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1、精选优质文档-倾情为你奉上READING 31: FINANCIAL REPORTING STANDARDSFRAMEWORKU.S. GAAPIFRSSimilaritiesPurposeof FrameworkThe FASB framework resides lowerinhierarchy. Management is not required to prioritize it if no standard is available.Management is explicitly required to prioritize the IASB framework if there
2、is no standard or interpretation available.Both the frameworks are similar in their purpose to assist in developing and assisting standards.Objectives of financial statementIt provides different objectives for business entities versus non business entities.It gives one objective for different busine
3、ss entities.Both frameworks have a broad focus to provide relevant information to a wide range of users.Underlying assumptionsAlthough it recognizes, but not given much prominence is given to accrual and going concern basis. In fact going concern assumption is not well developed in particularGive im
4、portance to accrual and going concern basisQualitative CharacteristicsSame characteristics but with a hierarchy Relevance and Reliability are primary qualities. Comparabilityisthe secondary quality. Understandability,treated as user-specificIt has the same characteristics (understandability, compara
5、bility, relevance and reliability) but there is no such hierarchy.The characteristics are same.ApproachRules based approach in the past but moving towards adopting object oriented approachPrinciples based approachFinancial statement elements (definition, recognition, and measurement)Performance elem
6、entsElements are revenues, expenses, gains, losses, and comprehensive income.Revenues and ExpensesFinancial Position elementsAsset: a future economic benefit.Term Probable is used to define assets and liabilities elements.Asset: a future economic resource with which future economic benefits are expe
7、ctedProbable is a part of the framework recognition criteria.Recognition of elementsDoes not discuss “Probable” for recognition criteria. Has separate criteria based upon “Relevance”IASB framework requires that it is probable that any future economic benefit to flow to/from the entity.Measurement of
8、 elementsFASB generally prohibits revaluations except for certain categories which must be carried at fair value (discussed in later topics).Revaluation is usually permitted (discussed in later topics)Measurement attributes like historical cost, current cost, settlement value, current market value,
9、and present value are broadly consistent.专心-专注-专业READING 32: COMPONENTS AND FORMAT OF THE INCOME STATEMENTU.S. GAAPIFRSSimilaritiesRevenue RecognitionIt specifies that revenue should be recognized when it is “realized or realizable and earned.”1. There is evidence of an arrangementbetween buyer and
10、seller.2. The product has been delivered, or the service has been rendered.3. The price is determined, or determinable.4. The seller is reasonably sure of collecting money.The basic revenue recognition deal with the definition of “earned.” The conditions are:1. The entity has transferred to the buye
11、r the significant risks and rewards of ownership of the goods;2. The entity retains neither continuingmanagerial involvement to the degree usually associated with ownership nor effective control over the goods sold;3. The amount of revenue can be measured reliably;4. It is probable that the economic
12、benefits associated with the transaction will flow to the entity; and5. The costs incurred or to be incurred in respect of the transaction can be measured reliably.Revenue Recognition (Service)Does not deal separatelyThe outcome of service can be estimated reliably, revenue associatedwiththe transac
13、tion will be recognized with reference to the stage of completion of the transaction at the balance sheet date. The conditions to measure reliably are:1. The amount of revenue can be measured reliably;2. It is probable that the economicbenefits associated with the transaction will flow to the entity
14、;3. The stage of completion of the transaction at the balance sheet date can be measured reliably; and4. The costs incurred for the transaction and the costs to complete the transaction can be measured reliably.Longterm ContractsUnder U.S. GAAP, a different method is used when the outcome cannot be
15、measured reliably,termedthe “completedcontract method.”Underthe completed contract method, the company does not report any revenue until the contract is finished. Under U.S. GAAP, the completed contract method is also appropriate when the contract is not a long-term contract.If the outcome of the co
16、ntract cannot be measured reliably, then revenue is only reported to the extent of contract costs incurred (if it is probable the costs will be recovered). Costs are expensed in the period incurred. Under this method, no profit would be reported until completion of the contract.IFRS provide that whe
17、n the outcome of a construction contract can be measured reliably, revenue and expenses should be recognized in reference to the stage of completion. U.S. GAAP has a similar requirement. Under both IFRS and U.S. GAAP, if a loss is expected on the contract, the loss is reported immediately, not upon
18、completion of the contract, regardless of the method used.BarterU.S. GAAP states that revenue can be recognized at fair value only if a company has historically received cash payments for such services and can thus use this historical experience as a basis for determining fair value.Under IFRS, reve
19、nue from barter transactions must be measured based on the fair value of revenue from similar non barter transactions with unrelated parties (parties other than the barter partner)Gross Vs. Net ReportingTo report gross revenues, the following criteria are relevant:1. The company is the primary oblig
20、or under the contract,2. bearsinventoryriskand credit risk,3. can choose its supplier, and4. has reasonable latitude to establish price.If these criteria are not met, the company should report revenues netDepreciation AmortizationIn most cases IFRS and U.S. GAAP, amortizable intangible assets are am
21、ortized using the straight-line method with no residual value. Goodwill and intangible assets with indefinite life are not amortized. Instead, they are tested at least annually for impairment.Discontinued OperationsThe income statement reports separately the effect of this disposal as a “discontinue
22、d” operation under both IFRS andU.S. GAAP.Extraordinary ItemsUnder U.S. GAAP, an extraordinary item is one that is both unusual in nature and infrequent in occurrence.IFRS prohibits classification of any income or expense items as being “extraordinary.”EarningsPer shareUnder U.S. GAAP, equity for wh
23、ich EPS is presented is referred to as common stock or common shares.Under IFRS, the type of equity for which EPS is presented is ordinary shares.Both IFRS &U.S. GAAP require the presentation of EPS on the face of the income statement for net profit or loss from continuing operations.Treasury Stock
24、MethodUnder U.S. GAAP, when a company has stock options, warrants, or their equivalents outstanding, the diluted EPS is calculated using the treasury stock methodUnder IFRS, requires a similar computation but does not refer to it as the “treasury stock method.”Comprehensiv e IncomeAccording to U.S.
25、GAAP, four types of items are treated as other comprehensive income. Foreign currency translation adjustments. Unrealized gains or losses on derivatives contracts accounted for as hedges. Unrealized holding gains and losses on a certain category of available-for- sale securities. Changes in the fund
26、ed status of a companys defined benefit post- retirement plans.READING 33: UNDERSTANDING THE BALANCE SHEETU.S. GAAPIFRSSimilaritiesBalance sheet illustrationsUnder U.S. GAAP current assets and current liabilities are shown before long term assets and liabilities respectively. It requires that minori
27、ty interests be presented on the consolidated balance sheet as a separate component of stock- holders equity and labeled separately. Entity with multiple minority interests may present in aggregate.Under IFRS the minority section is shown, as required, in the equity section. Noncurrent assets, as co
28、mmon practice are shown before current assets.Measurement basisThe notes to financial statementsandmanagements discussion and analysis are integral parts of the U.S. GAAP and IFRS financial reporting processes.InventoriesLIFO is allowed under U.S. GAAP along with FIFO, specific identification and we
29、ighted averageLIFO is not allowed under IFRS whereas FIFO, specific identification and weighted average are allowedSpecifically identifiable intangible assetsU.S. GAAP prohibits the capitalization as an asset of almost all research and development costs. All such costs usually must be expensed.Gener
30、ally, under U.S. GAAP, acquired intangible assets are reported as separately identifiable intangibles (as opposed to goodwill) if they arise from contractual rights (such as a licensing agreement), other legal rights (such as patents), or have the ability to be separated and sold (such as a customer
31、 list).Under IFRS, specifically identifiable intangible assets are recognized on the balance sheet if it is probable that future economic benefits will flow to the company and the cost of the asset can be measured reliably (externally purchased).IFRS prohibits the capitalization of costs as intangib
32、le assets during the research phase. Instead, these costs must be expensed on the income statement. Costs incurred in the development stage can be capitalized as intangible assets if certain criteria are met.Internally created identifiable intangibles are less likely to be reported on the balance sh
33、eet under IFRS or U.S. GAAP rather expensed outGoodwillUnder both IFRS &U.S. GAAP Goodwill should be capitalized and tested for impairment annually.READING 34: UNDERSTANDING THE CASH FLOW STATEMENTU.S. GAAPIFRSSimilaritiesInterests receivedOperating cash flowOperating or Investing cash flowInterest
34、paidOperating cash flowOperating or Financing cash flowDividends receivedOperating cash flowOperating or Investing cash flowDividends paidFinancing cash flowOperating or Financing cash flowBank overdraftsNot considered as cash or cash equivalents; classified as financingConsideredpartofcash equivale
35、ntTaxes paidOperatingGenerally operating but a portion can be investing or financing if identified separately with these categoriesFormat statementofIf direct is used reconciliation of NI with Operating cash flow must be providedNosuchrequirementto provide any reconciliationDirect or Indirect; encou
36、ragedDirectisDisclosuresIf not presented on the cash flow statement, both interest and taxes paid must be disclosed in footnotesTaxcashflowsmustbe separately disclosed in the cash flow statementPrevious Years StatementsThreeyearsofcashflow statements are providedTwoyearsofcashflow statements are pro
37、videdREADING 35: FINANCIAL ANALYSIS TECHNIQUESU.S. GAAPIFRSSimilaritiesSegment ReportingRequirements are similar to IFRS but less detailed. Disclosure of Segment Liabilities is a noticeable omissionIFRSrequiresthedetailed reporting of segmentsREADING 36: INVENTORIESU.S. GAAPIFRSSimilaritiesCostofInv
38、entoriesUnder both IFRS and U.S. GAAP the cots to be included in inventories and those needed to be expensed immediately are same.Inventory Valuation MethodsLIFO is permittedLIFO is not permittedUnder both IFRS and U.S. GAAP specificidentification, weighted average and FIFO are allowed.Measurement o
39、fInventory ValueInventories are measured at lower of costs or market where market is the current replacement cost which cannot be greater than NRV and lower than NRV minus Profit margin.Inventories should be measured at lower of cost and NRV (net releasable value).Reversalof Write-downU.S.GAAPprohib
40、itsany reversal of write-down.The amount of any reversal of any write-down of inventory arising from an increase in net realizable value is recognized as a reduction in cost of sales (COGS)MarktoMarket (presenting on fair value)U.S. GAAP are similar to IFRS in the treatment of inventories of agricul
41、tural and forest products and mineral ores. Mark-to-marketinventory accounting is allowed for refined bullion of precious metals.DisclosuresU.S. GAAP require of disclosure of income from LIFO Liquidation and significant estimatesrelatedto inventories.IFRS requires the amount of write down to be disc
42、losed and the circumstances which led to the write down of inventoriesOther disclosures are similar.Changesin inventory valuation method Under U.S. GAAP, a company making a change in inventory valuation method is required to explain why the newly adopted inventory valuation method is superior and pr
43、eferable to the old method. If a company changes from LIFO to any other method retrospective application is necessary. If a company changes to LIFO method then prospective application is necessaryUnder IFRS, a change in accounting policy, also cost formula, is acceptable only if the change results i
44、n the financial statements providing reliable more relevant information about the effects of transactions, other events, or conditions on the business financial position, financial performance, or cash flows.READING 37: LONG LIVED ASSETSU.S. GAAPIFRSSimilaritiesAcquisition of Long lived AssetsU.S. G
45、AAP does not net the interests.Under IFRS, income earned on temporarily investing the borrowed monies decreases the amount of borrowing costs eligible for capitalization.Intangible assets developed internallyU.S. GAAP requires both research and development costs to be expensed except for software de
46、velopmentUnder IFRS the research cost is expensed whereas the developmentcostis capitalized as an intangible assetThe treatment of software development costs under U.S. GAAP is similar to the treatment of all costs of internally developed intangible assets under IFRS.Intangible assets acquired in a
47、Business CombinationUnder U.S. GAAP, there are two criteria to judge whether an intangible asset acquired in a business combination should be recognized separately from goodwill: The asset must be either an itemarisingfrom contractual legal rights An item that can be separated from the acquired companyUnder IFRS, the acquired individual assets include identifiable intangible assets that meet the definitional and recognition criteria. If it doesnt then it will be recorded as goodwillDepreciation/