discussing the similarities and differences between at least 4 International Fin

Question

discussing the similarities and differences between at least 4 International Financial Reporting Standards and US GAAP that have been discussed for investments, accounting for income taxes, accounting for pensions and postretirement benefits, accounting for leases, accounting changes and error analysis, statement of cash flows and full disclosure in financial reporting in Intermediate Accounting Book. Discuss why you believe any differences exist and whether you believe these differences will be resolved. Complete sentence.

Explanation / Answer

The transition to IFRS can be a long and complicated process with many technical and accounting challenges to consider. Experience with conversions in Europe and Asia indicates there are some challenges that are consistently underestimated by companies making the change to IFRS, including:

Consideration of data gaps—

Preparation of the opening IFRS balance sheet may require the calculation or collection of information that was not previously required under US GAAP. Companies should plan their transition and identify the differences between IFR and US GAAP early so that all of the information required can be collected and verified in a timely manner. Likewise, companies should

identify differences between local regulatory requirements and IFRS. This could impact the amount of information-gathering necessary. For example, certain information required by the SEC but not by IFRS (e.g., a summary of historical data) can still be presented,in part, under US GAAP but must be clearly labeled as such, and the nature of the main adjustments to comply with IFRS must be discussed. Other incremental information required by a regulator might need to be presented in accordance with IFRS. For example, the SEC in certain instances requires two years of comparative IFRS financial statements, whereas IFRS would require only one.

Consolidation of additional entities—

IFRS consolidation principles differ from those of US GAAP in certain respects and those

differences might cause some companies either to deconsolidate entities or to consolidate entities that were not consolidated under US GAAP. Subsidiaries that previously were excluded from the consolidated financial statements are to be consolidated as if they were first-time adopters on the same date as the parent. Companies also will have to consider the potential data gaps of investees to comply with IFRS informational and disclosure requirements.

Consideration of accounting policy choices—

A number of IFRS standards allow companies to choose between alternative policies.

Companies should select carefully the accounting policies to be applied to the opening balance sheet and have a full understanding of the implications to current and future periods. Companies should take this opportunity to evaluate their IFRS accounting policies with a “clean sheet of paper” mind-set. Although many accounting requirements are similar between US GAAP and IFRS, companies should not overlook the opportunity to explore alternative IFRS accounting policies that might better reflect the economic substance of their transactions and enhance their communications with investors.

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