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International Versus U.S. Accounting: What in the World is the Difference?

Author/Moderator: Frederick Niswander, CPA, Ph.D. and Teresa L. Conover, CPA, Ph.D.
Publisher: AICPA
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Description

In 2002, IASB and FASB agreed to harmonize their agenda and work towards reducing differences between IFRS and U.S. GAAP. It has become apparent that FASB is working hard on this goal as recent pronouncements of both the FASB and the IASB are bringing the standards more in line with one another. In addition, the SEC recently removed the reconciliation requirement for foreign issuers to reconcile their financial statements from IFRS to U.S. GAAP.

With the fast pace of the convergence project, understanding the differences between IFRS and U.S. GAAP is becoming more important for businesses of all sizes. This course outlines the major differences between IFRS and U.S. GAAP.

Objectives: 
  • Recognize the significant differences and similarities between U.S. GAAP and IFRS
  • Analyze financial statements prepared in accordance with IFRS
  • Standardize reporting in an international environment

Prerequisite: Experience in financial reporting.

Table of Contents

  • Chapter 1 - Introduction to International Accounting
    • Learning Objectives
    • Introduction
    • Cross-Country Accounting Differences
    • Why Accounting Rules Differ Internationally
    • The Demand for International Accounting Standards
    • Impediments to International Accounting Standards
    • The International Accounting Standards Committee
    • The International Accounting Standards Board
    • Adoption of International Standards
    • FASB/IASB Cooperation
    • Summary and Conclusions
    • Questions
    • Case
  • Chapter 2 - Introduction to Financial Statements Prepared in Accordance with IAS
    • Learning Objectives
    • Introduction
    • It's All in How You Say It
    • Conceptual or Theoretical Accounting Framework
    • IAS 1 - Presentation of Financial Statements
      • Financial Statement Presentation - Balance Sheet
      • Financial Statement Presentation - Income Statement
      • Financial Statement Presentation - Statement of Changes in Equity
      • Financial Statement Presentation - Cash Flow Statement
      • Financial Statement Presentation - Footnotes
    • Audit Report
    • Summary and Conclusions
    • Questions
    • Case
  • Chapter 3
    • Current Assets - Learning Objectives
    • Introduction
    • Financial Statement Presentation of Current Assets
      • Cash
      • Accounts Receivable
      • Inventories
      • Marketable Securities
    • Summary and Conclusions
    • Questions
    • Case
      • Sub-case A
      • Sub-case B
      • Sub-case C
  • Chapter 4
    • Property, Plant & Equipment, and Investment Property
    • Learning Objectives
    • Introduction
    • Property, Plant & Equipment (PP&E)
      • Initial Valuation
      • Construction Period Interest
      • Exchange of Assets
      • Asset Exchanges
      • Depreciation of PP&E
      • Revaluation of PP&E
      • Deferred Taxes on Revaluations
      • Downward Revaluations
      • Disclosure Requirements for Long-Term Assets
    • Investment Property
    • Summary and Conclusions
    • Questions
    • Case
  • Chapter 5 - Leases, Intangibles, and Asset Impairment
    • Learning Objectives
    • Introduction
    • Leases
      • Lease Disclosures
      • Other Lease Issues
      • Example Companies
    • Intangible Assets
      • Purchased Intangible Assets
      • Self-Created Intangible Assets
      • Revaluation of Intangible Assets
      • Measurement Subsequent to Acquisition
      • Goodwill
      • Example Companies
    • Impairment of Long-Term Assets
      • Comparison to U.S. GAAP
      • Subsequent Reversals of Impairment Losses
      • Impairment of Goodwill
      • Impairment Disclosures
      • Other Impairment Issues
      • Example Companies
      • Deferred Tax Assets
    • Summary and Conclusions
    • Questions
    • Cases
  • Chapter 6 - Liabilities
    • Learning Objectives
    • Introduction
    • General
    • Contingencies
    • Deferred Taxes
    • Pensions
    • Employee Stock Compensation
    • Convertible Debt
    • Preferred Stock
    • Summary and Conclusions
    • Questions
    • Case
  • Chapter 7 - Accounting Changes, Discontinued Operations, Derivatives and Hedging, Segment Reporting, and Interim Financial Statements
    • Learning Objectives
    • Summary
    • Accounting Changes and Error Correction
      • Change in Estimate
      • Change in Accounting Principle
      • Correction of an Error
    • Discontinued Operations
    • Long-term Construction Contracts
    • Derivatives
    • Hedge Accounting
      • Disclosures by Example Companies
    • Segment Reporting
      • Primary Features of IFRS 8
      • Segment Reporting by Example Companies
    • Interim Financial Reporting
    • Summary and Conclusions
    • Cases
  • Chapter 8 - Business Combinations, Consolidated Financial Statements, and Foreign Operations
    • Learning Objectives
    • Introduction
    • Business Combinations
      • Accounting Methods
      • Cost of the Acquisition
      • Assets and Liabilities to be Revalued
      • Recognition of Intangible Assets
      • Goodwill
      • Negative Goodwill
      • Disclosures
      • Sample Companies
    • Consolidated Financial Statements
      • Joint Ventures
      • Associates
    • Foreign Subsidiaries
    • Summary and Conclusions
    • Cases
  • Chapter 9 - Ethics Focus: Accounting and Auditing
    • Ethics Overview
    • Recent Developments
    • Spotlight on Independence
    • Key Ethical Dilemmas
    • Addressing Ethical Dilemmas
    • Available Resources
  • Chapter 10 - Latest Developments
    • Appendix A - Jardine Matheson
    • Appendix B - Nestlé
    • Appendix C - Bayer
    • Appendix D- Nokia

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Excerpts

Chapter 1

Introduction to International Accounting

Learning Objectives

  • Understand why accounting rules differ across countries.
  • Identify the factors that cause accounting rules to differ across countries.
  • Describe the structure and operation of the International Accounting Standards Board (IASB) and its predecessor body, the International Accounting Standards Committee (IASC).
  • Be aware of the change in global attitudes toward international accounting standards.
  • Recognize and differentiate cosmetic from substantive differences between U.S. GAAP and International Financial Reporting Standards (IFRS).

Introduction
This text is intended to provide an overview of differences between accounting rules promulgated in the United States (U.S. GAAP) and international accounting rules established by the International Accounting Standards Board (IASB). These international rules consist primarily of International Financial Reporting Standards (IFRS) and International Accounting Standards (IAS).

The definition of IFRS has both a narrow and broad meaning. Narrowly, IFRSs refers to the new numbered series of pronouncements that the IASB is issuing, as distinct from the IASs series issued by the IASC, the predecessor to the IASB. More broadly, IFRSs refers to the entire body of IASB pronouncements, including standards and interpretations approved by the IASB and IASs and Standing Interpretations Committee (SIC) interpretations approved by the IASC.

As we will see, there are many areas of difference between U.S. GAAP and IFRS. However, the similarities are greater than the differences.

We approach the issue from the perspective of how IFRS differ from U.S. GAAP. We do not significantly address the areas of agreement. This text will be helpful, for example, to a U.S. controller who needs to begin to understand how to prepare financial statements in accordance with IFRS. We also assume that the reader is generally familiar with U.S. GAAP.

Cross-Country Accounting Differences

Accounting rules differ across countries and these differences may be cosmetic or substantive.

An example of a cosmetic difference is the presentation of the balance sheet in many countries that are, or were, members of the British Commonwealth. The balance sheet of a UK company is often presented (1) in reverse order of liquidity and (2) in the form A – L = OE rather than A = L + OE.

Exhibit 1-1 is the 2001 Balance Sheet of GlaxoSmithKline, prepared in accordance with UK GAAP and UK presentation conventions. It starts with goodwill and other fixed assets, then lists current assets and liabilities, which are combined to get net current assets, then subtracts other liabilities, and finally totals to net assets of £8,379 million. The equity section is then provided, which reconciles to the net asset figure.

Exhibit 1-1
Consolidated Balance Sheet
 
Notes
2001
£m
2000
£m
Goodwill
15
174
170
Intangible Assets
16
1,673
966
Tangible Assets
17
6,854
6,642
Investments
18
3,228
2,544
Fixed Assets
 
11,920
10,322
Equity Investments
19
185
171
Stocks
20
2,090
2,277
Debtors
21
5,591
5,399
Liquid investments
25
1,415
2,138
Cash at bank
25
716
1,283
Current assets
 
9,997
11,268
Loans and overdrafts
25
(2,124)
(2,281)
Other creditors
22
(7,306)
(6,803)
Creditors: amounts due after one year
 
(9,430)
(9,084)
Net current assets
 
567
2,184
Total assets less current liabilities
 
12,487
12,506
Loans
25
(2,108)
(1,751)
Other creditors
22
(190)
(143)
Creditors: amounts due after one year
 
(2,298)
(1,894)
Provisions for liabilities and charges
23
(1,810)
(1,657)
Net assets
 
8,379
8,955
Called up share capital
27
1,543
1,556
Share premium account
27
170
30
Other reserves
29
1,866
1,849
Profit and loss account
29
3,938
4,276
Equity shareholders’ funds
 
7,517
7,711
Non-equity minority interest
28
621
1,039
Equity minority interests
 
241
205
Capital employed
 
8,379
8,955
Approved by the Board
Sir Richard Sykes, Chairman
12th March 2002

 

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Videocourse Details

NASBA Field of Study: Accounting
Level: Intermediate
Recommended CPE Credit: 10
Important Information on Your CPE Credit
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Product# 731666
Availability:07/08/2008
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