DIFFERENCES BETWEEN IFRSs AND US GAAP

Guest , Last updated: 26 July 2008
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SOME KEY DIFFERENCES BETWEEN IFRSs AND US GAAP

General approach

IFRS: More 'principles-based' standards with limited application guidance.
US: More 'rule-based' standards with more specific application guidance.
Status: Not currently being addressed.

IAS 1 Comparative prior year financial statements

IFRS: One year comparative financial information is required.
US: No specific requirement under US GAAP to present comparatives. SEC regulations generally require three years of comparative financial information (balance sheet two years).
Status: Not currently being addressed.

IAS 1 Reporting "comprehensive income"

IFRS: Statement of changes in equity is required. A grand total of "comprehensive income" is permitted but not required. Comprehensive income is net income plus gains and losses that are recognised directly in equity rather than in net income.
US: Must present grand total of "comprehensive income". Can present in income statement, statement of comprehensive income, or statement of changes in equity.
Status: IASB's Comprehensive Income project is likely result in a multi-column performance statement separating current income flows from remeasurements of previously recognised items. The grand total would be similar to FASB's "comprehensive income".

Departure from a standard when compliance would be misleading

IFRS: Permitted in 'extremely rare' circumstances 'to achieve a fair presentation'. Specific disclosures are required.
US: Not directly addressed in US GAAP literature, although an auditor may conclude that by applying a certain GAAP requirements the financial statements are misleading, thereby allowing for an 'override'.
Status: Not currently being addressed.

IAS 1 Classification of liabilities on refinancing

IFRS: Noncurrent if refinancing is completed before balance sheet date.
US: Noncurrent if refinancing is completed before date of issue of the financial statements.
Status: FASB is considering an exposure draft proposing the IASB.

IAS 1 Classification of liabilities due on demand due to violation of debt covenant

IFRS: Noncurrent if the lender has granted a 12-month waiver before the balance sheet date.
US: Noncurrent if the lender has granted a waiver for a period greater tha one year (or operating cycle if longer) before the issuance of the financial statements or where it is probable that the violation will be cured within the grace period, if any, prescribed in the long-term debt agreement.
Status: FASB is considering an exposure draft proposing the IASB approach.

IAS 1 Extraordinary items

IFRS: Prohibited.
US: Extraordinary items are permitted but restricted to items that are both infrequent in occurrence and unusual in nature.
Status: IASB abolished the category in its 2003 Improvements Project.

IAS 2 Method for determining inventory cost

IFRS: LIFO is prohibited.
US: LIFO is permitted.
Status: IASB prohibited LIFO in its 2003 Improvements Project. Not currently being addressed.

IAS 2 Reversal of inventory write-downs

IFRS: Required, if certain criteria are met.
US: Prohibited.
Status: Not currently being addressed.

IAS 2 Measuring inventory at net realisable value even if above cost

IFRS: Permitted only for producers' inventories of agricultural and forest products and mineral ores and for broker-dealers' inventories of commodities.
US: Similar, but not restricted to producers and broker-traders.
Status: IASB extended this to commodity broker-traders in its 2003 Improvements Project.

IAS 7 Classification of interest received and paid in the cash flow statement

IFRS: May be classified as an operating, investing, or financing activity.
US: Must be classified as an operating activity.
Status: Not currently being addressed.

IAS 7 Inclusion of bank overdrafts in cash

IFRS: Included if they form an integral part of an entity's cash management.
US: Excluded.
Status: Not currently being addressed.

IAS 8 Non-mandated changes in accounting policy

IFRS: Must restate prior financial statements, unless impracticable.
US: Generally include the cumulative effect in net profit and loss in the current financial statements (but restate for LIFO, extractive industries, long-term contracts, IPOs).
Status: FASB has issued an exposure draft that would adopt the IASB approach.

IAS 8 Change in depreciation method for existing assets

IFRS: Change in estimate (prospective).
US: Change in accounting policy (cumulative effect in net profit or loss).
Status: FASB has issued an exposure draft proposing to adopt the IASB approach (change in estimate).

IAS 11 Construction contracts when the percentage of completion cannot be determined

IFRS: Cost recovery method.
US: Completed contract method.
Status: Not currently being addressed.

IAS 12 Classification of deferred tax assets and liabilities

IFRS: Always non-current.
US: Classification is split between the current and non-current components based on the classification of the underlying asset or liability.
Status: FASB and IASB are addressing some IAS 12/SFAS 109 differences in their short-term convergence projects. IASB is leaning toward adopting the FASB standard.

IAS 12 Subsequent recognition of a deferred tax asset after a business combination

IFRS: First reduce goodwill to zero; excess credited to net profit or loss.
US: First reduce goodwill to zero; then any other intangible assets to zero; excess credited to net profit or loss.
Status: FASB and IASB are addressing some IAS 12/SFAS 109 differences in their short-term convergence projects, but this issue is not being addressed.

IAS 12 Reconciliation of actual and expected tax expense

IFRS: Required for all companies applying IFRSs. Computed by applying the applicable tax rate(s) to accounting profit, disclosing also the basis on which the applicable tax rate(s) are computed.
US: Required for public companies only. Computed by applying the domestic federal statutory tax rates to pretax income from continuing operations. Non-public companies must disclose the nature of the reconciling items but not amounts.
Status: FASB and IASB are addressing some IAS 12/SFAS 109 differences in their short-term convergence projects.

IAS 12 Recognition of tax benefits related to share-based payment

IFRS: Credited to equity only to the extent that it arises from a transaction recognised in equity.
US: Generally credited to deferred tax liability, with any excess tax benefit credited to equity.
Status: FASB and IASB are addressing some IAS 12/SFAS 109 differences in their short-term convergence projects.

IAS 12 Recognition of tax benefits related to share-based payment

IFRS: Deferred tax is computed based on the intrinsic value of share-based payment.
US: Deferred tax is computed based on the GAAP expense recognised and trued up at realisation of the tax benefit.
Status: FASB and IASB are addressing some IAS 12/SFAS 109 differences in their short-term convergence projects.

IAS 12 Impact of temporary differences related to intercompany profits

IFRS: Deferred tax effect is recognised at the buyer's tax rate.
US: Deferred tax effect is recognised at the seller's tax rate.
Status: FASB and IASB are addressing some IAS 12/SFAS 109 differences in their short-term convergence projects.

IAS 12 Recognition of taxable temporary differences that arise from the initial recognition of an asset or liability in a transaction that is (a) not a business combination and (b) does not affect accounting profit or taxable profit

IFRS: Deferred tax not recognised. Nor are changes in this unrecognised deferred tax asset or liability subsequently recognised.
US: No similar 'initial recognition exemption'.
Status: FASB and IASB are addressing some IAS 12/SFAS 109 differences in their short-term convergence projects. IASB is leaning toward eliminating the exemption.

IAS 12 Other specific exemptions to the basic principle that a deferred tax is recognised for all temporary differences

IFRS: Does not have exemptions comparable to those in US GAAP as noted below.
US: US GAAP has some special exemptions from providing deferred tax including goodwill, leveraged leases, most undistributed earnings of subsidiaries, and intangible development costs in the oil and gas industry.
Status: FASB and IASB are addressing some IAS 12/SFAS 109 differences in their short-term convergence projects.

IAS 12 Tax rate for measuring deferred tax assets and liabilities

IFRS: Use enacted or 'substantially enacted' tax rate.
US: Use enacted tax rate.
Status: IASB will retain 'substantially enacted' but clarify that it means 'virtually certain'.

IAS 12 Measurement of deferred tax on undistributed earnings of a subsidiary

IFRS: Must use rate applicable to undistributed profits.
US: Use the higher of the distributed and undistributed rates.
Status: FASB and IASB are addressing some IAS 12/SFAS 109 differences in their short-term convergence projects.

IAS 12 Recognition of deferred tax assets

IFRS: Recognised only if realisation of tax benefit is 'probable'.
US: Always recognised, but a valuation allowance is provided unless realisation is 'more likely than not'. Further, applying the 'more likely than not' criterion through use of a valuation allowance results in disclosure differences between IAS 12 and SFAS 109.
Status: While in the past different interpretations of 'probable' and 'more likely than not' may also have led to differences in the recognition of deferred tax assets, such differences should no longer arise because, in IFRS 3 the IASB has defined 'probable' as 'more likely than not'. FASB and IASB are addressing some IAS 12/SFAS 109 differences in their short-term convergence projects. IASB is leaning toward retaining its current standard.

IAS 12 Changes in deferred taxes that were originally charged or credited to equity ('backwards tracing')

IFRS: Both IAS 12 and SFAS 109 require that the tax effects of items credited or charged directly to equity during the current year also be allocated directly to equity. A deferred tax item originally recognised by a charge or credit to shareholders' equity may change either from changes in assessments of recovery of deferred tax assets or from changes in tax rates, laws, or other measurement attributes. Consistent with the initial treatment, IAS 12 requires the resulting change in deferred taxes also be charged or credited directly to equity.
US: SFAS 109 requires allocation to current year income.
Status: FASB and IASB are addressing some IAS 12/SFAS 109 differences in their short-term convergence projects.

IAS 14 Basis of reportable segments

IFRS: Lines of business and geographical areas.
US: Components for which information is reported internally to top management, which may or may not be based on lines of business or geographical areas.
Status: IASB will solicit the views of financial analysts before reconsidering IAS 14.

IAS 14 Types of segment disclosures

IFRS: Required disclosures for both "primary" and "secondary" segments.
US: Only one basis of segmentation, although certain "enterprise-wide" disclosures are required such as revenue from major customers and revenue by country.
Status: IASB will solicit the views of financial analysts before reconsidering IAS 14.

IAS 14 Accounting basis for reportable segments

IFRS: Amounts are based on IFRS GAAP measures.
US: Amounts are based on whatever basis is used for internal reporting purposes.
Status: IASB will solicit the views of financial analysts before reconsidering IAS 14.

IAS 14 Segment result

IFRS: Defined segment result.
US: No definition of segment result.
Status: IASB will solicit the views of financial analysts before reconsidering IAS 14.

IAS 16 Basis of property, plant, and equipment

IFRS: May use either (a) revalued amount or (b) historical cost with depreciation and impairment. Revalued amount is fair value at date of revaluation less subsequent accumulated depreciation and impairment losses.
US: Generally required to use historical cost with depreciation and impairment.
Status: Revalued amount continues to be an accounting policy option under the IASB's 2003 revisions to IAS 16.

IAS 16 Major inspection or overhaul costs

IFRS: Generally are accounted for as part of the cost of an asset.
US: Generally expensed.
Status: The December 2003 revision to IAS 16 removed the requirement (formerly in SIC 23) that the inspection or overhaul component of an asset must have been separately identified and accounted for at acquisition.

IAS 16 Gains and losses on exchanges of similar non-current assets

IFRS: Gain or loss recognised.
US: Same.
Status: This difference was eliminated by FASB Statement 153 in December 2004.

IAS 17 Leasehold interest in land

IFRS: May be accounted for as investment property under IAS 40 if held for investment and if measured at fair value with value changes in profit or loss. Otherwise treated as a prepayment.
US: Always treated as a prepayment.
Status: IASB is starting a comprehensive leases project.

IAS 17 Minimum lease payments

IFRS: Include third-party guarantees related to the leased assets in minimum lease payments.
US: Exclude third-party guarantees from minimum lease payments.
Status: IASB is starting a comprehensive leases project.

IAS 17 Present value of minimum lease payments

IFRS: Lessors must use the implicit rate to discount minimum lease payments. Lessees would generally use the implicit rate in the lease to discount minimum lease payments unless the implicit rate is known and is lower.
US: Generally would use the incremental borrowing rate to discount minimum lease payments.
Status: IASB is starting a comprehensive leases project.

IAS 17 Recognition of a gain on a sale and leaseback transaction where the leaseback is an operating lease

IFRS: The gain is recognised immediately.
US: Generally, the gain is amortised over the lease term.
Status: IASB is starting a comprehensive leases project.

IAS 17 Disclosure of lease maturities

IFRS: Less detailed disclosure.
US: More detailed disclosure.
Status: IASB is starting a comprehensive leases project.

IAS 17 Right to virtually 100% of the output from land or depreciable assets for a specified period of time

IFRS: Executory contract. Not a lease, but addressed in IFRIC 4.
US: Must be accounted for as a lease.
Status: IASB is starting a comprehensive leases project. Also, this is addressed in part in IFRIC Draft Interpretation 3 Determining Whether an Arrangement Contains a Lease.

IAS 18 Revenue recognition guidance

IFRS: General principles that are consistent with US GAAP but contain limited detailed or industry specific guidance.
US: More specific guidance, particularly industry-specific issues. In addition, public companies must follow more detailed guidance provided by the SEC.
Status: A joint IASB/FASB project on revenue recognition concepts is under way.

IAS 18 Up-front non-refundable revenue, such as connection fees and developers' advance payments

IFRS: If the up-front fee is in exchange for products delivered or services performed - and, therefore, substantial risks and rewards have been transferred to the buyer in a separate transaction - revenue is recognised on completion of the up-front services. Otherwise it is amortised over the expected customer service period.
US: Amortisation over the expected customer service period. Direct incremental costs are similarly deferred.
Status: A joint IASB/FASB project on revenue recognition concepts is under way.

IAS 18 Revenue recognition for the delivered component in a transaction with multiple deliverables

IFRS: Revenue for the delivered component is recognised even if a refund must be made if the undelivered component is not delivered, if it is probable that the undelivered component will be delivered.
US: Revenue for the delivered component is deferred to the extent that a refund must be made if the undelivered component is not delivered or if specific performance conditions are not met.
Status: Not currently being addressed.

IAS 19 Termination benefits

IFRS: No distinction between "special" and other termination benefits. Termination benefits recognised when the employer is demonstrably committed to pay.
US: Recognise special (one-time) termination benefits when employees accept the offer and the amount can be reasonably estimated. Recognise contractual termination benefits when it is probable that employees will be entitled and the amount can be reasonably estimated.
Status: Not currently being addressed.

IAS 19 Measurement of gain or loss on curtailment of a benefit plan

IFRS: A curtailment gain or loss comprises (a) the change in the present value of the defined benefit obligation, (b) any resulting change in fair value of the plan assets, and (c) a pro rata share of any related actuarial gains and losses, unrecognised transition amount, and past service cost that had not previously been recognised.
US: Unrecognised actuarial gains and losses arising subsequent to transition do not affect the curtailment gain or loss, while the amount of gain or loss would be offset by a any portion of the unrecognised transition asset or liability.
Status: Not currently being addressed.

IAS 19 Timing of recognition of gains on curtailment of a benefit plan

IFRS: Both curtailment gains and losses are recognised when the entity is demonstrably committed and a curtailment has been announced.
US: A curtailment loss is recognised when it is probable that a curtailment will occur and the effects are reasonably estimable. A curtailment gain is recognised when the related employees terminate or the plan suspension or amendment is adopted, which could occur after the entity is demonstably committed and a curtailment plan is announced.
Status: Not currently being addressed.

IAS 19 Recognition of past service costs related to benefits that have vested

IFRS: Recognised immediately.
US: Amortised over the remaining service period or life expectancy.
Status: Not currently being addressed.

IAS 19 Multi-employer plan that is a defined benefit plans

IFRS: Should be accounted for as a defined benefit plan if necessary information is available, otherwise as a defined contribution plan.
US: Accounted for as a defined contribution plan.
Status: IFRIC Draft Interpretation D6 proposes to clarify under what circumstances sufficient information is available to apply defined benefit accounting.

IAS 19 Minimum liability recognition for benefits under defined benefit plans

IFRS: No minimum liability requirement.
US: At a minimum, the unfunded accumulated benefit obligation is recognised.
Status: Not currently being addressed.

IAS 19 Limitation on recognising pension assets

IFRS: Pension assets cannot be recognised in excess of the net total of unrecognised past service cost and actuarial losses plus the present value of benefits available from refunds or reduction of future contributions to the plan
US: No such limitation on the amount that can be recognised.
Status: Not currently being addressed.

IAS 19 Recognising actuarial gains and losses, when they arise, directly in the statement of equity

IFRS: Permitted.
US: Not permitted.
Status: In December 2004, the IASB amended IAS 19 to permit this.

IAS 20 Revenue from a government grant with conditions attached

IFRS: Revenue recognised if reasonable assurance that the conditions will be met.
US: Revenue deferred until the conditions are met.
Status: IASB is currently reconsidering IAS 20.

IAS 23 Borrowing costs related to assets that take a substantial time to complete

IFRS: Capitalisation is an available accounting policy choice.
US: Capitalisation is mandatory.
Status: Not currently being addressed.

IAS 23 Types of borrowing costs eligible for capitalisation

IFRS: Includes interest, certain ancillary costs, and exchange differences that are regarded as an adjustment of interest.
US: Generally includes only interest.
Status: Not currently being addressed.

IAS 23 Income on temporary investment of funds borrowed for construction of an asset

IFRS: Reduces borrowing cost eligible for capitalisation.
US: Generally does not reduce borrowing cost eligible for capitalisation.
Status: Not currently being addressed.

IAS 27 Basis of consolidation policy

IFRS: Control (look to governance and risk and benefits).
US: Approach depends on type of entity. For voting interest entities, look to majority voting rights. For variable interest entities, look to a risk and rewards model whereby an entity is consolidated by the 'primary beneficiary'.
Status: IASB has on its agenda a project on consolidation including SPEs.

IAS 27 Special purpose entities (SPEs)

IFRS: Consolidate if "controlled". Generally follow the same principles as for commercial entities in determining whether or not control exists.
US: If SPE is not a 'qualifying SPE', then consolidation is generally based on majority voting interests if SPE is a voting-interest entity or based on a risks and rewards model if SPE is a variable interest entity. Special rules apply for consolidation of 'qualifying SPEs'.
Status: IASB has on its agenda a project on consolidation including SPEs.

IAS 27 Different reporting dates of parent and subsidiaries

IFRS: Reporting date difference cannot be more than three months. Must adjust for any significant intervening transactions.
US: Reporting date difference cannot be more than three months. Must disclose any significant intervening transactions.
Status: IASB has on its agenda a project on consolidation including SPEs.

IAS 27 Different accounting policies of parent and subsidiaries

IFRS: Must conform policies.
US: No requirement to conform policies.
Status: IASB has on its agenda a project on consolidation including SPEs.

IAS 27 Accounting for investments in subsidiaries in parent-company financial statements

IFRS: Either cost method or apply financial instrument rules of IAS 39, but not equity method.
US: Equity method or cost method.
Status: December 2003 revision to IAS 27 prohibited the equity method.

IAS 27 Presentation of minority interest

IFRS: In equity.
US: Outside of equity, between liabilities and equity.
Status: FASB is reconsidering this issue as part of its convergence project.

IAS 28 Different reporting dates of investor and associate

IFRS: Reporting date difference cannot be more than three months. Must adjust for any significant intervening transactions.
US: Reporting date difference cannot be more than three months. Must disclose any significant intervening transactions.
Status: Not currently being addressed.

IAS 28 Different accounting policies of investor and associate

IFRS: Must conform policies.
US: No requirement to conform policies.
Status: Not currently being addressed.

IAS 28 Accounting for investments in associates in parent-company financial statements

IFRS: Either cost method or apply financial instrument rules of IAS 39, but not equity method.
US: Equity method is allowed.
Status: December 2003 revision to IAS 27 prohibited the equity method.

IAS 29 Adjusting financial statements of an entity that operates in a hyperinflationary economy

IFRS: Adjust using a general price level index before translating.
US: An entity that operates in a hyperinflationary economy must use the functional currency of its parent, rather than its own hyperinflationary currency, to prepare its financial statements.
Status: Not currently being addressed.

IAS 31 Investments in joint ventures

IFRS: May use either the equity method or proportionate consolidation.
US: Generally use the equity method (except in construction and oil and gas industries).
Status: Not currently being addressed.

IAS 32 Classification of convertible debt instruments by the issuer

IFRS: Split the instrument into its liability and equity components at issuance.
US: Classify the entire instrument as a liability. However, the intrinsic value of the conversion feature at the commitment date of the instrument, if any, is recognised as additional paid-in capital.
Status: Not currently being addressed.

IAS 33 Disclosures of earnings per share

IFRS: Basic and diluted income from continuing operations per share and net profit or loss per share.
US: Basic and diluted income from continuing operations, discontinuing operations, extraordinary items, cumulative effect of a change in accounting policy, and net profit or loss per share.
Status: IASB considered this in its Improvements Project.

IAS 33 Calculation of year-to-date (YTD) diluted EPS

IFRS: Apply the treasury stock method on a YTD basis, that is, do not average the individual interim period calculations.
US: Average the individual interim period incremental shares.
Status: FASB has issued an exposure draft proposing to adopt the IASB approach.

IAS 33 Contracts that may be settled in ordinary shares or in cash, at issuer's option

IFRS: Assume always that the contracts will be settled in shares.
US: Include based on rebuttable presumption that the contracts will be settled in shares.
Status: In its Improvements exposure draft, IASB had proposed to adopt the US approach. However, after considering comments on the Improvements ED, the IASB reverted to the above position.

IAS 34 Interim reporting - revenue and expense recognition

IFRS: Interim period is a discrete reporting period (with certain exceptions).
US: Interim period is an integral part of the full year (with certain exceptions).
Status: Not currently being addressed.

IAS 36 Indication of impairment

IFRS: Impairment is indicated, and a detailed calculation must be performed, if an asset's carrying amount exceeds the higher of the asset's value-in-use (discounted present value of the asset's expected future cash flows) and fair value less costs to sell.
US: Impairment is indicated, and a detailed calculation must be performed, if an asset's carrying amount exceeds the expected future cash flows to be derived from the asset on an undiscounted basis.
Status: Not currently being addressed.

IAS 36 Measurement of impairment loss

IFRS: Based on the recoverable amount (the higher of the asset's value-in-use and fair value less costs to sell).
US: Based on fair value.
Status: Not currently being addressed.

IAS 36 Measuring the residual value of an amortisable long-term asset

IFRS: Current net selling price assuming the asset were already of the age and in the condition expected at the end of its useful life.
US: Generally the discounted present value of expected proceeds on future disposal.
Status: Not currently being addressed.

IAS 36 Level of impairment testing for goodwill

IFRS: Cash generating unit (CGU) – the lowest level to which goodwill can be allocated.
US: Reporting unit – either a business segment or one organisational level below.
Status: Not currently being addressed.

IAS 36 Calculating impairment of goodwill

IFRS: One-step: compare recoverable amount of a CGU (higher of (a) fair value less costs to sell and (b) value in use) to carrying amount.
US: Two steps: 1. Compare FV of the reporting unit with its carrying amount including goodwill. If FV is greater than carrying amount, no impairment (skip step 2). 2. Compare implied FV of goodwill with carrying amount.
Status: Not currently being addressed.

IAS 36 Calculating impairment of indefinite-life intangible assets other than goodwill

IFRS: Goodwill and other indefinite-life intangible assets are included in a cash generating unit (CGU). The CGU is tested for impairment.
US: Goodwill is included in the CGU. Other indefinite-life intangible assets are tested separately.
Status: Not currently being addressed.

IAS 36 Subsequent reversal of an impairment loss

IFRS: Required, if certain criteria are met. No reversal of impairments of goodwill.
US: Prohibited.
Status: Not currently being addressed.

IAS 37 Measurement of provisions

IFRS: Best estimate to settle the obligation, which generally involves the expected value method. Discounting required.
US: Low end of the range of possible amounts. Some provisions are not discounted.
Status: Not currently being addressed.

IAS 37 Measurement of decommissioning provisions

IFRS: When initially recognised, use the current, risk-adjusted rate to discount the provision. Adjust the rate at each reporting date.
US: When initially recognised, use the current, risk-adjusted rate to discount the provision. Do not adjust the rate in future periods.
Status: IFRIC 1 clarified the IFRS approach. Not currently being addressed.

IAS 37 Recognition of restructuring provisions

IFRS: Recognise if a detailed formal plan is announced or implementation of such a plan has started.
US: Recognise when a transaction or event occurs that leaves an entity little or no discretion to avoid the future transfer or use of assets to settle the liability. An exit or disposal plan, by itself, does not create a present obligation to others for costs expected to be incurred under the plan.
Status: IASB is addressing this in its short-term convergence project.

IAS 37 Costs relating to disposal activities in the context of a resstructuring

IFRS: Costs associated with ongoing activities cannot be accrued.
US: Some costs associated with ongoing activities are accrued.
Status: IASB is addressing this in its short-term convergence project and is leaning toward the US GAAP approach.

IAS 37 Disclosures that may prejudice seriously the position of the entity in a dispute

IFRS: "In extremely rare cases" amounts and details need not be disclosed, but disclosure is required of the general nature of the dispute and why the details have not been disclosed.
US: Disclosure is required.
Status: Not currently being addressed.

IAS 38 Development costs

IFRS: Capitalise, if certain criteria are met.
US: Expense (except for certain website development costs and certain costs associated with developing internal use software).
Status: FASB may address this in its short-term convergence project.

IAS 38 Subsequent expenditure on purchased in-process R&D

IFRS: Capitalised if it meets the definition of development.
US: Expense.
Status: Not currently being addressed.

IAS 38 Revaluation of intangible assets

IFRS: Permitted only if the intangible asset trades in an active market.
US: Generally prohibited.
Status: Not currently being addressed.

IAS 39 Option to designate any financial asset or financial liability to be measured at fair value through profit or loss ('fair value option')

IFRS: Option is allowed.
US: No such option.
Status: This option was added in the December 2003 revisions to IAS 39.

IAS 39 Option to designate loans and receivables as available for sale to be measured at fair value through equity ('available-for-sale option')

IFRS: Option is allowed.
US: No such option.
Status: This option was added in the December 2003 revisions to IAS 39.

IAS 39 Investments in unlisted equity instruments

IFRS: Measured at fair value if reliably measurable; otherwise at cost.
US: Measured at cost.
Status: Not currently being addressed.

IAS 39 Measurement of derivatives

IFRS: All derivatives are measured at fair value except that a derivative that is linked to and must be settled by delivery of an unquoted equity instrument whose fair value cannot be reliably measured is measured at cost.
US: All derivatives are measured at fair value (though the definition of a derivative is not identical to that of IAS 39).
Status: Not currently being addressed.

IAS 39 Multiple embedded derivatives in a single hybrid instrument

IFRS: Sometimes accounted for separately.
US: Always treated as a single compound embedded derivative.
Status: Not currently being addressed.

IAS 39 Reclassification of financial instruments into or out of the trading category

IFRS: Prohibited.
US: Permitted, but generally transfers into or from the trading category should be rare.
Status: Not currently being addressed.

IAS 39 Effect of selling investments classified as held-to-maturity

IFRS: Prohibited from using held-to-maturity classification for the next two years.
US: Prohibited from using held-to-maturity classification. SEC indicates that prohibition is generally for two years.
Status: Not currently being addressed.

IAS 39 Subsequent reversal of an impairment loss

IFRS: Required for loans and receivables, held-to-maturity, and available-for-sale debt instruments if certain criteria are met.
US: Prohibited for held-to-maturity and available-for-sale securities. Reversal of valuation allowances on loans is recognised in the income statement.
Status: Not currently being addressed.

IAS 39 Derecognition of financial assets

IFRS: Combination of risks and rewards and control approach. Can derecognise part of an asset. No "isolation in bankruptcy" test. Partial derecognition allowed only if specific criteria are complied with.
US: Derecognise assets when transferor has surrendered control over the assets. One of the conditions is legal isolation in bankruptcy. No partial derecognition.
Status: This is a subject that both Boards are likely to address in the future.

IAS 39 Use of "Qualifying SPEs"

IFRS: No such category of SPEs.
US: Necessary for derecognition of financial assets if transferee is not free to sell or pledge transferred assets.
Status: This is a subject that both Boards are likely to address in the future.

IAS 39 Offsetting amounts due from and owed to two different parties

IFRS: Required if legal right of set-off and intent to settle net.
US: Prohibited.
Status: Not currently being addressed.

IAS 39 Use of "partial-term hedges" (hedge of a fair value exposure for only a part of the term of a hedged item)

IFRS: Allowed.
US: Prohibited.
Status: Not currently being addressed.

IAS 39 Hedging foreign currency risk in a held-to-maturity investment

IFRS: Can qualify for hedge accounting.
US: Cannot qualify for hedge accounting.
Status: Not currently being addressed.

IAS 39 Hedging foreign currency risk in a firm commitment to acquire a business in a business combination

IFRS: Can qualify for hedge accounting.
US: Cannot qualify for hedge accounting.
Status: Not currently being addressed.

IAS 39 Assuming perfect effectiveness of a hedge if critical terms match

IFRS: Prohibited. Must always measure effectiveness.
US: Allowed for hedge of interest rate risk in a debt instrument if certain conditions are met – "Shortcut Method".
Status: Not currently being addressed.

IAS 39 Use of "basis adjustment"

IFRS:
Fair value hedge: Required.
Cash flow hedge of a transaction resulting in a financial asset or liability: Same as US GAAP.
Cash flow hedge of a transaction resulting in a non-financial asset or liability: Choice of US GAAP or basis adjustment.
US:
Fair value hedge: Required.
Cash flow hedge of a transaction resulting in an asset or liability: Gain/loss on hedging instrument that had been reported in equity remains in equity and is reclassified into earnings in the same period the acquired asset or incurred liability affects earnings.
Status: Not currently being addressed.

IAS 39 Hedging gain or loss on net investment in a foreign entity

IFRS: The portion determined to be an effective hedge is recognised in equity.
US: Gains and losses relating to hedge ineffectiveness is recognised in profit or loss immediately.
Status: Not currently being addressed.

IAS 39 Macro hedging

IFRS: Fair value hedge accounting treatment for a portfolio hedge of interest rate risk is allowed if certain specified conditions are met.
US: Hedge accounting treatment is prohibited, though similar results may be achieved by designating specific assets or liabilities as hedged items.
Status: FASB does not have a project to address macro hedging.

IAS 40 Measurement basis of investment property

IFRS: Option of (a) cost-depreciation-impairment model or (b) fair value with value changes through profit or loss model.
US: Generally required to use historical cost with depreciation and impairment.
Status: Not currently being addressed.

IAS 41 Measurement basis of agricultural crops, livestock, orchards, forests

IFRS: Fair value with value changes recognised in net profit or loss.
US: Historical cost is generally used. However, fair value less costs to sell is used for harvested crops and livestock held for sale.
Status: Not currently being addressed.

IFRS 1 First-time adoption

IFRS: Full retrospective application of IFRSs in force at the time of adoption.
US: No specific standard. Practice is generally full retrospective application unless the transition provisions in a specific standard require otherwise.
Status: Not currently being addressed.

IFRS 2 Recognising an expense for share-based payment

IFRS: Expense recognised based on the fair value of share-based payment given for goods or services including employee services.
US: Same.
Status: This difference was eliminated as a result of revision of FASB Statement 123 in December 2004.

IFRS 2 Date for measuring share-based payment to non-employees

IFRS: Modified grant date method.
US: Earlier of counterparty's commitment to perform (often a sufficiently large disincentive for non-performace exists) or actual performance.
Status: This difference was created when FASB revised SFAS 123 in December 2004.

IFRS 2 Use of historical volatility or industry index permitted in measurement for non-public entities when it is not practicable to estimate expected volatility

IFRS: No.
US: Yes.
Status: This difference was created when FASB revised SFAS 123 in December 2004.

IFRS 2 Recognition of deferred tax asset for employee options

IFRS: Not before the award is 'in the money' (only when the award has intrinsic value).
US: Deferred tax asset recognised based on fair value of the award.
Status: This difference was created when FASB revised SFAS 123 in December 2004.

IFRS 3 Date on which consideration in a business combination is measured

IFRS: Acquisition date (date on which control passes).
US: Consummation (closing) date.
Status: IASB considered this in developing IFRS 3. The IASB and the FASB are working jointly on a project on procedures for acquisition accounting.

IFRS 3 Recognising a liability for a planned post-acquisition restructuring

IFRS: Only if acquiree already recognised a provision under IAS 37.
US: Can be recognised if a plan to exit an activity or terminate employees is begun before acquisition (must be finalised within one year after acquisition).
Status: IASB considered this in developing IFRS 3.

IFRS 3 Recognising pre-acquisition contingencies in a business combination

IFRS: Recognise if fair value is reliably measurable. Also the definition of contingent liability is broader than that in US GAAP.
US: Recognise at fair value (if determinable) or estimated amount if information indicates that the contingency can be reasonably estimated and is probable to occur.
Status: IFRS 3 approach is very close to the US approach.

IFRS 3 Measuring minority interest

IFRS: Minority's percent of fair values.
US: Minority's percent of carrying amount (book values) on acquired company's books.
Status: The IASB and the FASB are working jointly on a project on procedures for acquisition accounting.

IFRS 3 Purchased in-process R&D

IFRS: Under IFRS 3 can be recognised as an acquired finite life intangible asset (and therefore amortised), or as part of goodwill if not separately measurable (and therefore not amortised but subject to an annual impairment test).
US: Expense.
Status: FASB is considering whether to move to the IASB model.

IFRS 3 Negative goodwill

IFRS: Recognise immediately as a gain.
US: Initially allocate on a pro rata basis against the carrying amounts of certain acquired non-financial assets, with any excess recognised as an extraordinary gain.
Status: FASB is considering whether to move to the IASB model.

IFRS 3 Combinations of entities under common control

IFRS: Outside the scope of IFRS 3 though merger accounting (pooling of interests method) is generally used in practice.
US: Pooling of interests method is required.
Status: This is included in the scope of Phase II of IASB's business combinations project.

IFRS 4 Rights and obligations under insurance contracts

IFRS: IFRS 4 addresses recognition and measurement in only a limited way. It is an interim standard pending completion of a comprehensive project.
US: FASB has adopted several comprehensive pronouncements, and other comprehensive industry accounting guides have been published.
Status: The IASB is developing a comprehensive standard on accounting for rights and obligations under insurance contracts that is consistent with the IASB Framework definitions of assets and liabilities.

IFRS 4 Derivatives embedded in insurance contracts

IFRS: An embedded derivative whose characteristics and risks are not closely related to the host contract but whose value is interdependent with the value of the insurance contract need not be separated out and accounted for as a derivative.
US: An embedded derivative whose characteristics and risks are not closely related to the host contract must be accounted for separately.
Status: Not currently being addressed.

IFRS 5 Definition of a discontinued operation

IFRS: A reportable business or geographical segment or major component thereof.
US: A reportable segment, operating segment, reporting unit, subsidiary, or asset group (less restrictive than the IASB definition).
Status: Not currently being addressed.

IFRS 5 Presentation of discontinued operations

IFRS: Post-tax income or loss is required on the face of the income statement.
US: Pre-tax and post-tax income or loss is required on the face of the income statement.
Status: Not currently being addressed.

IFRS 6 Impairment of costs capitalised under full costing