IFRS compared to US GAAP: An overview - home.kpmg

1 IFRS compared to US GAAPAn overviewDecember SEC s next moveThe IASB and the FASB have publicly stated that convergence, as a strategy for achieving a single set of high-quality global accounting standards, will come to an end when they publish their partially converged leasing standards and the FASB publishes its standards on financial instruments (classification and measurement, and impairment). At that point, the Boards will enter a new phase of co-operation. Exactly how or whether this new phase will move IFRS and US GAAP closer together is yet to be seen. From a US policy perspective, the SEC continues to maintain its commitment to a long-term objective of a single set of high-quality global standards. But it is unclear what the next steps might be for the adoption of IFRS by US domestic registrants or when further action might be taken. In the meantime, the members of the IFRS Foundation s Monitoring Board, including the SEC, are scheduled for review in 2016 to determine whether they continue to qualify for membership on the Monitoring Board.

2 The criteria for continued membership would require the SEC to renew its commitment to: apply IFRS for companies raising capital in the US market; make financial contributions to support the development of IFRS on a continuing basis; and actively contribute to the development of IFRS, through the it is important that the US continue to be involved in the development and application of IFRS because of the number and significance of foreign private issuers using IFRS in the US capital markets, there does not appear to be a near-term commitment for the US to transition its domestic issuers to IFRS. As a consequence, we expect both IFRS and US GAAP to continue to be widely applied in major capital markets for the foreseeable future. However, it is possible that the SEC will consider a rule-making proposal in 2016 as a further step in the process that would permit US domestic registrants to provide IFRS-based information on a voluntary and supplementary basis to their US GAAP information in SEC , we believe that an understanding of the differences between IFRS and US GAAP will continue to be of keen interest to preparers and users of financial statements.

3 With this in mind, we are pleased to publish the 2015 edition of our comparison of IFRS and US Kalavacherla and Paul Munter and Mark Vaessen Julie SantoroKPMG International Department of Professional Practice, Standards Group KPMG LLP KPMG s Global IFRS InstituteKPMG s Global IFRS Institute provides information and resources to help board and audit committee members gain insight and access thought leadership about the evolving global financial reporting you are new to IFRS or a current user of IFRS, you can find digestible summaries of recent developments, detailed guidance on complex requirements, and practical tools such as illustrative financial statements and a local perspective, IFRS resources are also provided by KPMG member firms from around the world, including the United 2015 KPMG LLP, a Delaware limited liability partnership and the member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity.

4 All rights reserved. 2015 KPMG IFRG Limited, a UK company, limited by guarantee. All rights compared to US GAAP: An overview | 1 The SEC s next moveThe IASB and the FASB have publicly stated that convergence, as a strategy for achieving a single set of high-quality global accounting standards, will come to an end when they publish their partially converged leasing standards and the FASB publishes its standards on financial instruments (classification and measurement, and impairment). At that point, the Boards will enter a new phase of co-operation. Exactly how or whether this new phase will move IFRS and US GAAP closer together is yet to be seen. From a US policy perspective, the SEC continues to maintain its commitment to a long-term objective of a single set of high-quality global standards. But it is unclear what the next steps might be for the adoption of IFRS by US domestic registrants or when further action might be taken. In the meantime, the members of the IFRS Foundation s Monitoring Board, including the SEC, are scheduled for review in 2016 to determine whether they continue to qualify for membership on the Monitoring Board.

5 The criteria for continued membership would require the SEC to renew its commitment to: apply IFRS for companies raising capital in the US market; make financial contributions to support the development of IFRS on a continuing basis; and actively contribute to the development of IFRS, through the it is important that the US continue to be involved in the development and application of IFRS because of the number and significance of foreign private issuers using IFRS in the US capital markets, there does not appear to be a near-term commitment for the US to transition its domestic issuers to IFRS. As a consequence, we expect both IFRS and US GAAP to continue to be widely applied in major capital markets for the foreseeable future. However, it is possible that the SEC will consider a rule-making proposal in 2016 as a further step in the process that would permit US domestic registrants to provide IFRS-based information on a voluntary and supplementary basis to their US GAAP information in SEC , we believe that an understanding of the differences between IFRS and US GAAP will continue to be of keen interest to preparers and users of financial statements.

6 With this in mind, we are pleased to publish the 2015 edition of our comparison of IFRS and US Kalavacherla and Paul Munter and Mark Vaessen Julie SantoroKPMG International Department of Professional Practice, Standards Group KPMG LLP 2015 KPMG LLP, a Delaware limited liability partnership and the member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. 2015 KPMG IFRG Limited, a UK company, limited by guarantee. All rights | IFRS compared to US GAAP: An overviewContentsThe SEC s next move 1 IFRS compared to US GAAP: An overview 4 How to navigate this overview 51 Background Introduction The Conceptual Framework 72 General issues Basis of preparation of financial statements Form and components of financial statements Statement of cash flows Fair value measurement Consolidation Business combinations Foreign currency translation Accounting policies, errors and estimates Events after the reporting date Hyperinflation 313 Statement of financial position General Property, plant and equipment Intangible assets and goodwill Investment property Associates and the equity method (Equity-method investees) Joint arrangements (Investments in joint ventures) [Not used] Inventories Biological assets Impairment of non-financial assets Provisions, contingent assets and liabilities (Recognised contingencies and other provisions )

7 Income taxes 55 2015 KPMG LLP, a Delaware limited liability partnership and the member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. 2015 KPMG IFRG Limited, a UK company, limited by guarantee. All rights compared to US GAAP: An overview | 34 Specific items of profit or loss and OCI General Revenue Revenue from contracts with customers Government grants Employee benefits Share-based payments Borrowing costs (Financial income and expense) 755 Special topics Leases Operating segments Earnings per share Non-current assets held for sale and discontinued operations Related party disclosures Investment entity consolidation exception (Investment company consolidation exception) Non-monetary transactions Accompanying financial and other information Interim financial reporting Disclosure of interests in other entities Extractive activities Service concession arrangements Common control transactions and Newco formations 996 [Not used]

8 7 Financial instruments Scope and definitions Derivatives and embedded derivatives Equity and financial liabilities Classification of financial assets and financial liabilities Recognition and derecognition Measurement and gains and losses Hedge accounting Presentation and disclosure 1168 Insurance contracts Insurance contracts 118 Keeping you informed 120 2015 KPMG LLP, a Delaware limited liability partnership and the member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. 2015 KPMG IFRG Limited, a UK company, limited by guarantee. All rights | IFRS compared to US GAAP: An overviewIFRS compared to US GAAP: An overviewThe purpose of our publication IFRS compared to US GAAP, from which this overview has been extracted, is to assist you in understanding the significant differences between IFRS and US it does not discuss every possible difference, the publication provides a summary of those differences that we have encountered most frequently, resulting from either a difference in emphasis or specific application guidance.

9 In general, the publication addresses the types of businesses and activities that IFRS addresses. So, for example, biological assets are included in the publication, but accounting by not-for-profit entities is not. In addition, the publication focuses on consolidated financial statements separate ( unconsolidated) financial statements are not requirements of IFRS are discussed on the basis that the entity has adopted IFRS already. The special transitional requirements that apply in the period in which an entity changes its GAAP to IFRS are discussed in our publication Insights into IFRS, KPMG s practical guide to International Financial Reporting we have highlighted what we regard as significant differences, we recognise that the significance of any difference will vary by entity. Some differences that appear major may not be relevant to your business; by contrast, a seemingly minor difference may cause you significant additional work. Home 2015 KPMG LLP, a Delaware limited liability partnership and the member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity.

10 All rights reserved. 2015 KPMG IFRG Limited, a UK company, limited by guarantee. All rights compared to US GAAP: An overview | 5 How to navigate this overviewThis overview is an extract from our more extensive publication IFRS compared to US GAAP, which is available from your usual KPMG overview provides a quick summary of significant differences between IFRS and US GAAP. It is organised by topic, following the typical presentation of items in the financial statements. This edition is based on IFRS and US GAAP that is mandatory for an annual reporting period beginning on 1 January 2015 ignoring standards and interpretations that might be adopted before their effective , the following forthcoming requirements are the subject of a separate chapter: Revenue from contracts with customers .The following abbreviations are used in this Earnings per shareNCI Non-controlling interestsOCI Other comprehensive incomeSEC US Securities and Exchange CommissionHome6 | IFRS compared to US GAAP: An overviewUSIFRS 2015 KPMG LLP, a Delaware limited liability partnership and the member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity.