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UNIVERSITY OF NATIONAL AND WORLD ECONOMY
COURSEWORK
Business combinations
US GAAP vs. IFRS
Sofia,
27/05/2010
Contents
1. International Financial Reporting Standards (IFRS)
2. Generally Accepted Accounting Principles (US)
6. Acquired assets and liabilities
1. International Financial Reporting Standards (IFRS)
International Accounting Standards Board (IASB), adopted standards, interpretations and frame work called International Financial Reporting Standards (IFRS). Many of this standards are known by the older name of International Accounting Standards (IAS). IAS were issued between 1973 and 2001 by the Board of the International Accounting Standards Committee (IASC). On 1 April 2001, the new IASB took over from the IASC the responsibility for setting International Accounting Standards. The IASB has continued to develop standards calling the new standards IFRS.
The basic elements of the standards are:
1. Asset: An asset is a resource controlled by the enterprise as a result of past events, and from which future economic benefits are expected to flow to the enterprise.
2. Liability: A liability is a present obligation of the enterprise arising from the past events, the settlement of which is expected to result in an outflow from the enterprise' resources, i.e., assets.
3. Equity: Equity is the residual interest in the assets of the enterprise after deducting all the liabilities.
4. Revenues: increases in economic benefit during an accounting period in the form of inflows or enhancements of assets, or decrease of liabilities that result in increases in equity. However, it does not include the contributions made by the equity participants, i.e., proprietor, partners and shareholders.
5. Expenses: decreases in economic benefits during an accounting period in the form of outflows, or depletions of assets or incurrences of liabilities that result in decreases in equity.
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5. Costs of acquisitions
Contingent consideration
The accounting for contingent consideration has moved to being recorded at fair value. In addition, differences between IFRS and US GAAP may create differences in the initial classification of contingent consideration and, therefore, might cause differences in the subsequent accounting.
US GAAP- Contingent consideration is recognized initially at fair value as either an asset, liability or equity according to the applicable US GAAP guidance. Contingent consideration classified as an asset or a liability is remeasured to fair value at each reporting date until the contingency is resolved. The changes in fair value are recognized in earnings unless the arrangement is a hedging instrument for which ASC 815, as amended by the new business combination guidance (included in ASC 805), requires the changes to be initially recognized in other comprehensive income. Contingent consideration classified as equity is not remeasured at each reporting date. Settlement is accounted for within equity.
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Statement 141, together with the IASB’s IFRS 3, Business Combinations, completes a joint effort by the FASB and the IASB to improve financial reporting about business combinations and to promote the international convergence of accounting standards. Statement 141 and IFRS 3 required use of the acquisition method rather than the pooling-of-interests method to account for business combinations. In this Statements, the Boards in large part achieved their goal of reaching the same conclusions on the more significant issues involving application of the acquisition method of accounting for a business combination.
1. Ernst & Young - US GAAP vs. IFRS, April 2008;
2. PricewaterhouseCoopers- A Global Guide to Accounting for Business Combinations and Noncontrolling Interests, 2009;
3. PricewaterhouseCoopers - IFRS and US GAAP- similarities and differences, September 2009;
4. www.cpaclass.com/gaap- US GAAP sources;
5. www.en.wikipedia.org- IFRS;
6. www.en.wikipedia.org- GAAP(USA);
7. www.ey.com/ifrs- Ernst & Young, IFRS sources;
8. www.fasb.org- Statement No. 141(revised 2007);
9. www.fasb.org- Summary of Statement No. 141;
10. www.iasb.org- IFRS 3 Business Combinations;
11. www.ifrs.com/- IFRS Resources;
12. www.pwc.com/ifrs - PricewaterhouseCoopers, IFRS resources
Темата е разработена 27. 05. 2010 г.
Не съдържа таблици и графики.
Ключови думи:
business combinations, International Financial Reporting Standards (IFRS), Generally Accepted Accounting Principles (US), costs of acquisitions, acquired assets and liabilities, International Accounting Standards Board (IASB)
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