IFRS and US GAAP Similarities and Differences (PWC) 2 01 9 PDF

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IFRS and US GAAP Similarities and Differences (PWC) 2019...

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IFRS and US GAAP: similarities and differences 2018

This publication has been prepared for general informational purposes, and does not constitute professional advice on facts and circumstances specific to any person or entity. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication. The information contained in this publication was not intended or written to be used, and cannot be used, for purposes of avoiding penalties or sanctions imposed by any government or other regulatory body. PricewaterhouseCoopers LLP, its members, employees, and agents shall not be responsible for any loss sustained by any person or entity that relies on the information contained in this publication. Certain aspects of this publication may be superseded as new guidance or interpretations emerge. Financial statement preparers and other users of this publication are therefore cautioned to stay abreast of and carefully evaluate subsequent authoritative and interpretative guidance. The FASB Accounting Standards Codification® material is copyrighted by the Financial Accounting Foundation, 401 Merritt 7, Norwalk, CT 06856, and is reproduced with permission. Copyright © IFRS® Foundation. All rights reserved. Reproduced by PricewaterhouseCoopers LLP with the permission of IFRS Foundation. Reproduction and use rights are strictly limited. No permission granted to third parties to reproduce or distribute. The International Accounting Standards Board and the IFRS Foundation do not accept responsibility for any loss caused by acting or refraining from acting in reliance on the material in this publication, whether such loss is caused by negligence or otherwise.

PwC guide library Other titles in the PwC accounting and financial reporting guide series:

PwC

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Bankruptcies and liquidations

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Business combinations and noncontrolling interests, global edition

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Consolidation and equity method of accounting

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Derivatives and hedging

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Fair value measurements, global edition

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Financial statement presentation

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Financing transactions

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Foreign currency

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Income taxes

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Leases

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Loans and investments

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Property, plant, equipment and other assets

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Revenue from contracts with customers, global edition

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Stock-based compensation

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Transfers and servicing of financial assets

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Utilities and power companies

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Acknowledgments The IFRS and US GAAP: similarities and differences publication represents the efforts and ideas of many individuals within PwC. The 2018 project leaders include David Schmid, Dusty Stallings, Shiri Wertman, and Takeo Inada. The following PwC people contributed to the content or served as technical reviewers of this publication: Nicole Berman Richard Brown Jamie Carlson Joshua Contant Chip Currie Tony de Bell Shannon Detling Donald Doran Alexander Gee Marc Jerusalem Marie Kling Flavia Maslaton Andreas Ohl Jillian Pearce Jay Seliber Jennifer Spang Jessica Taurae Sandra Thompson Scott Tornberg Valerie Wieman

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Preface PwC is pleased to offer this guide, IFRS and US GAAP: similarities and differences. It has been updated as of June 2018. This publication is designed to alert companies, investors, and other capital market participants to the major differences between IFRS and US GAAP as they exist today, and to the timing and scope of accounting changes that the standard setting agendas of the IASB and FASB (collectively, the Boards) will bring. It would appear that the use of IFRS in the United States by public companies will not be required for the foreseeable future. However, as discussed in Chapter 1, knowing both accounting frameworks, being financially bilingual, is increasingly important for US capital market participant s. Each topical chapter consists of the following: □

A conceptual discussion of the current IFRS and US GAAP similarities and differences

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A detailed analysis of current differences between the frameworks, including an assessment of the impact of the differences

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Commentary and insight with respect to recent/proposed guidance

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In addition, this publication includes an overview of IFRS for small and mediumsized entities.

This publication is not all-encompassing. It focuses on those differences that we generally consider to be the most significant or most common. When applying the individual accounting frameworks, companies should consult all of the relevant accounting standards and, where applicable, national law. References to US GAAP and IFRS Definitions, full paragraphs, and excerpts from the FASB’s Accounting Standards Codification and standards issued by the IASB are clearly designated within quotes in the text. In some instances, guidance was cited with minor editorial modification to flow in the context of the PwC Guide. The remaining text is PwC’s original content. References to other chapters and sections in this guide When relevant, the discussion includes general and specific references to other chapters of the guide that provide additional information. References to another chapter or particular section within a chapter are indicated by the abbreviation “SD” followed by the specific section number (e.g., SD 2.3.2 refers to section 2.3.2 in chapter 2 of this guide).

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Guidance date This guide has been updated and considers guidance under IFRS and US GAAP as of June 30, 2018. Additional updates may be made to keep pace with significant developments. Users should ensure they are using the most recent edition available on CFOdirect (www.cfodirect.com) or Inform (www.pwcinform.com). Other information The appendices to this guide include a FASB/IASB project summary exhibit and a summary of significant changes from the previous edition. ***** This guide has been prepared to support you in reviewing the differences between IFRS and US GAAP that we generally consider to be the most significant or most common. It should be used in combination with a thorough analysis of the relevant facts and circumstances, review of the authoritative accounting literature, and appropriate professional and technical advice. We hope you find the information and insights in this guide useful. Paul Kepple US Chief Accountant

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Table of contents 1

Importance of being financially bilingual 1.1

Overview ........................................................................................................

1-2

1.2

IFRS and the SEC .........................................................................................

1-2

1.3

IFRS affects US businesses in multiple ways ..............................................

1-3

1.3.1

Mergers and acquisitions and capital-raising ..............................

1-3

1.3.2

Non-US stakeholders .....................................................................

1-3

1.3.3

Non-US subsidiaries ......................................................................

1-3

Our point of view ..........................................................................................

1-3

1.4 2

IFRS first-time adoption 2.1

3

IFRS first-time adoption ..............................................................................

2-2

2.1.1

What does IFRS 1 require? ............................................................

2-2

2.1.2

When to apply IFRS 1 ....................................................................

2-3

2.1.3

The opening IFRS balance sheet ...................................................

2-3

2.1.4

Important takeaways .....................................................................

2-3

Revenue recognition 3.1

Revenue recognition .....................................................................................

3-2

3.2

Collectibility threshold .................................................................................

3-2

3.3

Noncash consideration .................................................................................. 3-3

3.4

Licenses of intellectual property ...................................................................

3-3

3.5

Practical expedients at transition and definition of completed contract ...

3-4

3.6

Shipping and handling .................................................................................. 3-5

3.7

Presentation of taxes collected from customers ..........................................

3-5

3.8

Interim disclosure requirements ..................................................................

3-6

3.9

Effective date ................................................................................................. 3-6

3.10 Impairment loss reversal .............................................................................. 3.11 Relief for nonpublic entities ......................................................................... 4

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Expense recognition —share-based payments 4.1

Expense recognition—share-based payments ............................................

4-2

4.2

Scope .............................................................................................................

4-3

4.3

Measurement of awards granted to employees by nonpublic companies .....................................................................................................

4-4

4.4

Measurement of awards granted to nonemployees ....................................

4-4

4.5

Classification of certain instruments as liabilities or equity ......................

4-5

4.6

Awards with conditions other than service, performance, or market conditions .........................................................................................

4-6

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4.7

Awards with a performance target met after the requisite service period is completed ......................................................................................

4-6

4.8

Service-inception date, grant date, and requisite service ...........................

4-7

4.9

Attribution—awards with service conditions and graded-vesting features ..........................................................................................................

4-7

4.10 Attribution—awards to nonemployees ........................................................

4-8

4.11

Certain aspects of modification accounting ................................................

4-8

4.12

Accounting for forfeitures ............................................................................

4-8

4.13

Derived service period ..................................................................................

4-9

4.14 Tax withholding arrangements—impact to classification ..........................

4-9

4.15

Accounting for income tax effects ................................................................

4-10

4.16 Recognition of social charges (e.g., payroll taxes) ......................................

4-10

4.17

5

Valuation—Guidance on expected volatility and expected term................................................................................................

4-11

4.18 Employee stock purchase plans (ESPP) ......................................................

4-11

4.19 Group share-based payment transactions ..................................................

4-12

Expense recognition —employee benefits 5.1

Expense recognition—employee benefits ....................................................

5-2

5.2

Expense recognition—gains/losses..............................................................

5-4

5.3

Expense recognition—prior service costs and credits ................................

5-4

5.4

Expense recognition—expected return on plan assets ...............................

5-5

5.5

Income statement classification ..................................................................

5-6

5.6

Capitalization of employee benefit costs .....................................................

5-7

5.7

Measurement date and frequency ...............................................................

5-7

5.8

Substantive commitment to provide pension or other postretirement benefits ..........................................................................................................

5-8

Defined benefit versus defined contribution plan classification ...............

5-8

5.9

5.10 Curtailments .................................................................................................

5-9

5.11

Settlements....................................................................................................

5-10

5.12

Asset ceiling ..................................................................................................

5-11

5.13

Measurement of defined benefit obligation when both employers and employees contribute ............................................................................

5-11

5.14

Plan asset valuation ......................................................................................

5-12

5.15

Discount rates ...............................................................................................

5-13

5.16

Accounting for termination indemnities .....................................................

5-13

5.17

Deferred compensation arrangements—employment benefits .................

5-14

5.18

Accounting for taxes .....................................................................................

5-14

5.19

Recent/proposed guidance ..........................................................................

5-15

5.19.1

IASB amendment - Remeasurements upon a significant event ...............................................................................................

5-15

5.19.2 IASB exposure draft - Availability of refunds from a defined benefit plan managed by an independent trustee ......................... 5-15

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Assets—nonfinancial assets 6.1

Assets—nonfinancial assets .........................................................................

6-2

6.2

Impairment of long-lived assets held for use—general ..............................

6-3

6.2.1

Impairment of long-lived assets—cash flow estimates ................

6-4

6.2.2

Impairment of long-lived assets—asset groupings ......................

6-6

6.3

Impairment of long-lived assets held for sale—general .............................

6-6

6.4

Carrying basis ...............................................................................................

6-7

6.5

Internally developed intangibles .................................................................

6-7

6.6

Acquired research and development assets ................................................

6-8

6.7

Indefinite-lived intangible assets—level of assessment for impairment testing ............................................................................................................

6-9

6.7.1

Indefinite-lived intangible assets—impairment testing...............

6-9

6.7.2

Indefinite-lived intangible assets—impairment charge measurement ..................................................................................

6-10

6.8

Impairments of software costs to be sold, leased, or otherwise marketed .......................................................................................................

6-10

6.9

Advertising costs ..........................................................................................

6-11

6.10 Depreciation ................................................................................................ .

6-12

6.11

Overhaul costs ..............................................................................................

6-12

6.12

Asset retirement obligations ........................................................................

6-12

6.13

Borrowing costs ............................................................................................

6-13

6.14 Lease scope ...................................................................................................

6-14

6.15

Lease classification —general .......................................................................

6-15

6.16 Sale-leaseback arrangements ......................................................................

6-16

6.17

Leases involving land and buildings ...........................................................

6-17

6.18 Lease—other .................................................................................................

6-18

6.19 Distributions of nonmonetary assets to owners .........................................

6-20

6...