.Prior to November 2007, if these foreign companies submitted IFRS or localGAAP financial statements, rather than US GAAP, a reconciliation of net incomeand net assets to US GAAP was required.

Following some progress in converging IFRSs and US GAAP, for fiscal yearsending after15 November 2007, the SEC has permitted foreign private issuers touse IFRSs in preparing their financial statements without reconciling them to USGAAP. In order to qualify for such exemption, a foreign private issuer’s financialstatements must fully comply with the IASB’s version of IFRSs, with one exception.The exception relates to foreign private issuers that use the version of IFRSs thatincludes the European Commission’s ‘carve-out’ for IAS 39. The SEC has permittedsuch issuers to use that version in preparing their financial statements for a two-year period as long as a reconciliation to the IASB’s version of IFRSs is provided.After the two-year period, these issuers will either have to use the IASB’s versionof IFRSs or provide a reconciliation to US GAAP.

Recent regulatory developments – United StatesWith the resolution of the debate regarding foreign private issuers, the focus ofattention has now switched to the potential for US domestic issuers to submitIFRS financial statements for the purpose of complying with the rules andregulations of the SEC. In a significant step toward that objective, in August2008 the SEC issued proposals that, if accepted, could allow some U.S. issuers,based on specific criteria, an option to use IFRSs for fiscal years ending on orafter 15 December 2009 and could lead to mandatory transition to IFRSs fordomestic issuers starting for fiscal years ending on or after 15 December 2014.A ‘roadmap’ has been proposed which acknowledges that IFRSs have thepotential to become the global set of high-quality accounting standards andwhich sets out seven milestones (set out on the next page) that, if achieved,could lead to mandatory adoption from 2014.

Working towards a single set of global standards

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Milestones 1 – 4 (issues that need to be addressed before mandatoryadoption of IFRSs)

1. Improvements in accounting standards (i.e. IFRSs).

2. Funding and accountability of the International Accounting Standards Committee Foundation.

3. Improvement in the ability to use interactive data (e.g. XBRL) for IFRS reporting.

4. Education and training on IFRSs in the United States.

Milestones 5 – 7 (the transition plan for the mandatory use of IFRSs)

5. Limited early use by eligible entities – this milestone would give a limited number of US issuers the option of using IFRSs for fiscal years ending on or after 15 December 2009.

6. Anticipated timing of future rule-making by the SEC – on the basis of the progress of milestones 1 – 4 and the experience gained from milestone 5, the SEC will determine in 2011 whether to require mandatory adoption of IFRSs for all US issuers. If so, the SEC will determine the date and approach for a mandatory transition to IFRSs. Potentially, the option to use IFRSs when filing could also be expanded to other issuers before 2014.

7. Potential implementation of mandatory use.

The differences remainingIn the light of these proposals for change, and the now very real prospect of all US companies transitioning to IFRSs within the next 7 years, there is aheightened awareness of differences between IFRSs and US GAAP. Our objectivein providing the brief comparison set out in the remainder of this guide is toprovide a snapshot for practitioners of the extent of the gap that needs tobe bridged.

Working towards a single set of global standards

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AbbreviationsAFS Available-for-sale (financial assets)

ARO Asset retirement obligation

CGU Cash generating unit

CTA Cumulative translation adjustment

ESOP Employee share ownership plan

FAS Financial Accounting Standard (US)

FASB Financial Accounting Standards Board (US)

FIN FASB Interpretation (US)

FVO Fair Value Option (IAS 39)

GAAP Generally Accepted Accounting Principles

GAAS Generally Accepted Auditing Standards

HTM Held-to-maturity (financial assets)

IASB International Accounting Standards Board

IAS(s) International Accounting Standard(s)

IFRS(s) International Financial Reporting Standard(s)

LIFO Last-in-first-out (inventory valuation)

OCI Other comprehensive income

R&D Research and development

SEC Securities and Exchange Commission (US)

SPE(s) Special purpose entity(ies)

End-note references indicated in superscript in the comparison table are locatedon page 69.

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Comparison of IFRSs andUS GAAPThe table on the following pages sets out some of the key differences betweenIFRSs and US GAAP, based on standards, interpretations and other accountingliterature in issue at 30 June 2008.

Since the previous edition of this guide (March 2007), the IASB has issuedsubstantially revised versions of IFRS 3 Business Combinations, IAS 1Presentation of Financial Statements and IAS 27 Consolidated and SeparateFinancial Statements. In addition, IFRS 8 Operating Segments (which replacesIAS 14 Segment Reporting) was issued in November 2006. These new andrevised Standards will not be effective until 2009. However, in order to providethe best guide to differences between IFRSs and US GAAP on an ongoing basis,the comparison table has been updated to reflect the changes to theseStandards and, in the case of IFRS 3 and IAS 27, the equivalent changes in USGAAP (i.e. FAS 141(R) Business Combinations and FAS 160. Non-controllingInterests in Consolidated Financial Statements. For a comparison of the previousversions of the relevant Standards, please refer to the previous edition of this guide.

Throughout this guide, we have also adopted the general terminology changesarising from IAS 1(2007).

This summary does not attempt to capture all of the differences that exist orthat may be material to a particular entity’s financial statements. Our focus is ondifferences that are commonly found in practice.

The significance of these differences – and others not included in this list – willvary with respect to individual entities depending on such factors as the natureof the entity’s operations, the industry in which it operates, and the accountingpolicy choices it has made. Reference to the underlying accounting standardsand any relevant national regulations is essential in understanding the specificdifferences.

The rate of progress being achieved by both the IASB and the FASB in theirconvergence agendas means that a comparison between standards can onlyreflect the position at a particular point in time. You can keep up to date onlater developments via our IAS Plus website www.iasplus.com, which sets outthe IASB agendas and timetables, as well as project summaries and updates.

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IAS/IFRS Topic IFRSs US GAAP

Comparison of IFRSs and US GAAP

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_ Generalapproach

More ‘principles-based’ standards withlimited applicationguidance.

More ‘rules-based’standards with specificapplication guidance.

IFRS 1 First-timeadoption

General principle isfull retrospectiveapplication of IFRSs inforce at the time ofadoption, unless thespecific exceptionsand exemptions inIFRS 1 permit orrequire otherwise.

No specific standard.Practice is generally fullretrospective applicationunless the transitionalprovisions in a specificstandard requireotherwise.

IFRS 1 General Specific exceptions and exemptions availed of attransition in accordance with IFRS 1 can give riseto differences between IFRSs and US GAAP inareas that would not normally give rise to suchdifferences.

IFRS 2 Scope:exclusion ofemployee shareownershipplans (ESOPs)

Equity instrumentsissued by an employerand held by an ESOPfollow the sameaccounting model asshare-based paymentawards.

Equity instruments issuedby an employer and heldby an ESOP follow adifferent accountingmodel from other share-based payment awards.

IFRS 2 Grouptransactions:share-basedpaymentawards grantedby a subsidiaryto itsemployees thatare to besettled byequityinstruments ofthe parent

Classified as liabilitiesin the individualfinancial statementsof the subsidiary.

Classified as equity in theindividual financialstatements of thesubsidiary.




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IFRS 2 Recognition ofshare-basedpayments withgraded vestingfeatures

Charge is recognisedon an acceleratedbasis to reflect thevesting as it occurs.

IFRS 2 Measurementof share-basedpayments withgraded vestingfeatures

Only allows formeasurement ofgraded vestingawards as, insubstance, multipleawards, whichrequires an entity todetermine a separategrant-date fair valuefor each separatelyvesting portion of theaward.

An accounting policychoice is permitted forawards with a servicecondition only, to either:(a) amortise the entiregrant on a straight-linebasis over the longestvesting period; or (b)recognise a charge similarto IFRSs.

Allows for a choice ofmeasurement for gradedvesting share-basedpayment awards as eithera single award (i.e. singlegrant-date fair value forthe entire award) or, insubstance, multipleawards.

IFRS 2 Capitalisationofcompensationcost

Allow for thecapitalisation ofcompensation costsubject to therequirements of otherIFRSs.

Allows for thecapitalisation ofcompensation cost subjectto the other requirementsof US GAAP, which maydiffer from IFRSs.

IFRS 2 Classificationof share-basedpaymentarrangementsin thestatement offinancialposition

Focus on whether theaward can be cashsettled.

More detailed requirementsthat may result in moreshare-based arrangementsbeing classified as liabilities.However, also providesspecific exceptions fromliability classification forthose arrangements thatinclude a cash settlementfeature.




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IFRS 2 Modificationof awardsoriginally notexpected tovest that resultsin the awardsnow beingexpected tovest.

For share-basedpayment awardsoriginally notexpected to vest(improbable) that are now expected tovest as a result of amodification,compensation cost is, at a minimum, thegrant-date fair valueof the original award.

For share-based paymentawards originally notexpected to vest(improbable) that are nowexpected to vest as aresult of a modification,compensation cost isbased on the modifiedaward’s fair value.

IFRS 2 Measurementdate for share-basedpayments tonon-employees

The date the entityobtains the goods orthe counterpartyrenders service.

Earlier of counterparty’scommitment to perform(where a sufficiently largedisincentive for non-performance exists) oractual performance.

IFRS 2 Recognition ofperformance-based awardsfor non-employees

Recognition based onthe probable outcomeof the performancecondition.

Recognise the lowestaggregate amount withinthe range of potentialvalues.

IFRS 2 Measurementof awards tonon-employees

There is a rebuttablepresumption that thefair value of goods orservices received ismore reliablymeasureable than thefair value of the equityinstruments issued.

Requires the use of themore reliably measureablecomponent.

IFRS 2 Measurementat grant date:employee sharepurchase plan

Requires therecognition ofcompensation costbased on the grant-date fair value of allshare-based paymentawards. No exceptionfor employee sharepurchase plans.

Provides an exception tothe recognition ofcompensation cost foremployee share purchaseplans that meet specifiedcriteria.




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IFRS 3(2008)

Contingentliabilities andassets

Contingent liabilitiesare recognised at fairvalue provided thattheir fair values can bemeasured reliably. Thecontingent liability issubsequentlymeasured at thehigher of the amountoriginally recognisedand the amount thatwould be recognisedin accordance withIAS 37.

Contractual contingenciesare recognised at fairvalue (without the ‘reliablymeasurable’ filter). Non-contractual contingenciesare recognised only if it ismore likely than not thatthey meet the definitionof an asset or a liability atthe acquisition date. Afterrecognition, entities retainthe initial measurementuntil new information isreceived and thenmeasure liabilities at thehigher of the acquisition-date fair value and theamount under FAS 5.

Contingent assets arenot recognised.

For assets, measure at thelower of acquisition datefair value and the bestestimate of a futuresettlement amount.

IFRS 2 Recognition ofpayroll taxes

No specific guidance,but generallyrecognised as thecompensation cost isrecognised, or at grantdate (depending onthe terms of theobligation).

Requires recognitionwhen the obligatingevent (generally theexercise of an award)occurs.

IFRS 3(2008)

Measurementof non-controllinginterests

Permits non-controlling intereststo be measured eitheras a proportionateshare of identifiablenet assets acquired orat fair value. Choicemade on anacquisition-by-acquisition basis.

Requires measurement atfair value.



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IFRS 3(2008)

Effective date Effective for businesscombinations forwhich the acquisitiondate is in annualreporting periodsbegining on or after 1 July 2009.

Effective for acquisitionsthat close in yearsbeginning after 15 December 2008.

Early adoptionpermitted but only for annual periodsbeginning on or after30 June 2007 (IAS 27(2008) to be adoptedat the same time).

Early adoption isprohibited.

IFRS 4 Rights andobligationsunderinsurancecontracts1

IFRS 4 addressesrecognition andmeasurement in onlya limited way. It is aninterim Standardpending completionof a comprehensiveproject.

Several comprehensivepronouncements andother comprehensiveindustry accountingguides have beenpublished.

IFRS 4 Derivativesembedded ininsurancecontracts1

An embeddedderivative whosecharacteristics andrisks are not closelyrelated to the hostcontract but whosevalue isinterdependent withthe value of theinsurance contractneed not beseparated out andaccounted for as a derivative.

An embedded derivativewhose characteristics andrisks are not closelyrelated to the hostcontract must beaccounted for separately.




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IFRS 5 Definition of a discontinuedoperation2

A reportable businessor geographicalsegment or majorcomponent thereof.

Continuinginvolvement notaddressed.

A component which maybe an operating segment,a reporting unit, asubsidiary, or an assetgroup (less restrictive thanthe IFRS 5 definition).

Disposing entity shouldhave no continuing cashflows representative ofsignificant continuinginvolvement.

IFRS 5 Presentation ofdiscontinuedoperations2

Post-tax income orloss to be disclosed inthe statement ofcomprehensiveincome (or separateincome statement,where applicable).

Pre-tax and post-taxincome or loss arerequired on the face ofthe income statement.

IFRS 5 Impairmentconsiderationsfor foreignentities thatwill bedisposed of

Does not permit theinclusion of thecumulative translationadjustment (CTA) inthe carrying amountof an investment in aforeign entity that isbeing evaluated forimpairment.

CTA is included in thecarrying amount of aninvestment in a foreignentity that is beingevaluated for impairment.

IFRS 8 Segment’sdisclosure ofnon-currentassetsattributable tosegments3

Include intangibleassets.

Exclude intangible assets.

IFRS 8 Disclosure ofsegmentliabilities3

Required if such ameasure if providedto the chief operatingdecision maker.

Not required.




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IFRS 8 Matrix form oforganisation –identificationof segments3

Operating segmentsare identified on thebasis of the coreprinciple of theStandard.

Segments are based onproducts and services.

IAS 1(2007)

Financialstatementpresentation4

Specific line itemsrequired.

Certain standards requirespecific presentation ofcertain items. Publicentities are subject to SECrules and regulations,which require specific lineitems.

IAS 1(2007)

Comparativeprior yearfinancialstatements4

One year comparativefinancial informationis required at aminimum5.

No specific requirementunder US GAAP topresent comparatives.Generally at least oneyear of comparativefinancial information ispresented. Public entitiesare subject to SEC rulesand regulations, whichgenerally require twoyears of comparativefinancial information forthe income statementand the statements ofequity and cash flows.

IAS 1(2007)

Departure froma standardwhencompliancewould bemisleading

Permitted in“extremely rare”circumstances toachieve a fairpresentation. Specificdisclosures arerequired.

Not directly addressed inUS GAAP literature,although an auditor mayconclude, underGenerally AcceptedAuditing Standards(GAAS) rule 203, that byapplying a certain GAAPrequirement the financialstatements are misleading,thereby allowing for an‘override’.




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IAS 1(2007)

Classificationof liabilities onrefinancing4

Non-current ifrefinancing iscompleted before theend of the reportingperiod.

Non-current if refinancingis completed before dateof issuance of thefinancial statements.

IAS 1(2007)

Classificationof liabilities dueon demanddue to violationof debtcovenant4

Non-current if thelender has granted a12-month waiverbefore the end of thereporting period.

Non-current if the lenderhas granted a waiver fora period greater than oneyear (or operating cycle,if longer) before theissuance of the financialstatements or when it isprobable that theviolation will be correctedwithin the grace period,if any, prescribed in thelong-term debtagreement.

IAS 1(2007)

Extraordinaryitems4

Prohibited. Permitted.

IAS 2 Measurementof carryingamount

Lower of cost and netrealisable value.

Lower of cost and market(i.e. current replacementcost).

IAS 2 Use of costformulas

The same formulamust be applied to allinventories that havea similar nature anduse to the entity.

The same formula doesnot need to be applied toall inventories that have asimilar nature and use tothe entity.

IAS 2 Assetretirementobligations(AROs) arisingduring theproduction ofinventory

An ARO that isincurred as aconsequence ofhaving used therelevant asset duringa period to produceinventory isaccounted for as acost of the inventory.

ARO is added to thecarrying amount of theproperty, plant, andequipment used toproduce the inventory.




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IAS 2 Method fordetermininginventory cost

LIFO is prohibited. LIFO is permitted.

IAS 2 Reversal ofwrite-downs

Required, if certaincriteria are met.

Prohibited.

IAS 2 Measuringinventory atnet realisablevalue even ifabove cost

Permitted only forproducers’ inventoriesof agricultural andforest products andmineral ores and forbroker-dealers’inventories ofcommodities.

Permitted, but based on aspecific product (preciousmetals).

IAS 7 Classificationof interestreceived andpaid in thestatement ofcash flows

Interest received –may be classified asoperating orinvesting.

Interest paid – may beclassified as operatingor financing.

Must be classified asoperating.

IAS 7 Inclusion ofbank overdraftsin ‘cash’ forthe purpose ofpresentation ofthe statementof cash flows

Included if they forman integral part of anentity’s cashmanagement.

Excluded.

IAS 7 Reporting cashflows fromoperatingactivities

Use of direct orindirect method isallowed. Net incomemust be reconciled tonet cash flows fromoperating activitiesonly under theindirect method.

Use of direct or indirectmethod is allowed. Underboth methods, netincome must bereconciled to net cashflows from operatingactivities.




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IAS 7 Disclosure ofcash flowsrelating todiscontinuedoperations

Requires disclosure ofcash flows arisingfrom discontinuedoperations undereach category eitherin the statement ofcash flows or in thenotes.

Does not require separatedisclosure. If an entityelects to report cashflows from discontinuedoperations, each categorymust be reportedseparately.

IAS 7 Presentation ofcash flow pershare

Does not explicitlyprohibit disclosure ofcash flow per share.

Prohibited.

IAS 7 Cash flowsfrom hedgingactivities

Requires classificationin the same categoryas the cash flowsfrom the item beinghedged.

Allows classification ofcash flows from hedgingactivities in the samecategory as the cashflows from the hedgeditem provided that certainrequirements are met andthat the accounting policyis disclosed.

IAS 7 Presentation inthe statementof cash flowsof the taxdeduction inexcess ofcompensationcost recognisedunder IFRS 2

Does not includespecific guidance.

Requires presentation (asa separate line item) inthe financing section ofthe statement of cashflows (with an equal andoffsetting amountdisplayed in the operatingsection).

IAS 8 Corrections oferrors

Retrospectiverestatement isrequired, unlessimpracticable.

Retrospective restatementis required; noimpracticabilityexemption available.

IAS 8 Disclosures:newpronounce-ments in issuebut not yeteffective

All entities arerequired to disclosespecified informationin relation to newIFRSs in issue but notyet effective.

Only SEC registrants arerequired to disclose theeffect of newpronouncements in issuebut not yet effective.




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IAS 11 Method ofaccounting forconstructioncontracts whenthe percentageof completioncannot bedetermined

Cost recoverymethod.

Completed contractmethod.

IAS 12 Classificationof deferred taxassets andliabilities6

Always non-current. Classification is splitbetween current andnon-current componentsbased on theclassification of theunderlying asset orliability, or on theexpected reversal of itemsnot related to an asset orliability.

IAS 12 Recognition ofdeferred taxassets6

Recognised to theextent that theirrecovery is consideredprobable.

Recognised in full andthen reduced by avaluation allowance forthe non-probable portion.

IAS 12 Tax rate formeasuringdeferred taxassets andliabilities6

Use enacted or’substantivelyenacted’ tax rates.7

Use enacted tax rates.

IAS 12 Uncertain taxpositions6

Accounting for taxconsequences reflectsmanagement’sexpectations.

Prescribes a methodologythat is based on theprobability of a taxposition being sustained.

IAS 12 Taxconsequencesof intragroupsales6

Tax expense fromintragroup sales isrecognised anddeferred taxes arerecognised for thechange in tax basisusing the buyer’s taxrate.

Tax expense fromintragroup sales isdeferred until the relatedasset is sold or otherwisedisposed of, and nodeferred taxes arerecognised for thepurchaser’s change in taxbasis.




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IAS 12 Deferred taxeson foreignnon-monetaryassets/liabilitiesremeasuredfrom localcurrency tofunctionalcurrency6

Deferred tax isrecognised on theremeasurement fromlocal currency tofunctional currency.

No deferred tax isrecognised on theremeasurement fromlocal currency tofunctional currency.

IAS 12 ‘Initialrecognition’exemption6

Deferred tax notrecognised for taxabletemporary differencesthat arise from theinitial recognition ofan asset or liability ina transaction that is(a) not a businesscombination, and (b)does not affectaccounting profit ortaxable profit. Nor arechanges in thisunrecognised deferredtax asset or liabilitysubsequently recognised.

No similar exemption.

IAS 12 Otherexceptions tothe basicprinciple thatdeferred tax isrecognised forall temporarydifferences6

Does not have all theexemptionscomparable to thosein US GAAP.

US GAAP has threeadditional exemptionsfrom the requirement torecognise deferred taxthat differ from IFRSs.

IAS 12 Calculation oftax benefitsrelated toshare-basedpayments6

Deferred tax iscomputed on thebasis of the taxdeduction for theshare-based paymentunder the applicabletax law (i.e. intrinsicvalue).

Deferred tax is computedon the GAAP expenserecognised and trued upor down at realisation ofthe tax benefit/deficit.



IAS 12 Subsequentchanges indeferred taxesthat wereoriginallyrecognisedoutside profitor loss(backwardtracing)6

The tax effects ofitems recognisedoutside profit or lossduring the currentyear are alsorecognised outsideprofit or loss. Adeferred tax itemoriginally recognisedoutside profit or lossmay change either asa result of a change inassessment as to therecoverability ofdeferred tax assets oras a result of changesin tax rates, laws, orother measurementattributes. Consistentwith the initialtreatment, IAS 12requires that theresulting change indeferred taxes also berecognised outsideprofit or loss.

Backward tracing isgenerally prohibited.Subsequent changes areallocated to continuingoperations.

IAS 12 Reconciliationof actual andexpected taxrates6

Required for allentities applyingIFRSs; expected taxexpense is computedby applying theapplicable tax rate(s)to accounting profit,disclosing also thebasis on which anyapplicable tax rate iscomputed.

Required for publicentities only; expected taxexpense is computed byapplying the domesticfederal statutory rates topre-tax income fromcontinuing operations.

Non-public entities mustdisclose the nature of thereconciling items but notthe amounts.


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IAS 12 Recognition ofdeferred tax onundistributedearnings frominvestments6

Deferred tax isrecognised on theundistributedearnings of any formof investee unless (1)the investor is able tocontrol the timing ofthe reversal of thetemporary differenceand (2) it is probablethat the temporarydifference will notreverse in theforeseeable future.

Deferred tax is recognisedon all undistributedearnings, arising after1992, of domesticsubsidiaries and jointventures. No deferred taxis recognised onundistributed earnings offoreign subsidiaries andcorporate joint ventures ifthe duration of suchinvestment is consideredpermanent.

IAS 12 Measurementof deferredtax onundistributedearnings of asubsidiary6

Must use rateapplicable toundistributed profits.

Generally, US GAAPrequires the use of thehigher of the distributedand the undistributedrates.

IAS 16 Basis ofmeasurementfor property,plant andequipment

May use eitherrevalued amount orhistorical cost.Revalued amount isfair value at date ofrevaluation lesssubsequentaccumulateddepreciation andimpairment losses.

At historical cost.Revaluations prohibited.

IAS 16 Majorinspection oroverhaul costs

Generally accountedfor as part of the costof an asset.

Either expensed asincurred, deferred andamortised over the perioduntil the next overhaul, oraccounted for as part ofthe cost of an asset.



IAS 16 Measuring theresidual valueof property,plant andequipment

Current net sellingprice assuming theasset were already ofthe age and in thecondition expected atthe end of its usefullife.

Residual value may beadjusted upwards ordownwards.

Generally the discountedpresent value of expectedproceeds on futuredisposal.

Residual value may onlybe adjusted downwards.

IAS 16 Depreciation Components of anasset with differingpatterns of benefitsmust be depreciatedseparately.

Component accounting ispermitted, but notrequired.

IAS 17 Scope8 Applies broadly toassets with certainexceptions.

Only applies to leasesinvolving property, plantand equipment.


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IAS 17 Leaseclassification8

The classification of alease depends on thesubstance of thetransaction. Specificindicators andexamples areprovided.

The classification of alease depends on thelease meeting certainspecified criteria.

IAS 17 Sales-type leaseinvolving realestate8

No specific criteria areprovided.

Provides specific criteria.

IAS 17 Leases of landand buildings8

Land and buildingselements areconsidered separatelyunless the landelement is notmaterial.

Land and buildingelements are generallyaccounted for as a singleunit, unless landrepresents more than25% of the total fairvalue of the leasedproperty.



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IAS 17 Present valueof minimumleasepayments8

Generally would usethe rate implicit in thelease to discountminimum leasepayments.

Lessors must use implicitrate to discount minimumlease payments. Lesseesgenerally would use theincremental borrowingrate to discount minimumlease payments unless theimplicit rate is known andis the lower rate.

IAS 17 Leveragedleases8

No special accountingprovided forleveraged leases.

Permits specialaccounting for leveragedleases if specific criteriaare met.

IAS 17 Recognition ofa gain or losson a sale andleasebacktransaction8

If the leaseback is afinance lease, deferand amortise the gainor loss over the leaseterm.

If the leaseback is anoperating lease,recognition of thegain or loss dependson whether thetransaction isestablished at, below,or above fair value.

Depends on the extent ofthe seller’s retainedinterest in the asset.

IAS 17 Sale andleasebacktransactioninvolving realestate8

There is no differencein accountingbetween sale andleaseback transactionsinvolving real estateand non-real estateassets.

Specific requirementsexist for sale andleaseback transactionsinvolving real estate.



IAS 18 Revenuerecognitionguidance9

General principles areprovided to determinewhether revenueshould be recognised.

More specific guidance isprovided to determinewhether revenue shouldbe recognised. In addition,public entities mustfollow more detailedguidance provided by theSEC.

IAS 18 Customerloyaltyprogrammes10

Transactions that resultin award credits areaccounted for asmultiple-elementrevenue transactionsand the fair value ofconsideration receivedis allocated betweenthe goods/servicessupplied and theaward credits granted,by reference to fairvalues.

Several methods may beacceptable.


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IAS 19 Multi-employerplan that is adefined benefitplan11

Accounted for as adefined benefit planif the requiredinformation isavailable. Otherwiseas a definedcontribution plan.

Accounted for as adefined contribution plan.

IAS 19 Classification of groupadministrationplans (“multiple-employerplans” in theUS)

May be classified andaccounted for aseither a definedbenefit plan or adefined contributionplan, depending onthe economicsubstance of theplan’s terms.

Classified and accountedfor as a defined benefitplan.



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IAS 19 Defined benefitplans thatshare risksbetweenvarious entitiesunder commoncontrol11

Classified andaccounted for as adefined benefit plan,but amount recordedin individual groupentities’ financialstatements may varydepending onwhether there is acontractualagreement or policythat states thecharges to eachindividual groupentity.

Accounted for as adefined benefit plan inthe consolidated financialstatements of the group.Accounted for in theindividual group entities’financial statements aseither a definedcontribution or a definedbenefit plan, dependingon the circumstances.

IAS 19 Carryingamount of netdefined benefitliability (orasset) in thestatement offinancialposition11

Defined benefitobligation less fairvalue of plan assets,and reduced orincreased by netunrecognisedactuarial gains andlosses and past servicecost.

Defined benefitobligation less fair valueof plan assets. Allactuarial gains and lossesand past service cost areeither recognised in profitor loss or deferred inequity (via othercomprehensive income)(see below).

IAS 19 Recognition ofactuarial gainsand lossesoutside profitor loss11

Accounting policychoice available torecognise all actuarialgains and losses inother comprehensiveincome (OCI),provided that they arerecognised in full inthe period in whichthey occur. If this treatment ifadopted, actuarialgains and losses arenot subsequentlyreclassified to profit or loss.

All actuarial gains andlosses are recognised inprofit or loss eventually – although ‘deferral’ inequity of gains and lossesthat do not exceedprescribed limits ispermitted. Such gainsand losses are initiallyreflected in OCI, but aresubsequently amortisedto profit or loss.



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IAS 19 Recognition ofactuarial gainsand losses inprofit or loss11

Where an entity electsto recognise actuarialgains and losses inprofit or loss, a widechoice is available as tothe pattern ofrecognition. Theminimum requirementis to only recogniseactuarial gains andlosses that exceed a pre-determined‘corridor’ over aspecified period(generally the averageremaining working livesof the employeesparticipating in theplan). Alternatively, theStandard permits anysystematic method forrecognition that resultsin faster recognition ofactuarial gains andlosses, provided thatthe policy is applied toboth gains and lossesand the basis is appliedconsistently fromperiod to period.

Similar to IFRSs.However, when applyingthe minimumrequirement (i.e. the‘corridor’ approach),actuarial gains and lossesare recognised over theaverage remaining serviceperiod. If all, or almost all,of a plan’s participantsare inactive, suchamounts are recognisedover the averageremaining life expectancyof the inactiveparticipants rather thanthe average remainingservice period.

The ‘corridor’ limits underUS GAAP differ fromthose used under IFRSs.

IAS 19 Recognition ofpast servicecost in netperiodic benefitcost11

Recognisedimmediately if relatedto vested benefits;otherwise, recognisedover the vestingperiod.

Amortised over theremaining service period(or life expectancy if all,or almost all, theparticipants are inactive).




25

IAS 19 Limitation onrecognition ofpost-employmentbenefit assets11

Asset recognisedcannot exceed the nettotal of unrecognisedpast service cost andactuarial losses plusthe present value ofbenefits availablefrom refunds orreduction of futurecontributions to theplan.

No limitation on theamount that can berecognised.

IAS 19 Accounting forinsurancepolicies11

Insurance policies areaccounted for as planassets if specificconditions are met.

Annuity contracts andinsurance policies aregenerally excluded fromplan assets, and thebenefits covered by thesecontracts are excludedfrom the benefitobligation (with someexceptions).

IAS 19 Measurementfrequency11

No explicitrequirement as tohow frequently thedefined benefitobligation and theplan assets aremeasured.

Measurement is requiredto be performed at leastonce annually or moreoften when certain eventsoccur.

IAS 19 Measurementof the expectedrate of returnon plan assets11

Based on the fairvalue of plan assets.

Based on the market-related value of the planassets, which is either thefair value or a calculatedvalue which incorporatesasset-related gains andlosses over a period of nomore than five years.




26

IAS 19 Minimumfundingrequirementnot available asrefunds orreductions infuturecontributions11

To the extent that thecontributions payablewill not be availableafter they are paidinto the plan, theentity recognises a liability when theobligation arises.

Does not requirerecognition of a liabilityfor minimum fundingrequirements.

IAS 19 Terminationbenefits11

No distinctionbetween special andother benefits.Recognise terminationbenefits when theemployer isdemonstrablycommitted to pay.

Recognise special (one-time) termination benefitsgenerally when they arecommunicated toemployees unlessemployees will renderservice beyond a‘minimum retentionperiod’, in which case theliability is recognisedratably over the futureservice period. Recognisecontractual terminationbenefits when it isprobable that employeeswill be entitled and theamount can bereasonably estimated.Recognise voluntarytermination benefitswhen the employeeaccepts the offer.




27

IAS 19 Definition of‘curtailment’11

A curtailment ariseswhen an entity iseither demonstrablycommitted to makinga significant reductionin the number ofemployees covered bya plan or amends theterms of a definedbenefit plan such thata significant elementof future service bycurrent employeeswill no longer qualifyfor benefits or willqualify only forreduced benefits.

A curtailment is an eventthat significantly reducesthe expected years offuture service of presentemployees or eliminatesfor a significant numberof employees the accrualof defined benefits forsome or all of their futureservices.

IAS 19 Timing ofrecognition ofgains/losseson acurtailment11

Both curtailmentgains and losses arerecognised when theentity is demonstrablycommitted and acurtailment has beenannounced.

A curtailment loss isrecognised when it isprobable that acurtailment will occur andthe effects are reasonablyestimable. A curtailmentgain is recognised whenthe relevant employeesare terminated or theplan suspension oramendment is adopted,which could occur afterthe entity is demonstrablycommitted and acurtailment is announced.




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IAS 19 Measurementof gains/losseson acurtailment11

A curtailment gain orloss comprises (a) thechange in the presentvalue of the definedbenefit obligation, (b)any resulting changein fair value of theplan assets, and (c) apro-rata share of anyrelated actuarial gainsand losses,unrecognisedtransition amount,and past service costthat had notpreviously beenrecognised.

Similar to IFRSs. However,some detailed differencesmay arise in respect ofthe amounts ofunamortised actuarialgains and losses,unamortised transitionamount and past servicecost that are included inthe curtailment gain orloss.

IAS 21 Determinationof thefunctionalcurrency

Includes primary andsecondary factors toconsider indetermining thefunctional currency.

Does not have a hierarchyof factors to consider indetermining thefunctional currency.Has detailed guidance onthe determination.

IAS 21 Remeasuringforeigncurrencybalances intothe functionalcurrency –available-for-sale (AFS) debtsecurities

Foreign currencygains or losses on AFSdebt securities arereported in currentearnings.

Foreign currency gains orlosses on AFS debtsecurities are reported inother comprehensiveincome (OCI).




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IAS 21 Change infunctionalcurrency

Prospectively from thedate of the change.Bases in non-monetaryassets and liabilitiesare the translatedamounts at currentexchange rates at thedate of the change.

Accounting treatment andbases in non-monetaryassets and liabilitiesdepend on whether thefunctional currency ischanging from a foreigncurrency to the reportingcurrency (prospectivetreatment, similar to IFRSs)or vice versa(retrospective).

IAS 23 Borrowingcosts related toassets that takea substantialtime tocomplete

Prior to the adoptionof IAS 23(2007),capitalisation is anavailable accountingpolicy choice.

Following theadoption ofIAS 23(2007)(accounting periodsbeginning 1 January2009 with earlieradoption permitted),capitalisation ismandatory.

Capitalisation ismandatory.




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IAS 23 Types ofborrowingcosts eligibleforcapitalisation

Includes interest,certain ancillary costs,and exchangedifferences that areregarded as anadjustment of interest.

Changes made as aresult ofImprovements to IFRSs(issued May 2008 andeffective from 1January 2009) replacethe detaileddescription with areference to theguidance in IAS 39 oneffective interest rate,to remove potentialinconsistencies.

Generally only includesinterest.

IAS 23 Income ontemporaryinvestment offundsborrowed forconstruction ofan asset

Reduces borrowingcosts eligible forcapitalisation.

Does not reduceborrowing costs eligiblefor capitalisation exceptin very limitedcircumstances.

IAS 27(2008)

Basis forconsolidation12

Control (look togovernance and risksand benefits).

Approach depends on thetype of entity. For votinginterests, entitiesgenerally look to majorityvoting rights. For variableinterest entities, look to arisks and rewards model.

IAS 27(2008)

Considerationof potentialvoting rights12

An entity mustconsider potentialvoting rights that arecurrently exercisablewhen determiningwhether control ispresent.

An entity would generallynot consider potentialvoting rights whendetermining whethercontrol is present.




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IAS 27(2008)

Special purposeentities12

Consolidate if‘controlled’.Generally follow thesame principles as forcommercial entities indetermining whetheror not control exists.

If SPE is not a‘qualifyingSPE’ (QSPE), thenassessed whether withinthe scope of risks andrewards model forvariable interest entities.Otherwise, applyguidance based onmajority voting interests.QSPEs are notconsolidated.

IAS 27(2008)

Exemptionfromrequirement toprepareconsolidatedfinancialstatements

Permits a parent toelect not to prepareconsolidated financialstatements if specificconditions are met.

No exemption is availablefrom the requirement toprepare consolidatedfinancial statements.

IAS 27(2008)

Differentreporting dates

Reporting datedifference cannot bemore than threemonths. Must adjustfor any significantinterveningtransactions.

Reporting date differencegenerally should not bemore than three months.Must disclose effects ofany significantintervening transactions.May adjust for suchtransactions.

IAS 27(2008)

Consolidatedaccountingpolicies

Must conformpolicies.

SEC staff does not requirepolicies to be conformedprovided that policies arein accordance with USGAAP.




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IAS 28 Equity-methodinvestmentsheld for sale

Investor recordsinvestment at thelower of its (1) fairvalue less cost to sellor (2) carryingamount as of the datethe investment isclassified as held forsale.

Investor applies equitymethod of accountinguntil significant influenceis lost.

IAS 28 Investor andassociate havedifferentaccountingpolicies

Must conformaccounting policies.


IAS 28 Investor andassociate havedifferentreporting dates

Reporting datedifference cannot bemore than threemonths. Must adjustfor any significantinterveningtransactions.

Reporting date differencegenerally should not bemore than three months.Must disclose effects ofany significantintervening transactions.May adjust for suchtransactions.

IAS 28 Impairments ofequity-methodinvestments

Investor must assesswhether animpairment indicatorexists on the basis ofthe criteria in IAS 39.If an investordetermines that animpairment of anequity-methodinvestment isrequired, it shouldmeasure theimpairment inaccordance with IAS 36 as the excessof the investment’scarrying amount overthe recoverableamount.

Investor must determinewhether a decrease in thevalue of an equity-method investment isother than temporary.If the decrease in value isother than temporary, theinvestor must measurethe impairment as theexcess of the investment’scarrying amount over thefair value.




33

IAS 28 Losses in excessof an investor’sinterest

Investor shouldgenerally discontinueloss recognition, evenif the associate’sfuture profitabilityappears imminentand assured (as longas the investor hasnot incurred legal orconstructiveobligations or madepayments on behalfof the associate).

Investor should continueto recognise losses whenthe imminent return toprofitable operations ofthe investee appears tobe assured (even if theinvestor has not (1)guaranteed obligations ofthe investee or (2)otherwise committed toprovide further financialsupport to the investee).

IAS 29 Translations offoreign entitieswhosefunctionalcurrency is thecurrency of ahighlyinflationaryeconomy

Adjust using ageneral price levelindex beforetranslating.

Adjust the financialstatements as if thereporting currency of theparent was the entity’sfunctional currency.

IAS 31 Types of jointventures13

Three broad types ofventures: (1) jointlycontrolled operations,(2) jointly controlledassets, and (3) jointlycontrolled entities.

Refers to jointlycontrolled entities.Guidance is provided forother types ofarrangements (such ascollaborativearrangements).

IAS 31 Accounting forjointlycontrolledentities13

May use either theequity method ofaccounting orproportionateconsolidation.

Generally use the equitymethod of accounting(except in theconstruction andextractive industries, in which proportionateconsolidation ispermitted).



IAS 31 Gains on non-monetarycontributions

The venturer cannotrecognise a gain if (1)the risks and rewardsof ownership of thecontributed assetshave not passed tothe joint venture, (2)the gain cannot bemeasured reliably, or(3) the transactionlacks commercialsubstance, unlessmonetary or non-monetary assets arereceived.

No guidance if anactual or impliedcommitment toreinvest exists.Treatment should bebased on thesubstance of thetransaction.

The venturer mayrecognise a gain if cash ornear-cash consideration isreceived.

IAS 31 Venturer andjointlycontrolledentity havedifferentaccountingpolicies

Must conformaccounting policies.



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A gain is deferred if anactual or impliedcommitment to reinvestexists.

IAS 32 Offsettingfinancial assetsand financialliabilities in thestatement offinancialposition –elective nature

Entities are requiredto offset financialassets and financialliabilities in thestatement of financialposition when theoffset criteria are met.

Entities are not requiredto offset financial assetsand financial liabilities inthe statement of financialposition even if thecriteria for offset are met.



35


IAS 32 Offsettingcertain assetsand liabilities inthe statementof financialposition –intent to settlenet

To qualify foroffsetting, there mustbe intent to settle ona net basis or torealise the asset andsettle the liabilitysimultaneously. Thereis no exception forassets and liabilitiessubject to masternetting agreements.

An entity may elect tooffset fair value amountsfor certain assets andliabilities subject tomaster nettingagreements even in theabsence of an intentionto settle net.

IAS 32 Offsettingamounts duefrom and owedto twodifferentparties

Required when andonly when a legallyenforceable right andthe intention to settlenet exist.

Prohibited.

IAS 32 Classification ofconvertibledebtinstrumentswith conversionoption fixedamount of cashfor fixednumber ofshares (a‘conventional’instrument) –issueraccounting

Split the instrumentinto its liability andequity componentsand measure theliability at fair valuewith the equitycomponentrepresenting theresidual.

Equity component willarise only for instrumentswith a beneficialconversion feature thatexists at the inception ofthe instrument.14



IAS 32 Convertibledebt – multiplesettlementalternatives(shares or cash)uponconversion –issueraccounting

Separation of theconversion option isrequired in allcircumstances. Theconversion optiongenerally is precludedfrom being classifiedin equity because itviolates the fixed-for-fixed principle andinstead it is accountedfor as a derivative.

Separation of theconversion option as anembedded derivative isrequired unless the issuercannot be forced to cashsettle.14

IAS 32 Puttable orcontingentlyredeemableequity securities– issueraccounting

Such instruments areliabilities. There is nomezzanine equityclassification underIFRSs.15

Typically, such instrumentsare classified in equity or,by SEC registrants, inmezzanine equity.


36

IAS 32 Obligations toissue a variablenumber ofshares – issueraccounting

Accounted for asliabilities.

Accounted for as equity,unless they meet certainconditions.

IAS 32 Derivativesindexed to,and potentiallynet cash, or netshare settled in,the entity’s ownshares at thechoice of theholder (exceptfor written putsand forwardpurchasecontracts thatmay be grossphysicallysettled) – issueraccounting

Accounted for asassets or liabilities atfair value throughprofit or loss.

If the issuer has a choiceof settlement, thenclassified in equity unlessthe issuer could be forcedto settle in cash.



37


IAS 32 Written putoptions on theentity’s ownshares – issueraccounting

Accounted for at thepresent value of theredemption amount(exercise price) unlessthey can only be netsettled.

Accounted for at fairvalue.

IAS 32 Forwardpurchasecontracts onthe entity’sown equity –issueraccounting

If gross physical sharesettlement is asettlement alternative,then subsequentmeasurement is at thepresent value of theredemption amount(even if net share ornet cash settlement isan alternative).

If net share or net cashsettlement is a settlementalternative, thensubsequent measurementis fair value (even if grossphysical share settlementis an alternative).

IAS 32 Derivativesindexed to, andpotentiallysettled in, theshares of asubsidiary ofthe issuer –issueraccounting

Except for written putoptions and forwardrepurchase contracts,derivatives that canbe settled only byphysical delivery of afixed number ofshares in a subsidiaryin exchange for afixed amount of cashor another financialasset are accountedfor in equity in theconsolidated financialstatements.

Accounted for asderivatives, if they meetthe definition of aderivative in US GAAP.They do not qualify forthe scope exception forcontracts indexed to, andclassified in own equity.




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IAS 33 Application ofthe two-classmethod toparticipatingsecurities

Method applies onlyto participatingsecurities that areequity instruments.Not required forparticipating debtinstruments (e.g.participatingconvertible debt).

Method applies toparticipating securitiesirrespective of whetherthey are debt or equityinstruments.

IAS 33 Calculation ofyear-to-date(YTD) dilutedEPS16

Apply the treasurystock method on aYTD basis (i.e. do notaverage the individualinterim periodcalculations).

Average the individualinterim periodincremental shares.

IAS 33 Contracts thatmay be settledin ordinaryshares or incash, at issuer’soption16

Assume always thatthe contracts will besettled in shares.

Include based on arebuttable presumptionthat the contracts will besettled in shares (if moredilutive). The presumptionthat the contract will besettled in shares may beovercome if pastexperience or a statedpolicy provides areasonable basis tobelieve that the contractwill be paid partially orwholly in cash.

IAS 33 Disclosures forearnings pershare

Basic and dilutedincome fromcontinuing operationsper share and netprofit or loss pershare.

Basic and diluted incomefrom continuingoperations, discontinuedoperations, extraordinaryitems, cumulative effectof a change in accountingpolicy, and net profit orloss per share.




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IAS 34 Interimreporting –revenue andexpenserecognition

Interim period is adiscrete reportingperiod (with certainexceptions).

Interim period is anintegral part of the fullyear (with certainexceptions).

IAS 34 Interim-perioddisclosures forchanges inaccountingpolicy

Disclose thedifferences betweenaccounting policies inthe current interimperiod compared withthe most recentannual financialstatements. Require,at a minimum, adescription of thenature and effect ofthe change.

Disclose any changes inaccounting policies in thecurrent interim periodcompared with (1) thecomparable interimperiod of the prior annualperiod, (2) the precedinginterim periods in thecurrent annual period,and (3) the prior annualreport.

IAS 36 Level at whichimpairmentanalysis isperformed

Cash-generating unit(CGU).

Asset group.

IAS 36 Level ofimpairmenttesting forgoodwill

CGU – the lowestlevel at whichgoodwill is monitoredfor internalmanagementpurposes. This levelcannot be larger thanan operatingsegment.

Reporting unit – either anoperating segment or onelevel below.




40

IAS 36 Calculatingimpairment ofgoodwill

One-step approach:compare recoverableamount of a CGU(higher of (a) fairvalue less costs to selland (b) value-in-use)to carrying amount.

Two-step approach:

1. Compare fair value ofthe reporting unit withits carrying amountincluding goodwill.If fair value is greaterthan carrying amount,no impairment (skipstep 2).

2. Compare ‘implied fairvalue’ of goodwill(which is determinedbased on ahypothetical purchaseprice allocation) withits carrying amount,recording animpairment loss forthe difference.

IAS 36 Calculatingimpairment ofindefinite-lifeintangibleassets

Calculated bycomparingrecoverable amount(higher of (a) fairvalue less costs to selland (b) value-in-use)to carrying amount.

Calculated by comparingfair value to carryingamount.

IAS 36 Recording theimpairment

Impairment chargesare accumulated in acontra-account to theasset.

Impairment chargesshould be recordeddirectly against the asset,which will create a newcost basis for the asset.




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IAS 36 Subsequentreversal ofimpairmentloss

Required for allassets, other thangoodwill, if certaincriteria are met.

Prohibited.

IAS 37 Recognition ofprovisions

Threshold forrecognition is‘possible’ (defined as‘more likely than not’)

Also uses a ‘probable’threshold – but this isinterpreted as a higherthreshold than ‘morelikely than not’.

IAS 37 Measurementof provisions –range ofestimates

Best estimate to settlethe obligation, whichgenerally involves theexpected valuemethod.

Most probable outcometo settle the obligation. If no one item is morelikely than another, usethe low end of the rangeof possible amounts.

IAS 37 Measurementof provisions –discounting

Discounting isrequired.

Unless specificallypermitted by anaccounting standard,discounting is onlyallowed where the timingand amount of the futurecash flows are fixed anddeterminable.

IAS 37 Disclosures thatmay prejudiceseriously theposition of theentity in adispute

“In extremely rarecases” amounts anddetails need not bedisclosed, butdisclosure is requiredof the general natureof the dispute andwhy the details havenot been disclosed.

Disclosure is required.




42

IAS 37 Initialmeasurementof decom-missioningprovisions

Asset retirementobligation (ARO)liability measured asthe best estimate ofthe expenditure tosettle the obligationor to transfer theobligation to a thirdparty at the end ofthe reporting period.

ARO liability measured atfair value in the period itis incurred if a reasonableestimate of fair value canbe made.

IAS 37 Discountingdecom-missioningprovisions

Use the current, risk-adjusted rate todiscount the provisionwhen initiallyrecognised. Adjustthe rate at eachreporting date.

Use the current, creditadjusted risk-free rate todiscount the provisionwhen initially recognised.Do not adjust the rate infuture periods.

IAS 37 Recognition ofrestructuringprovisions

Recognise if adetailed formal plan isannounced orimplementation ofsuch a plan hasstarted.

Recognise when atransaction or eventoccurs that leaves anentity little or nodiscretion to avoid thefuture transfer or use ofassets to settle theliability. An exit ordisposal plan, by itself,does not create a presentobligation to others forcosts expected to beincurred under the plan.

IAS 38 Developmentcosts

Capitalise if specifiedcriteria are met.

Expense as incurred(except for certainwebsite developmentcosts and certain costsassociated withdeveloping internal usesoftware).




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IAS 38 Revaluation ofintangibleassets

Permitted only if theintangible asset istraded in an activemarket.

Prohibited.

IAS 39 Definition ofderivative:notionalamount orpaymentprovisioncharacteristic

No requirement tohave a notionalamount or paymentprovision, but inpractice one of thesecharacteristics usuallyexists.

A financial instrument orother contract must haveone or more notionalamounts, paymentprovisions, or both to beconsidered a derivative.

IAS 39 Definition ofderivative: netsettlementversus’settlement at afuture date’characteristic

No net settlementcharacteristic orrequirement;however, contracts topurchase, sell, or usenon-financial itemsare only accountedfor as derivatives ifthey can be settlednet in cash or withanother financialinstrument. Settlingcontracts net isbroadly defined and isnot restricted to theability to net-settle incash.

IFRSs include a’settlement at a futuredate’ characteristic inthe definition.

A financial instrument orother contract mustrequire or permit netsettlement, be readilysettled net by a meansoutside the contract, orprovide for delivery of anasset that puts therecipient in a position notsubstantially differentfrom net settlement.




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IAS 39 Derivativescopeexception:normalpurchases andnormal salesversusown–usecontracts

Required.

No documentation isrequired.

Written options arenot eligible if the non-financial item isreadily convertible tocash.

Embedded derivativesdo not disqualify anentity from applyingthe own-useexception.

Elective.

Must havedocumentation.

Certain written optionsare eligible.

Embedded derivativesthat are not clearly- andclosely-related disqualifyan entity from applyingthe normal purchases andnormal sales exception.

IAS 39 Derivativescopeexception:certaincontracts nottraded on anexchange –underlying isbased on aclimatic orgeologicalvariable or onsome otherphysicalvariable

When such contractsdo not meet thedefinition of aninsurance contract(i.e. they are notwithin the scope ofIFRS 4 InsuranceContracts), they arewithin the scope ofIAS 39 and areaccounted for asderivatives.

Outside scope.




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IAS 39 Derivativescopeexception:certaincontracts nottraded on anexchange –underlying isbased onspecifiedvolumes ofsales or servicerevenues

Contracts with anunderlying based onspecified volumes ofsales or servicerevenues may meetthe definition of aderivative; however,royalty agreementsbased on the volumeof sales or servicerevenues areaccounted for underIAS 18 Revenue andwould not beaccounted for asderivatives.

Outside scope.

IAS 39 Derivativescopeexception:contractswhoseunderlying is anon-marketableequity security

These are accountedfor as derivativesunless the entitycannot reliablymeasure theinstrument’s fairvalue.

These usually do notmeet the net settlementcharacteristic in thedefinition of a derivative.




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IAS 39 Embeddedderivative:clearly- andclosely-related

Similar to US GAAP,one of the conditionsfor separating anembedded derivativeis that its economiccharacteristics andrisks are not closely-related to those ofthe host contract.However, there aredetailed applicationdifferences related toitems such as (1) puts,calls and prepaymentoptions, (2)embedded derivativesin purchase, sale andservice contracts, (3)insurance contracts,(4) caps and floors oninterest rates, and (5)foreign currencyfeatures.

A third condition forseparating an embeddedderivative is that itseconomic characteristicsand risks are not clearly-and closely-related tothose of the hostcontract.




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IAS 39 Reassessmentof embeddedderivativestatus

Entities are notpermitted to reassesswhether anembedded derivativeis required to beseparated unlessthere is a change inthe terms thatsignificantly modifiesthe cash flows.

Typically, entities reassesswhether an embeddedfeature is required to beseparated at least at theend of each reportingperiod.

IAS 39 Presentation ofembeddedderivatives(combined withthe host orseparate)

IAS 39 explicitly statesthat it does notaddress whether anembedded derivativeshould be presentedseparately in thefinancial statements.

US GAAP does notexplicitly addresspresentation ofembedded derivatives.However, SEC staffguidance indicates“although bifurcated formeasurement purposes,embedded derivativesshould be presented on acombined basis with thehost contract, except incircumstances where theembedded derivative is aliability and the hostcontract is equity”.

IAS 39 Option todesignate anyfinancial assetor financialliability to bemeasured atfair valuethrough profitor loss

Option is allowed ifone of three criteriais met.

Option allowed at initialrecognition. Criteria inIFRSs do not apply.




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IAS 39 Scope of itemseligible foroption todesignate anyfinancial assetor financialliability to bemeasured atfair valuethrough profitor loss (the fairvalue option –FVO)

Prohibits election ofthe FVO for certaincontracts, such asinsurance contractsand warranties thatare not financialinstruments;precludes applicationto an investment inan equity instrumentthat does not have aquoted market pricein an active marketand whose fair valuecannot be reliablymeasured; and, withlimited exceptions,excludes investmentsin equity-methodinvestments (referredto as ‘associates’).

Except for the existenceof qualifying criteriaabove and the prohibiteditems noted, the scope ofitems to which the FVOcan be applied is similar.

IAS 39 Date ofelection todesignate anyfinancial assetor financialliability to bemeasured atfair valuethrough profitor loss

Election only at initialrecognition.

Election at initialrecognition as well ascertain subsequent dates.

IAS 39 Definition offair value:principal (ormostadvantageous)market

Does not define fairvalue in terms of theprincipal market. Forfinancial instrumentstraded in activemarkets, the mostadvantageous activemarket to which theentity has access isused. No principalmarket concept.

Explicitly requires reportingentity to measure fairvalue assuming thetransaction occurs in theprincipal market (or mostadvantageous market ifno principal market) forthe asset or liability.

Detailed guidance on thisconcept.




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IAS 39 Definition offair value:application toliabilities

Assumes liability issettled with thecounterparty.Fair value of afinancial liability witha demand feature isnot less than theamount payable ondemand (discounted).

Assumes liability istransferred to anothermarket participant.No specific guidance ondetermining the fair valueof a financial liability witha demand feature.

IAS 39 Fair value atinitialrecognition(inception)

Entry price ispresumptively fairvalue, unless fairvalue is evidenced byother observablemarket transactionsor a valuationtechnique that onlyincludes observableinputs.

Exit price, but providesexamples whentransaction price mightnot represent fair value.

IAS 39 Valuationtechniques

Detailed guidance oninputs to valuationtechniques.

Permits carryforwardof measurementassumptions(information) tosubsequentmeasurements.

Does not permit mid-market pricing, unlessoffsetting positions.Assumes bid price forassets and ask pricefor liabilities.

Detailed guidance onthree acceptablevaluation approaches.

Does not permitcarryforward ofmeasurementassumptions (information)to subsequentmeasurements.

Permits mid-marketpricing as a practicalexpedient.

IAS 39 Fair valuehierarchy

Categorises fair valuemeasurements intotwo broad categories.

Categorises fair valuemeasurements into threebroad levels.




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IAS 39 Fair valuedisclosures

No fair valuehierarchy disclosures.

No separatedisclosure of recurringand non-recurring fairvalue measurements.

Required disclosuresabout sensitivity tounobservableassumptions andinception gains andlosses.

Fair value hierarchydisclosures.

Separate disclosure ofrecurring and non-recurring fair valuemeasurements.

No required disclosuresabout sensitivity tounobservableassumptions or inceptiongains and losses.

IAS 39 Derecognitionof financialassets

Combination of risksand rewards andcontrol approach. No ‘isolation inbankruptcy’ test.Partial derecognitionallowed only ifspecific criteria arecomplied with.

Derecognise assets whentransferor hassurrendered control overthe assets. One of theconditions is legalisolation. No partialderecognition.

IAS 39 Transfers offinancial assets:order ofderecognitionanalysis

IAS 39 requires allsubsidiaries to beconsolidated underIAS 27 and SIC 12prior to considerationof whether a transferof financial assets isconsidered a sale. Inthis case,derecognition underIAS 39 is assessed at aconsolidated level.

Requires derecognition of a financial asset to bedetermined prior to anassessment of whetherconsolidation of thetransferee is required.




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IAS 39 Transfers offinancial assets:definition ofcontrol

Under IAS 39, controlof a financial asset issurrendered if thetransferee has theunilateral ability to sellthat transferred asset.Note, however, thatcontrol is not the soledeterminative factorin assessingderecognition.

Control of a financialasset is surrendered onlyif (1) the transferredfinancial asset is legallyisolated from thetransferor, (2) thetransferee has the abilityto freely pledge orexchange the transferredfinancial asset, and (3)the transferor does notmaintain effective controlover the transferred assetthrough other rights.

IAS 39 Transfers offinancial assets:rights tocontractualcash flows areretained andpass-througharrangements

IAS 39 provides thatan entity canderecognise afinancial assetregardless of whetherit retains the right tothe contractual cashflows of that asset ifthree restrictiveconditions for ‘pass-througharrangements’ aremet.

Does not allow forderecognition of afinancial asset if thecontractual rights to thecash flows of thatfinancial asset areretained.

IAS 39 Accounting forservicing rights:initialrecognition ofa servicingasset

IAS 39 considers aservicing assetretained as part of atransfer of financialassets as a retainedinterest in thosetransferred assets.Therefore, theservicing asset isinitially recognised atits allocated previouscarrying amountbased on relative fairvalue at the transferdate in accordancewith paragraphs 24and 27 of IAS 39.

Requires a servicing assetto be initially recognisedat fair value.


IAS 39 Investments ininstruments

Measured at fair valueif reliably measurable;otherwise at cost.

Measured at cost less‘other than temporary’impairments, if any.



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IAS 39 Accounting forservicing rights:subsequentmeasurementof a servicingasset or liability

IAS 39 does notprovide guidance onthe subsequentmeasurement of aservicing rightbecause it is notconsidered a financialinstrument.

Provides an entity theoption to subsequentlymeasure a servicing assetor liability either at fairvalue or amortised cost.

IAS 39 Initialrecognition:transactioncosts incurredto acquire asecurity

Transaction costs thatare directlyattributable to theacquisition of anyfinancial asset (otherthan an assetclassified as at fairvalue through profitor loss) are includedin the initialmeasurement of thatfinancial asset.

No specific guidance onthe accounting fortransaction costs incurredin acquiring a debt orequity security. Forinvestments in debtsecurities classified asheld-to-maturity (HTM) oravailable-forsale (AFS),costs paid directly to theseller of the debt securityplus any fees paid lessfees received should beincluded in the debtsecurity’s initialinvestment.




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IAS 39 Initialrecognition:trade-date vs.settlement-dateaccounting

IAS 39 provides thatan entity may elect asan accounting policyto apply trade-date orsettlement-dateaccounting for eachcategory of financialassets that is definedin IAS 39 (i.e. AFS,HTM, loans andreceivables, and fairvalue through profitor loss). However,trade-date orsettlement-dateaccounting must beapplied consistently toall financial assetswithin the samecategory.

Does not specify whethera debt or equity securityshould be initiallyrecognised on a trade- orsettlement-date basis.Whether an entityrecognises the acquisitionof a debt or equitysecurity on a trade-dateor settlement-date basis isoften dependent on theindustry in which theentity operates.




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IAS 39 Classificationcategories:definition ofheld-to-maturity (HTM)

The HTM classificationin IAS 39 may applyto any non-derivativedebt instrument. Theinstrument does notneed to be structuredas a ‘security’ as isrequired under USGAAP. However, IAS39 prohibitsclassification of aninvestment as HTM ifthat investment is notquoted in an activemarket. Such aninvestment mayinstead be classified inthe loans andreceivables category.

The HTM classification inUS GAAP is limited toinvestments that thatmeet the definition of adebt security. Aninvestment in a debtsecurity that is not tradedin an active market couldbe classified as HTM if itmeets the conditions forthat classification.

IAS 39 Classificationof financialassets as held-to-maturity

Puttable debtinstruments cannotbe classified as HTM.

No such prohibitionexists. May be classifiedas HTM if the holder hasthe positive intent andability to hold thatsecurity. However,because the purchaseprice of the puttablesecurity includes apremium for the putfeature, carefulconsideration of the putfeature is necessary todetermine whether it callsinto question the intentand ability to hold to thesecurity to maturity.




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IAS 39 Classificationcategories:definition oftrading

Under IAS 39, afinancial asset mustbe classified at fairvalue through profitor loss (the IFRSequivalent to the USGAAP tradingcategory) if theinvestment (1) isacquired principallyfor the purpose ofselling in the nearterm, (2) is part of aportfolio of identifiedfinancial instrumentsthat are managedtogether and forwhich there isevidence of a recentactual pattern ofshort-term profit-taking or (3) is aderivative instrument.

Under the IAS 39definition of trading,an investment maynot be classified astrading if an entitydoes not intend to sellthe investment in thenear term. However,such an investmentmay qualify fordesignation as at fairvalue through profitor loss if certainconditions are met.

Defines a trading securityas a security that isbought and heldprincipally for thepurpose of selling in thenear term with anobjective of generatingprofits on short-termpricing differences.However, classification ofa security as trading is notprecluded simply becausethe enterprise does notintend to sell the securityin the near term.

IAS 39 Reclassificationof financialinstruments intoor out of thetrading category

Prohibited. Permitted but expected tobe rare.




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IAS 39 Subsequentmeasurement:interest incomerecognition

Under IAS 39, interestincome oninvestments in debtinstruments isrecognised using theeffective interestmethod based on theestimated cash flowsover the expected lifeof the instrument.

Interest income isrecognised on the basisof contractual cash flows,with certain exceptionsdependent on the specificcharacteristics of a debtinstrument such aswhether it (a) is part of agroup of prepayable debtsecurities, (b) is abeneficial interest insecuritised financialassets, or (c) has beenother-than-temporarilyimpaired, or (d) waspurchased with evidenceof credit deterioration.

IAS 39 Subsequentmeasurement:recognition ofa change inexpectedfuture cashflows

If a change in theexpected future cashflows of aninvestment in a debtinstrument occurs,the carrying amountof the investment isrecalculated based onthe present value ofthe revised estimatedfuture cash flows ofthe debt investmentdiscounted at theoriginal effectiveinterest rate. Thecumulative catch-upadjustment to thecarrying amount ofthe debt investment isrecognised in profit orloss.

Whether and how achange in expectedfuture cash flows of aninvestment in a debtinstrument is recognisedis dependent on thecharacteristics of the debtinstrument and whateffective interest methodis being applied.




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IAS 39 Foreignexchangedifferences onavailable-for-sale (AFS) debtinstruments

Changes in valueattributable tochanges in foreignexchange rates arereflected in profit orloss as exchangedifferences.

Changes in valueattributable to changes inforeign exchange rates isincluded in accumulatedother comprehensiveincome (equity) andreclassified to the incomestatement when theinstrument is sold.

IAS 39 Impairment ofdebt andequitysecurities

Focus is on ‘lossevents’ that provideobjective evidence ofimpairment.

Impairment is onlyrecognised only when thedecline in fair value isconsidered other-than-temporary. Severaldifferent sources ofliterature provideguidance on when asecurity is consideredother-than-temporarilyimpaired.


IAS 39 Subsequentreversal of animpairmentloss recognisedin profit or loss

Required for loans andreceivables, HTM andAFS debt instruments,if specified criteria aremet.

Prohibited for HTM andAFS securities. Reversalsof valuation allowanceson loans are recognised inthe income statement.



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IAS 39 Impairment:determinationof impairmentloss

Under IAS 39, theimpairment loss to berecognised if a ‘lossevent’ occurs isdependent on theclassification of theinvestment. If aninvestment classifiedas HTM is impaired,the amount ofimpairment iscalculated bycomparing thepresent value of theestimated future cashflows of theinvestmentdiscounted at theinvestment’s originaleffective interest rateto the carryingamount of theinvestment on theimpairment date. If aninvestment classifiedas AFS is impaired,the amount ofimpairment iscalculated in the samemanner as US GAAP.

If an investment in a debtor equity security isdetermined to be other-than-temporarilyimpaired, the impairmentloss to be recognised inearnings is calculated asthe difference betweenthe security’s carryingamount and the currentfair value of the securityon the date ofimpairment.




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IAS 39 Loansreceivable:classification ofinvestments inloans that arein the form ofdebt securitiesthat are notquoted in anactive market

Investments in loansthat are in the formof debt securities andfor which no quotedprices in an activemarket exist areaccounted for asloans and receivables,AFS financial assets,or financial assets atfair value throughprofit or loss.

Investments in loans thatare in the form of debtsecurities are classified astrading, AFS or HTMsecurities.

IAS 39 Loansreceivable:held-for-sale ortradingclassification

An entity classifiesloans receivable asheld for trading if itintends to sell thoseloans immediately orin the near term.Additionally, if certaineligibility criteria aremet, loans receivablemay be designated asat fair value throughprofit or loss underthe fair value option.Loans classified asheld for trading or asat fair value throughprofit or loss aremeasured at fair valuewith changes in fairvalue recognised inprofit or loss.

Loans receivable held forsale are reported at thelower of cost or fair valueunless an entity elects tocarry a loan receivable atfair value with changes infair value recognised inearnings under the fairvalue option.




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IAS 39 Loansreceivable:available-for-saleclassification

Entities are permittedto classify loansreceivable as AFSfinancial assets andmeasure them at fairvalue with changes infair value recognisedoutside profit or loss.

Loans receivable that arenot in the form of a debtsecurity cannot beclassified as AFS.

IAS 39 Loansreceivable:recognition ofloanimpairment

A loan is impaired ifthere is objectiveevidence thatimpairment exists as aresult of a loss event.

A loan is impaired if it isprobable that a creditorwill be unable to collectall amounts due.

IAS 39 Loansreceivable:interestrecognition onimpaired loans

Interest income isrecognised using therate of interest usedto discount the futurecash flows in themeasurement of theimpairment loss.

No specific guidance onthe recognition,measurement, orpresentation of interestincome on an impairedloan.

IAS 39 Debt:presentation(debt issuecosts)

Debt issue costs arenever capitalised asan asset.

For liabilities carried atamortised cost, debt issuecosts may be capitalisedas an asset.




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IAS 39 Modification orexchange ofdebtinstruments

Principle – 10% cashflow test with nospecific guidance fordetermining thepresent value of cashflows.

3rd party costs (e.g.legal fees) – if anextinguishmentoccurs, then suchcosts are expensed.If no extinguishmentoccurs, then suchcosts are amortisedusing the effectiveinterest method.

Convertibles – nospecific guidance forevaluating amodification thatimpacts theembedded conversionoption.

Troubled debtrestructurings – nospecific guidance fortroubled debtrestructurings. Entitiesapply the 10% cashflow test.

Principle – 10% cashflow test with specificguidance for determiningthe present value of cashflows.

3rd party costs (e.g.legal fees) – if anextinguishment occurs,then such costs areamortised using theeffective interest method.If no extinguishmentoccurs, then such costsare expensed.

Convertibles – specificguidance for evaluating amodification that impactsthe embedded conversionoption.

Troubled debtrestructurings – specificguidance for troubleddebt restructurings thatprecludes gains unless thenew principle amount isless than the carryingamount.

IAS 39 Frequency forassessing hedgeeffectiveness

Required every timeannual or interimfinancial statementsare prepared.

Required every timefinancial statements orearnings are reported,and at least every threemonths.




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IAS 39 Assessingeffectiveness ofhedgingrelationshipsthat use anoption as ahedginginstrument

An entity cannotexclude componets oftime value from aneffectivenessassessment. An entitymay designate thechange in intrinsicvalue as the hedginginstrument.

An entity may excludecomponents of time valuefrom an effectivenessassessment.

IAS 39 Designation ofhedginginstrument

Single instrumentscan hedge more thanone type of risk ifspecific conditionsare met.

An entity is prohibitedfrom separating acompound derivative intodifferent risk componentsthat are designated ashedging instruments.

IAS 39 Hedgeable risksfor hedges offinancialinstruments(including, inUS GAAP, arecognisedloan servicingright or a non-financial firmcommitmentwith financialcomponents)

An entity may hedgerisks associated withonly a portion of cashflows or fair value ifidentifiable andmeasurable.

Must be one or acombination of thefollowing:

• interest rate risk;

• credit risk; and

• foreign exchange risk.

Overall changes in fairvalue or cash flows.

IAS 39 Hedgeable risksfor hedges ofnon-financialitems (except,in US GAAP,those notedabove)

An entity may hedgeoverall changes in fairvalue or cash flows,or foreign currencyrisks.

An entity may hedgeoverall changes in fairvalue or cash flows for anentire item. For cash flowhedges, the foreignexchange risk also can bedesignated as the hedgedrisk.




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IAS 39 Shortcutmethod

Not permitted underIFRSs.

Allowed for hedgingrelationships involving aninterest rate swap and aninterest-bearing financialinstrument that meetspecific requirements.

IAS 39 Written optionsas hedgeditems

Permitted only if thewritten option isdesignated as anoffset to a purchasedoption.

Permitted if thecombination of thehedged item and thewritten option provides atleast as much potentialfor gains as exposure tolosses.

IAS 39 Foreigncurrencyhedging

Do not require thatthe unit exposed tothe hedged risk be aparty to the hedginginstrument.

Either the operating unitmust have foreigncurrency exposure oranother unit with thesame functional currencyas the operating unitmust be a party to thehedging instrument.

IAS 39 Partial-termhedging (whenhedginginstrument haslonger term)

Not permitted whenhedging instrumentremains outstandinglonger than thedesignated hedgingrelationship.

Not prohibited, buteffectiveness must still bedemonstrated.

IAS 39 Fair valuehedges: fairvalue hedgesof servicingrights and non-financial firmcommitmentswith financialcommitments

The only permissiblehedgeable risks areforeign currency riskand overall changes infair value or cashflows (same as allother non-financialitems).

Permits recognised loanservicing rights and non-financial firmcommitments withfinancial components tobe hedged for the samerisks as financial assetsand financial liabilities.




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IAS 39 Fair valuehedges: held-to-maturitysecurities as ahedged item

Prepayment risk orinterest rate riskcannot be designatedas the hedged risk.

Changes in total fairvalue of a prepaymentoption embedded in aHTM security can bedesignated as a hedgedrisk. Interest rate riskcannot be designated asthe hedged risk.

IAS 39 Fair valuehedges: partial-term hedging(when hedgeditem has longerterm)

Permissible todesignate a hedgingrelationship for only aportion of the periodfor which a hedgeditem is outstanding.It is more likely thatthe hedgingrelationship will beconsidered highlyeffective.

Not explicitly prohibited;however, hedgingrelationships generallywill not be highlyeffective.

IAS 39 Fair valuehedges:measurementof fair valuechanges inhedged itemthat areattributable tochanges in thebenchmarkinterest rate

Hedged item can bedefined as a portionof the interest ratecash flows of afinancial asset orfinancial liability (e.g.a benchmark ratecomponent). Hedgeditem is not limited toall of the contractualcash flows.

For a fair value hedge, allcontractual cash flowsmust be included whenchanges in fair valueattributable to changes inthe benchmark interestrate are calculated.




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IAS 39 Fair valuehedges: firmcommitment toacquire abusiness in abusinesscombination asa hedged item

Permitted as ahedged item forforeign exchange risk.

Cannot be designated asa hedged item.

IAS 39 Fair valuehedges: non-derivativefinancialinstruments ashedginginstruments

Can be designated forany hedge of foreignexchange risk.

Can only be designatedas hedging changes infair value of anunrecognised firmcommitment (or a portionthereof) attributable toforeign exchange risk.

IAS 39 Fair valuehedges:portfolio hedgeof interest raterisk (‘macrohedging’)

A special hedgeaccounting method isprovided for aportfolio fair valuehedge of interest raterisk (a currencyamount, instead ofindividual assets orliabilities, can bedesignated as thehedged item) ifcertain specificconditions are met.

The hedge accountingtreatment provided byIFRSs (i.e. currencyamount designated as ahedged item) isprohibited. However,similar results may beachieved by designatingspecific assets or liabilitiesas hedged items.

IAS 39 Cash flowhedges: non-derivativefinancialinstruments ashedginginstruments

Can be designated ashedging instrumentsin a foreign currencycash flow hedge.

Cannot be designated ashedging instruments in acash flow hedge.




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IAS 39 Basisadjustmentswhendiscontinuing acash flowhedgeinvolving anon-financialasset or non-financialliability

May choose to: (1)reclassify cumulativeamounts recognisedin equity in the sameperiod(s) in which theacquired asset orliability affectsearnings, or (2)include thoseamounts in the initialcost basis or othercarrying amount ofthe acquired asset orliability (i.e. ‘basisadjustments’).

Amounts in equity(accumulated othercomprehensive income)must be reclassified intoearnings in the sameperiod(s) during whichthe hedged forecastedtransaction affectsearnings.

IAS 39 Cash flowhedges: foreigncurrency cashflow hedgewith aninternalderivative

Not permitted inconsolidated financialstatements – hedginginstrument mustinvolve external party.

Permitted in consolidatedfinancial statements ifspecific conditions aremet.

IAS 39 Cash flowhedges:considerationof option’sterminal valuewhen assessingand measuringhedgeeffectiveness

An entity may includeor exclude time valuein effectivenessassessments, butcannot focus solely onterminal value inmeasuringeffectiveness.

An entity may use apurchased option’sterminal value whenassessing effectiveness ifcertain criteria are met.Also, an entity mayassume no ineffectivenessif additional criteria aremet.




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IAS 39 Cash flowhedges:forecastedtransactionwhoseoccurrence isno longerprobable

If transaction is nolonger expected tooccur, amountspreviouslyaccumulated in equityshould be reclassifiedto profit or loss.

The cumulative gain orloss on a derivativeshould remain inaccumulated othercomprehensive incomeunless it becomesprobable that theforecasted transactionwill not occur by the endof the originally specifiedperiod or within anadditional two-monthperiod.

IAS 39 Cash flowhedges:change invariable cashflows methodfor measuringineffectiveness

Not permitted underIFRSs.

Permitted as long as fairvalue of the hedgingswap is ‘at or somewhatnear zero’ at hedgeinception.

IAS 40 Measurementbasis forinvestmentproperty

Option of (a) historicalcost model(depreciation,impairment) or (b) fairvalue model withvalue changesthrough profit or loss.

Generally required to usehistorical cost model(depreciation,impairment).

IAS 40 Propertyinterests heldunder anoperating lease

Accounted for asinvestment propertyunder IAS 40 if heldfor investment and ifmeasured at fair valuewith value changes inprofit or loss.Otherwise upfrontpayments treated asprepayments.

Always treated as aprepayment.




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IAS 41 Measurementbasis ofagriculturalcrops,livestock,orchards,forests

Fair value with valuechanges recognisedin profit or loss.

Historical cost is generallyused. However, fair valueless costs to sell is usedfor harvested crops andlivestock held for sale.


Endnotes:

1 The IASB is developing a comprehensive Standard on accounting for rightsand obligations under insurance contracts that is consistent with the IASBFramework definitions of assets and liabilities.

2 The IASB and the FASB are working on a joint project on discontinuedoperations. The Boards intend to converge the definition of ‘discontinuedoperations’ and the disclosures for components of an entity that have beendisposed of. Exposure drafts from both Boards are expected in the thirdquarter of 2008.

3 IFRS 8 Operating Segments was issued in November 2006 and (subject tothe differences noted in the main table) has resulted in convergence withUS statement FAS 131. IFRS 8 is effective for periods beginning on or after1 January 2009, with earlier application permitted. In advance ofapplication of IFRS 8, IAS 14 Segment Reporting is the relevant Standard(see earlier editions of this guide).

4 This issue is being addressed in the joint IASB/FASB project on FinancialStatements Presentation.

5 IAS 1(2007) (effective 1 January 2009) requires a statement of financialposition at the begining of the earliest comparative period whenever theentity retrospectively applies an accounting policy or makes a retrospectiverestatement of items in its financial statements or when it reclassifies itemsin its financial statements.

6 The IASB and the FASB are addressing some IAS 12/FAS 109 differences intheir short-term convergence projects. Exposure drafts are expected in thefourth quarter of 2008.

7 Based on decisions made to date, in the revised IAS 12, the IASB will retain’substantively enacted’ but clarify that it means ‘virtually certain’.

8 The IASB and the FASB are working on a joint project on leases.

9 The difference is applicable to sales of goods or products, rendering ofservices, software arrangements, multiple-element arrangements, and realestate sales. A joint IASB/FASB project on revenue recognition concepts isunderway.

10 This difference relates to guidance provided in IFRIC 13 Customer LoyaltyProgrammes, which was issued in June 2007. IFRIC 13 is effective forannual periods beginning on or after 1 July 2008. Earlier application ispermitted.


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11 The IASB has a project on post-employment benefits on its active agenda(Discussion Paper issued in March 2008).

12 The IASB has on its agenda a convergence project on consolidation toaddress control, including SPEs.

13 The IASB issued an Exposure Draft on joint ventures in September 2007.The project addresses two topics: (1) the form of the arrangement is theprimary determinant of the accounting, and (2) that an entity has a choiceof accounting treatment for interests in jointly controlled entities. A finalStandard is expected in 2009.

14 The FASB recently issued FASB Staff Position (FSP) No. APB 14-1 Accountingfor Convertible Debt Instruments That May Be Settled in Cash uponConversion (Including Partial Cash Settlement). The FSP requires the liabilityand equity components of convertible debt instruments that may be settledby the issuer in cash upon conversion (including partial cash settlement) tobe separately accounted for in a manner that reflects the issuer’s non-convertible debt borrowing rate. This FSP is effective for fiscal yearsbeginning after 15 December 2008 and interim periods within those fiscalyears.

15 In February 2008, the IASB amended IAS 32 to require equity classificationin limited circumstances for some puttable financial instruments.The amendments are effective for annual periods beginning on or after 1 January 2009. Early application is permitted.

16 The IASB and the FASB have a joint convergence project on earnings pershare. Exposure drafts proposing amendments to the relevant standardswere issued in August 2008.


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IAS Plus Newsletter Quarterly newsletter on recent developments in IFRSswith special editions issued for important developments.To subscribe, visit www.iasplus.com

iGAAP 2007: A guide A comprehensive guide to the requirements of IFRSsto IFRS reporting

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iGAAP 2008 4th edition (May 2008). Guidance on how to Financial instruments: apply these complex Standards, including illustrative IAS 32, IAS 39 and examples and interpretations.IFRS 7 explained

Standard-specific Detailed guides for specific Standards, with guides: explanations of the requirements, guidance for – IFRS 1 application and discussion of evolving literature. – IFRS 2– IFRS 3 & IAS 27– IFRS 5– IAS 34


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