So What’s the Difference?

By: Jim Keeslar, Director, Assurance Services, Jim.Keeslar@BCGcompany.com

To date, we have covered some IFRS topics like, revenue recognition, IFRS for SMEs, why one should be interested now and even Wiki . But we haven’t said much yet about some of the major differences between U.S. GAAP and IFRS. I will give you a few of the major differences below.  If you want to hear more, sign up for our symposium on February 24th. 

  • No LIFO inventory option in IFRS.
  • Research & Development (R&D) costs are expensed in U.S. GAAP where research is expensed and development is generally capitalized for IFRS.
  • IFRS requires component depreciation. So if an asset is made up of several components that can be segregated and would have different useful lives, then the asset is broken down into the components for depreciation purposes. U.S. GAAP does not require this method.
  • Property, plant and equipment can be carried at cost or revalued at fair market value under IFRS.  U.S. GAAP allows cost method only.
  • Certain impairments (such as for inventory) can be written back up (after being written down) for IFRS which is not the case under U.S. GAAP.
  • All deferred tax assets and liabilities are classified as long-term under IFRS whereas they are classified as current or long-term under U.S. GAAP.

The above list is by no means all-inclusive. It is just meant to give you a flavor for some differences between U.S. GAAP and IFRS. Over the months ahead, we will cover more differences and dig deeper into particular ones. In the meantime, if you want to hear more now register for the upcoming symposium.

Until next time…Think big. Think global.

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BCG Blogger, January 17th 2011 | Tags: , , ,
Posted in IFRS for SMEs, IFRS vs. U.S. GAAP

IFRS for SMEs: Taking Its Talents to the U.S.

By: BJ Davis, Supervisor, Assurance Services,  BJ.Davis@BCGCompany.com

It has been a year and a half since the IASB released IFRS for small and medium-sized entities (SMEs). However, its use has not gained much traction in the U.S. despite the fact that it’s a viable option for many entities.  The question now is – will it ever be a viable option?

Currently, any entity that meets the following definition of a “small and medium-sized entity” is eligible to use IFRS for SMEs:

  • Do not have public accountability, but
  • Do publish general purpose financial statements for external users.

But what is meant by “public accountability?” An entity is considered to have public accountability if it:

  • Has debt or equity instruments that trades in a public market or it is in the process of issuing such instruments, or
  • The entity holds assets in a fiduciary capacity for a broad group of outsiders as one of its primary businesses.

A key point to note is that there is no size restriction on an entity as long as it meets the above conditions. It should also be noted that IFRS for SMEs is not designed to be used by not-for-profit or government entities. Therefore, U.S. GAAP remains the only viable accounting standard for these entities.

So why would an entity want to use IFRS for SMEs? For starters, at approximately 230 pages, it’s simpler and less complex than regular IFRS and it’s much simpler than U.S. GAAP, which runs about 17,000 pages, depending on your font of choice. IFRS for SMEs also reduces disclosure requirements and cuts out topics from regular IFRS and U.S. GAAP that are not relevant to those entities, such as earnings per share and segment reporting. Also, the IASB has committed to only revising IFRS for SMEs once every three years, thus adding stability to the standard.

But there are some drawbacks regarding IFRS for SMEs. Most notable is the significant knowledge gap surrounding IFRS for SMEs in the U.S. Financial statement preparers, as well as users, must be trained on IFRS for SMEs and this takes time as well money. Even educators, such as university professors and teachers, are just now beginning to address IFRS in the classroom setting.

Hopefully, once this knowledge gap is closed, it will become clearer whether IFRS for SMEs is right for a given entity. For additional thoughts on IFRS for SMEs, see this article in the Journal of Accountancy: http://www.journalofaccountancy.com/Issues/2009/Dec/20091928.

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BCG Blogger, January 11th 2011 | Posted in Uncategorized

IFRS “Wiki” Resource

By: Jeremy Michael, CPA, Manager Assurance Services, Jeremy.Michael@BCGCompany.com

With the word “wiki” in the news lately I began wondering what exactly does “wiki” mean.  So naturally I performed an internet search and found the most simplistic answer to that question on the American Heritage Dictionary website where it is defined as a collaborative website whose content can be edited by anyone with access to it.  I also found a very detailed, all-encompassing definition on a very well known “wiki” page; wikipedia.org. 

 By now you are probably asking yourself what in the world does this have to do with “Where in the World is IFRS?”?  The answer to that question is quite simple and actually will point us to a very useful resource I found on IFRS.com entitled  IFRS for SME’s – U.S. GAAP Comparison Wiki, a topic developed by the AICPA accounting standards team in an effort to help everyone learn about the similarities and differences between international financial accounting standards for small and medium-sized entities (IFRS for SME’s) compared to U.S. generally accepted accounting principles (GAAP). The page site is organized on the right in a manner that resembles actual sections of the IFRS for SME’s standards issued by the International Accounting Standards Board (IASB).  What makes this resource extremely useful is that the IFRS for SME’s standards are listed on the right with paragraph references and the new standard is then compared to treatment under U.S. GAAP.  Anyone currently preparing financial statements under IFRS for SME’s or anyone who may be interested in the differences between the two sets of accounting standards will find this “wiki” site extremely useful. You may want to add this to your favorites and refer to it often since the site’s contents will continue to evolve as users contribute additional content on their experiences with adopting IFRS for SME’s.

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BCG Blogger, January 3rd 2011 | Tags: , , , ,
Posted in IFRS for SMEs, Resources



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