Types of Differences Between IFRS and U.S. GAAP

—Definitions. —Recognition. —Measurement. —Alternatives. —Lack of requirements or guidance. —Presentation. —Disclosure.

—- Choice of alternatives. —- Less guidance leads to more judgment in applying IFRS.

Inventories:

—- Initial cost. —- Cost formulas to allocate cost of inventories to expense. —- Subsequent balance sheet measurement.

—Costs included: Cost of purchase (purchase price and direct acquisition costs). Conversion costs (labor and overhead). Other costs (design, interest if takes time to bring to saleable condition).
—Costs excluded: Abnormal waste. Storage unless necessary for production process. Purely administrative overhead. Selling costs.

Cost formulas:
—No LIFO! —Must use same cost formula for similar inventory items.

Must report on balance sheet at lower of cost or net realizable value:
—Unlike U.S. GAAP which uses lower of cost or market. NRV = estimated selling price less costs of completion and other costs to make sale.

IFRS: Principles-based acccounting system.

GAAP: Rules-Based

IFRS:
1) Inventory is required to be reported at the lower of cost or Net Realizable Value-(est. selling price less est. cost of completion and est cost to make sale.)
2) Grouped by: item or goroup of similar items
3) Write-downs to NRV must be reversed when Selling price increases.

GAAP:
1) Lower of cost or market-(replacement cost w/ceiling NRV and floor NRV less normal profit margin.
2) Grouped: same, and total inventory basis
3) write-downs to market NOT reversable

—IFRS and U.S. GAAP both yield same expense over entire life.

1) costs—when yield probable future benefits which can be measured.

2) i.e. replacements—follow initial recognition rules and then remove cost and a/d of the replaced part.

Replacement of a part of an asset should be capitalized if 1 and 2 are met and the carrying amount of the replaced part should be derecognized

1) purchase price plus costs to put into service.

2) can use cost or---unlikeU.S. GAAP, can use revaluation model.

At cost: (which includes)
1) purchase price, including import duties and taxes
plus costs to put into service.
2) cost directly attributable to bringing the asset to the location and necessary conditions for it to perfrom as intended.
3) est. of the costs of dismantling and removing and restoring the site location.

IF acquired in exchange for a non-monetary asset or combination of monetary and non-m should be initially measured at Fair Value,...unless the exchange lacks commercial substance.

Two models:
1) Cost Model-item is carried at cost less accumulated depr. and any accum. impairment losses. (This is consistant w/US GAAP)

2) Revaluation model-item is carried at fair value at the date of revaluation, less any subsequent accum. depr. and any accum. impairment losses.
--Using this model requires revaluationsoften enough that the carrying value does not differ materially from assets fair value.
--Revaluations are made to entire class.
--Revaluations INC. are CR directly to OCI as revaluation surplus, DEC. are reductions of this surplus, excess is recognized as expense.
--Revaluation surplus may be trans. to RE on disposal of the asset.

Revalued assets may be presented either:
1) at a gross amount less separately reported accum. depr.(both revalued).
2) at a net amount.

1) Restate the accumulated depr. proportionately w/ the change in the gross carrying amount of the asset so that the carrying amount of the asset after revalueation ='s its revalued amount.

2) Eliminate the accum. depr. against the gross carrying amount of the asset, and restate the net amount to the revalued amount of the asset.

Requires est. of useful life, residual value, and the method of depreciation to be reviewed on an annual basis.

Changes in any of these treated prospectively as changes in est.

--Items comprised of significant parts for which diff. depr. methods or useful lives are appropriate each oart must be depr. separately, Commonly referred to as component depr. (not commonly used under GAAP)

When the carrying amount of item is:
1) disposed
2)when no future economic benefits are expected from its use or disposal.

Gains or Loss included in net income.

Investment Property:
Same general principles as IAS 16 choice or cost or revaluation,
--Except gains or losses from changes in FV recognized in current income and not revaluation surplus
--Even using cost model—disclose FV in notes

(—U.S. generally requires use of cost model for investment property.)