Auditor-Liabilities and Equity

Auditor-Liabilities and Equity

SUBJECT	IFRS	US GAAP
Liabilities
Provisions – general	Record the provisions relating to present obligations from past events if outflow of resources is probable and can be reliably estimated.	Similar to IFRS, with rules for specific situations (employee termination costs, environmental liabilities, loss contingencies, etc).
Provisions – restructuring	Recognise restructuring provisions if detailed formal plan announced or implementation effectively begun.	Recognition of a liability based solely on commitment to a plan is prohibited. Must meet the definition of a liability, including certain criteria regarding the likelihood that no changes will be made to the plan or that the plan will be withdrawn.
Contingencies	Disclose unrecognised possible losses and probable gains.	Similar to IFRS.
Deferred income taxes – general approach	Use full provision method (some exceptions) driven by balance sheet temporary differences. Recognise deferred tax assets if recovery is probable.	Similar to IFRS, but recognise all deferred tax assets and then provide valuation allowance if recovery is less than 50% likely. A number of specific differences in application.
Deferred income taxes – main exceptions	No temporary differences on non-deductible goodwill and initial recognition of assets and liabilities that do not impact on accounting or taxable profit.	Similar to IFRS regarding non-deductible goodwill. Initial recognition exemption does not exist.
Government grants	Recognise as deferred income and amortise. Entities may offset capital grants against asset values.	Similar to IFRS except long-lived asset contributions recorded as revenue.
Leases – lessee accounting	Record finance leases as asset and obligation for future rentals. Depreciate over useful life of asset. Apportion rental payments to give constant interest rate on outstanding obligation. Charge operating lease rentals on straight-line basis.	Similar to IFRS. Specific rules must be met to record a finance or capital lease.
Leases – lessee accounting: sale and leaseback transactions	For a finance lease, defer and amortise profit arising on sale and finance leaseback. If an operating lease arises, profit recognition depends on sale proceeds compared to fair value of the asset. Consider substance/linkage of the transactions.	Timing of profit and loss recognition depends on whether seller relinquishes substantially all or a minor part of the use of the asset. Immediately recognise losses. Consider specific strict criteria if a property transaction.
Financial liabilities – classification	Classify capital instruments depending on substance of the issuer's obligations. Mandatorily redeemable preference shares classified as liabilities.	Where an instrument is not a share, classify as liability when obligation to transfer economic benefit exists. Similar to IFRS.
Convertible debt	Account for convertible debt on split basis, allocating proceeds between equity and debt.	Convertible debt is usually recognised as a liability.
Derecognition of financial liabilities	Derecognise liabilities when extinguished. The difference between the carrying amount and the amount paid is recognised in the income statement.	Similar to IFRS.

SUBJECT	IFRS	US GAAP
Equity
Capital instruments – purchase of own shares	Show as deduction from equity.	Similar to IFRS

Auditor-Liabilities and Equity