31. Summary of differences between UK and US generally accepted accounting principles The Group’s consolidated accounts are prepared in accordance with generally accepted accounting principles in the United Kingdom (“UK GAAP”), which differ in certain respects from generally accepted accounting principles in the United States (“US GAAP”). Differences which have a significant effect on the consolidated net profit and shareholders’ funds of the Group are set out below. While this is not a comprehensive summary of all differences between UK and US GAAP, other differences would not have a significant effect on the consolidated net profit or shareholders’ funds of the Group. The differences have been shown as gross of tax with the related …show more content…
Signet Group plc Annual Report & Accounts year ended 29 January 2005 103 Notes to the accounts (continued) Extended service agreements Prior to the adoption of the amendment to FRS 5 ‘Application Note G – Revenue Recognition’, the Group recognised for UK GAAP purposes all revenue arising from the sale of extended service agreements in the US at the date of sale with provision being made for the estimated cost of future claims arising under these warranties. Following the adoption of the above, under UK GAAP revenue from the sale of extended service agreements in the US is now deferred and recognised, net of incremental costs arising from the initial sale, in proportion to anticipated claims arising. This period is based on the historical claims experience of the US business, which has been consistent since these products were launched. The Group reviews the pattern of claims at the end of each year to determine any significant trends that may require changes to revenue recognition rates. Under US GAAP, the Group historically recognised revenue immediately on a proportion of contracts where analysis of past experience showed that no claim or cost arose, and deferred the balance of revenue over the estimated period of future claims. The Group’s US GAAP policy has now been corrected so that the policies applied under UK and US GAAP are now consistent, with no future GAAP differences expected to arise.
* In our opinion, Partial Revenue Recognition approach is most consistent with the actual substance of a sales transaction involving an extended warranty contract. Using partial revenue recognition, the company can recognize partial revenue at the time of sale. We can distinguish between what is earned and what is yet to be earned. At the time of sale, the company recognized a portion of the revenue that they earned on the total sales because the warranty contract is incomplete. It recognizes the rest portion of the sale as deferred revenue and records “over the contract period” (Bruns 3). This method let the sales revenue and liabilities account to
The financial statements are presented in Pounds Sterling, generally rounded to nearest million, which are prepared on the historical basis, exempting certain financial instruments such as share-based payments, customer loyalty programmes and pensions that have been measured to fair valued.
This report discusses the main principle of tax effect accounting and disclosures requirements as defined by AASB 112. It also provides a detailed analysis of Coca-Cola Amatil (CCA)’s annual report compliance with those disclosure requirements and relevance with shareholders and potential investors.
New accounting rules will affect the company’s revenue recognition in the upcoming year. Many companies such as Rolls-Royce Holdings will be affected by this change. Rolls-Royce Holdings books its revenues even before its services performed. For instance, they sell large engines and maintenance service, and Rolls-Royce Holdings booked the revenue even 1.5 years in advance. They will no longer able to book this unperformed revenues for the upcoming year. The investors will have a better picture on the firm’s revenues based on the new revenue recognition. Some sectors, such as telecommunications, media and pharmaceuticals, are expected to be affected more than others, because the firms recognize revenues before they perform the services. Moreover,
The five research articles I have chosen to further my research on the convergence between U.S. GAAP and IFRS are The Implication of US GAAP and IFRS Convergence on American Business by Austin Willmore (2015), IFRS adoption by country by PWC (2015), International Financial Reporting Standards and American Generally Accepted Accounting Principles: the Convergence Lessons by Kuzina (2015), The economic impact of IFRS - a financial analysis perspective by Seay (2014), and Accounting for Leases The New Standard by CPA Journal (2016). These articles are related to my topic, where these researchers researched and analyzed the financial statement reporting on convergence of the U.S. Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS), and certain accounts when adopting IFRS present a different result in the financial reporting for U.S. reporting companies when U.S. GAAP standards combined with IFRS. Also, these research articles discuss the existence of two systems of standards, U.S. GAAP and IFRS; and the issue and difficulty of the process to fully converge.
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ASC subtopic 605-20 provides guidance in the accounting for revenues from service activities and arrangements which includes the ff: a. separately price extended warranty and maintenance contracts. b. commissions from restrospective insurance arrangements. c. fees for guaranteeing a loan d. services for freight-in-transit at the end of reporting period e. advertising barter transactions. This subtopic doesn’t include: a. guarantees accounted for as derivatives b. product warranties c. financial guarantee insurance contracts.
The main aim of this assignment is to present an exploration of two major parts of financial statements i.e. Statement of Comprehensive income and statement of financial position. This is done by comparing elements of Balance Sheet and income statement of two separate companies and discussing similarities and difference of Presentation and Disclosures of these two separate organizations.
For example the extra charge for maintenance accumulated from last year and for this year should be equally divided and not charged to the first quarter only. Similarly, cost of relocating the Southern Paper Sioux Springs office that has been charged to the first quarter, had been the expenditure incurred last year. It should not have been included in the first quarter. No doubt these are good accounting practices but nevertheless reverting the charges to their respective results would not compromise GAAP practice. Unrealized income would be better off transferred to the next or the last quarter as the income received would not materialize until at the end of the year. Including the dividend from the company's Brazilian unit would not help increase profitability at the end of the year unless the company is assured of its profitability. As of now it needs to balance its accounts before it can estimate correct profit level at the end of the year. With regard to the obsolete inventories, there is no alternative course of action but to write-off from this
Differences Between GAAP and IFRS and Implications of Potential Convergence - Boundless Open Textbook. (n.d.). Retrieved February 5, 2015, from https://www.boundless.com/accounting/textbooks/boundless-accounting-textbook/introduction-to-accounting-1/conventions-and-standards-21/differences-between-gaap-and-ifrs-and-implications-of-potential-convergence-131-7049/
There are a number of differences between GAAP and IFRS in the area of accounting for pensions and other post-retirement and postemployment benefits (Deloitte, 2004). Some differences will result in less earnings volatility, while others will result in more. Under IFRS, a company can adopt a policy that would allow recognition of gains/losses in other comprehensive income. Gains/losses treated in accordance with this election would not be subsequently recycled through the income statement. This election generally reduces the volatility of pension expense recorded within the company’s income statement because gains/losses would be recorded only within other comprehensive income. Other policy elections available under IFRS for gain/loss recognition are similar to those under GAAP. Under IFRS, companies are not required to present the full-funded status of the postemployment benefit plans on the balance sheet. However, companies are required to disclose the full-funded status within the notes to the financial statements. GAAP permits the use of a calculated asset value to spread market movements over periods up to five years in the determination of expected returns of plan assets. IFRS prohibits the use of calculated value and required that the actual fair value of plan assets at each measurement date be used. Differences between GAAP and
With any financial statement it is important to note, when comparing and contrasting differences between the financial highlights page which is
The US Generally Accepted Accounting Principles (GAAP) is a set of international accounting rules which originated from the United States. US GAAP can be defined as a set of accounting principles, standards and procedures that companies use to compile their financial statements (Elliott & Elliott, 2008). The International Financial Reporting Standards (IFRS) on the other hand are accounting rules originating from the United Kingdom. International Financial Reporting Standards (IFRS) are a set of accounting rules designed with a common global language for business affairs so that financial accounts of companies are understandable and comparable across international boundaries (Devinney, Pedersen & Tihanyi, 2010).
an analysis of the company’s accounting policies that are likely to affect interpretation of its financial reports (at least 3 policies)
To: Mrs Maria Long, Manager Accounts Department, Cleanspace Ltd From: Date: Subject: Accounting Theory Team No. 29 24 March 2011 Report on Financial Reporting and Disclosure Practices of France