Module 3 Case: Differences in Valuation of US GAAP and IFRS

These assets are used for producing the services or goods, administrative aims or for the rental objectives and offer benefit for the time period of more than one financial period. For the non-current assets there can be two modes i.e. cost or revaluation. In cost model the asset is mentioned at cost by deducting the amount of accumulated depreciation while in revelation model the asset is mentioned on fair price. Philips uses the cost model where the depreciation is calculated by straight line method (Philips.com,

Please see the Inventory Valuation tab in your workbook, to review application of costs using the FIFO, LIFO, and average methods based on purchase and sales information. You will choose the method

Assets are things that a company owns that have value. This typically means they can either be sold or used by the company to make products or provide services that can be sold. Assets include physical property, such as plants, trucks, equipment and inventory. It also includes things that can’t be touched but nevertheless exist and have value, such as

2007/2008 Edition This PricewaterhouseCoopers publication is for those who wish to gain a broad understanding of the key similarities and differences between IFRS, US GAAP and Swiss GAAP FER. No summary publication can do justice to the many differences of detail that exist between IFRS, US GAAP and Swiss GAAP FER. Even if the guidance is similar, there can be differences in the detailed application, which could have a material impact on the financial statements. It needs to be stressed that this brochure deals with the main differences only. Many more pages would be needed to be

a. (i.) According to FASB Statement of Concepts No. 6, paragraph 25, assets are probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events. They represent probable future economic benefits controlled by the enterprise. According to FASB Statement of Concepts No 6, paragraph 80, expenses are outflows or other using up of assets or incurrences of liabilities (or a combination of both) during a period from delivering or producing goods, rendering services, or carrying out other activities that constitute the entity's ongoing major, or central, operations. Expenses are gross outflows

“The uproar over fair value accounting practices, which some critics have blamed for the depths of the global financial crisis, threatens to sink a long-sought move by countries around the world toward a single set of international financial reporting standards (IFRS). The U.S. Financial Accounting Standards Board (FASB) has been working with London's International Accounting Standards Board (IASB) since 2002 toward what accounting professionals call convergence. The Securities & Exchange Commission (SEC) is expected to announce its road map for conversion sometime this month, which will probably include early adoption in 2010 for about 110 of the largest U.S. companies with business operations throughout the world. The key difference between U.S. Generally Accepted Accounting Principles (GAAP) and IFRS is that U.S. standards are based on explicit rules while the international standards' reliance on principles gives companies more room to use their judgment in deciding how to recognize revenue and other key metrics. Adoption of IFRS would also probably trigger a big tax hike for U.S. companies, which would no longer be able to use the last-in-first-out [LIFO] inventory accounting method, which doesn't exist under the international standards. The LIFO method assumes that goods purchased most recently are sold first and that the

Differences in the asset impairment testing model may result in assets being impaired earlier under IFRS and Mexican FRS. However, there are certain differences on the impairment testing under the three frameworks. The broad based requirement to capitalize development costs under IFRS and Mexican FRS (when certain criteria are met) creates the potential for differences compared with US GAAP, wherein development costs are generally expensed as incurred. IFRS prohibits (whereas US GAAP and Mexican FRS permit) the use of the lastin, first-out inventory-costing methodology. In addition, Mexican FRS accepts the inventory costing

There are several differences between the International Financial Reporting Standards (IFRS) and the U.S. Generally Accepted Accounting Principles (GAAP). The IFRS is considered more of a "principles based" accounting standard in contrast to U.S. GAAP which is considered more "rules based." By being more "principles based", IFRS, arguably, represents and captures the economics of a transaction better than U.S. GAAP. As a team me collaborated to answer the following seven questions.

Under International Accounting Standard (IAS) 41, we presume fair value can be reliably measured for a biological asset, or a living animal or plant, and IAS 41 requires measurement at fair value less costs to sell (FVLCTS) from initial recognition of biological assets up to the point of harvest. The only expectation to the presumption is when initial recognition for a biological asset for which quoted market prices are not available as well as for which alternative fair value measurements are determined to be clearly unreliable. Under this situation, IAS 41 requires an entity to measure that biological asset at its cost less any accumulated depreciation

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/

For analysis sake, the transition from LIFO to FIFO method helps one to evaluate the up-to-date costs of inventories and debt paying capabilities as well as portraying their uninflated inventory turnover values (Subramanyam, 2014). Additionally, since inventories often represent significant percentages of a company’s assets and inflation leads to price increases overtime, LIFO to FIFO restatements can allow analysts to compare companies with different inventory valuation methods (Investopedia, 2016c). More specifically, investors can assess each method’s short and long-term effects on values such as tax expense and net income (affecting earnings

Under GAAP, inventory is recorded as the lesser of the cost or market value. In this case the appropriate valuation would be determined as of the last day of the audit period, December 31, 2015. GAAP also doesn't allow for manipulation of values rather it demands reporting of accurate figures. As stated in this chapter, "professional judgment is essential to evaluating the risks of material misstatements in the financial statements. When professional judgment is compromised by taking shortcuts or allowing biases and pressures imposed by others to taint decision making, the public loses trust in the accounting profession." (The Public Interest in Accounting - page 207)

While IAS 16 permits a company to utilize the verifiable expense technique, IFRS additionally permits the utilization of a revaluation (reasonable quality) system

In the 2008 Memorandum of Understanding between the FASB and IASB regarding the ongoing convergence project involving GAAP and IFRS, revenue recognition was one of the subjects that was supposed to be settled by 2011. This indicates that there is a difference between the way that revenue is recognized under IFRS and the way it is recognized under US GAAP. Deloitte & Touche has prepared a white paper outlining some of the differences between the two that the two agencies are attempting to resolve as part of the convergence process. There are five different areas of difference between the two systems. These are percentage of completion, sell-through-type arrangements, contingent consideration, variable consideration and royalties, and modifications.

It’s important to call that under US GAAP, estimates of useful and residual value, and the method of depreciation, are reviewed only when events or changes in circumstances indicate that the current estimates or depreciation method are no longer appropriate. Unlike IFRS, the revaluation of property, plant and equipment is not permitted.