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This guide is one of a series of publications intended to assist users in

understanding International Accounting Standards. These include:

International 3rd Edition. Written by Deloitte &

Accounting Standards: Touche, Uni ted Kingdom. Published
A Guide to Preparing by ABG Professional Information :
Accounts www.abgweb.com.
International 2nd Edition. Model financial
Accounting Standards - statements and presentation and
A Practical Guide to disclosure checklists prepared under
Financial Reporting IAS. Published by Deloitte Touche
Tohmatsu.
IAS In Your Pocket 2nd Edition. An 80-page pocket-sized
guide with summaries of all IASB
Standards and Interpretations, updates
on agenda projects, and other useful
IASB-relat ed information.
IAS Plus Newsletter A quarterly newsletter on recent
developments in International
Accounting Standards and accounting
updates for individual countries. To
subscribe visit our IAS Plus website.
www.iasplus.com Our IAS Plus website provides up-to-
date news on IAS developments as
well as summaries of IFRS and
Interpretations and reference materials
for download.
Financial Instruments – Related summaries, guidance,
Applying IAS 32 and examples, and US GAAP
IAS 39 comparisons. Published by Deloitte
Touche Tohmatsu.
 2002 Deloitte Touche Tohmatsu.
All rights reserved.
Printed in Hong Kong
HK050-02

This publication has been written in general terms and is intended for
general reference only. The application of its contents to specific
situations will depend on the particular circumstances involved.
Accordingly, we recommend that readers seek appropriate
professional advice regarding any particular problems they
encounter. This publication should not be relied on as a substitute for
such advice. The partners and managers of Deloitte Touche
Tohmatsu will be pleased to advise on any such problems. While all
reasonable care has been taken in the preparation of this publication,
Deloitte Touche Tohmatsu accepts no responsibility for any errors it
might contain, or for any loss, howsoever caused, that happens to any
person by their reliance on it.
 FOREWORD
In recent years there has been a clear trend towards
International Accounting Standards (now known as
International Financial Reporting Standards – IFRS) as
the single body of internationally accepted accounting
standards. This movement affects the environment in
which all companies operate, including those in the
United States.
Globally, thousands of companies will be moving to
IFRS as their primary basis of financial reporting over
the next several years. In Europe, for example, the
European Commission recently issued a regulation that,
with a few exceptions, requires all publicly listed
companies domiciled within the European Union to
prepare their consolidated financial statements in
accordance with IFRS by 2005. This requirement will
affect approximately 7,000 enterprises, including the
subsidiaries, associates and joint ventures of these
entities. Another example is Australia, where the
government is considering a proposal that IFRS be
adopted as Australian GAAP.
Other key developments surrounding the use and
acceptability of IFRS include the restructuring of the
International Accounting Standards Committee, the US
Securities and Exchange Commission’s Concept
Release, International Accounting Standards, and the
endorsement of International Accounting Standards by
both the International Organization of Securities
Commissions and the Basel Committee. These
developments have enhanced the credibility of IFRS,
resulting in their increased use.
Companies in the United States are becoming
increasingly affected by IFRS. Additionally, the work
of the International Accounting Standards Board (the
IASB, formerly the Board of the International
Accounting Standards Committee) will affect the nature
and scope of national standard -setters, including the US
Financial Accounting Standards Board – FASB.
FOREWORD
Convergence
The primary focus of the IASB is convergence of
accounting standards worldwide. In order to facilitate
convergence of accounting standards, the IASB has
seven members who serve as official liaisons to national
standard-setters. Countries with formal liaisons are
Australia (including New Zealand), Canada, France,
Germany, Japan, the United Kingdom, and the United
States.
The liaison function is significant because the IASB,
unlike its predecessor (the IASC Board), is now
formally linked to national standard-setters. As a result,
the liaison Board members maintain close contact with
their respective national standard-setters and are
responsible for coordinating agendas and ensuring that
the IASB and national bodies are working towards
convergence.
This Publication
This publication summarises some of the differences
between IFRS and US GAAP. The summary does not
attempt to capture all of the differences between IFRS
and US GAAP that exist or may be material to a
particular company’s financial statements. In this
publication we have focused on differences that are
commonly found in practice. Reference to the
underlying accounting standards and any relevant
national regulations is essential in understanding the
specific differences.
DELOITTE TOUCHE TOHMATSU
Ken Wild, Global Leader
International Accounting Standards
John T. Smith, Leader
IAS Centre of Excellence – The Americas
July 2002
 COMPARISON OF IAS AND US GAAP COMPARISON OF IAS AND US GAAP

IAS Topic IFRS US GAAP

1 Comparative One year US GAAP states
The following table sets out some of the differences between prior year comparative that comparatives
International Financial Reporting Standards (IFRS) and United financial financial are “desirable”.
States GAAP. The significance of these differences – and statements information is Generally at least
others not included in this list – will vary with respect to required. one year of
individual companies depending on such factors as the nature comparative
of the company’s operations, the industry in which it operates, financial information
and the accounting policy choices it has made. Reference to is presented.
the underlying accounting standards and any relevant national Public companies
regulations is essential in understanding the specific are subject to SEC
differences. rules and
regulations, which
generally require
two years of
IAS Topic IFRS US GAAP comparative
_ General Principle-based Rule-based financial
approach standards with standards with more information.
limited application specific application 1 Reporting a Permitted, but not Required.
guidance. guidance. separate line required. 1
_ Ability to make Generally more Generally fewer item for “total
choices choices. choices. comprehensive
income”
1 Financial Specific line items Certain standards
statement required. require specific 1 Departure from Permitted in Not directly
presentation presentation of a Standard “extremely rare” addressed in U.S.
certain items. when circumstances “to GAAP literature,
Public com panies compliance achieve a fair although an auditor
are subject to SEC would be presentation”. may conclude that
rules and misleading by applying a
regulations, which certain GAAP
require specific line requirement the
items. financial statements
are misleading,
thereby allowing for
an “override”.
2 Reversal of Required, if certain Prohibited.
inventory write- criteria are met.
downs
2 Basis of Carried at the Carried at the lower
inventory lower of cost and of cost and market
net realisable (market is the lower
value (NRV). of replacement cost
and NRV minus
normal profit
margin).
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 COMPARISON OF IAS AND US GAAP COMPARISON OF IAS AND US GAAP

IAS Topic IFRS US GAAP IAS Topic IFRS US GAAP

7 Classification of May be classified Must be classified 12 Subsequent First reduce First reduce
interest received as an operating, as an operating recognition of a goodwill to zero, goodwill to zero,
and paid in the investing, or activity. deferred tax with any excess then any other
cash flow financing activity. asset after a credited to net intangible assets to
statement business profit or loss. zero, with any
combination excess credited to
8 Correction of May either restate Must restate prior
net profit or loss.
errors prior financial financial
statements or statements. 12 Reconciliation of Required for all Required for public
include the actual and companies. companies only.
cumulative effect expected tax Non-public
in net profit and expense companies must
loss in the current disclose the nature
financial of the reconciling
statements.1 items but not
amounts.
8 Non-mandated May either restate Generally include
changes in prior financial the cumulative 12 Recognition of Credited to equity Credited to equity.
accounting statements or effect in net profit tax benefits only to the extent
policy include as a and loss in the related to that it arises from a
cumulative effect current financial employee share transaction
in net profit and statements (but options recognised in
loss in the current restate for LIFO, equity.
financial extractive
statements.1 industries, long-term 12 Impact of Deferred tax effect Deferred tax effect
temporary is recognised. is not recognised.
contracts, IPOs). differences
8 Change in Change in Change in related to
depreciation estimate accounting policy intercompany
method for (prospective). (cumulative effect in profits
existing assets net profit or loss).
14 Basis of Lines of business Components for
11 Construction Cost recovery Completed contract reportable and geographical which information is
contracts when method. method. segments areas. reported internally
the percentage to top management,
of completion which may or may
cannot be not be based on
determined lines of business or
geographical areas.
12 Classification of Always non- Classification is split
deferred tax current. between the current
assets and and non-current
liabilities components.

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 COMPARISON OF IAS AND US GAAP COMPARISON OF IAS AND US GAAP

IAS Topic IFRS US GAAP IAS Topic IFRS US GAAP

14 Types of Required Only one basis of 17 Recognition of a The gain is The gain is
segment disclosures for segmentation, gain on a sale recognised amortised over the
disclosures both “primary” and although certain and leaseback immediately. lease term.
“secondary” “enterprise-wide” transaction
segments. disclosures are where the
required such as leaseback is an
revenue from major operating lease
customers and
revenue by country. 17 Disclosure of Less detailed More detailed
lease maturities disclosure. disclosure.
14 Accounting Amounts are Amounts are based
basis for based on IFRS on whatever basis is 18 Revenue General revenue More specific
reportable GAAP measures. used for internal recognition recognition guidance exists on
guidance principles are revenue recognition,
segments reporting purposes.
provided that are particularly relating
14 Segment result Defined segment No definition of consistent with US to industry specific
result. segment result. GAAP but contain issues. In addition,
limited detailed or public companies
16 Major inspection May be accounted Generally
industry specific must follow more
or overhaul for as a separate expensed. guidance. detailed guidance
costs component of an provided by the
asset. SEC.
16 Basis of May use either fair Generally required 19 Accounting for No guidance on Share options
property, plant, value or historical to use historical share options the recognition and issued from a
and equipment cost. cost.
(stock measurement of variable plan or to
17 Minimum lease Include guarantees Exclude guarantees compensation) share options. non-employees are
payments of third party debt of third party debt in Certain disclosures expensed.
related to the minimum lease are required (not Share options
leased assets. payments. including the fai r issued from a fixed
value of options plan are recognised
17 Present value of Generally would Generally would use granted). either at their
minimum lease use the implicit the incremental intrinsic value
payments rate in the lease to borrowing rate to (generally zero) or
discount minimum discount minimum fair value. If
lease payments. lease payments. intrinsic value is
17 Initial direct Either expense or Amortise. used, then certain
costs (lessors) amortise over the disclosures are
lease term.1 required, including
the fair value of
17 When is “sale General guidance. Very specific rules, options granted.
and leaseback particularly related
accounting” to sale and
appropriate leaseback
transactions
involving real
estate.

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 COMPARISON OF IAS AND US GAAP COMPARISON OF IAS AND US GAAP

IAS Topic IFRS US GAAP IAS Topic IFRS US GAAP

19 Termination No distinction Recognise special 21 FX differences Sometimes added Always in net
benefits between “special” (one-time) on monetary to the cost of an income.
and other termination benefits items resulting asset.1
termination when employees from a non-
benefits. accept the offer and hedgeable
Termination the amount can be severe
benefits reasonably devaluation
recognised when estimated.
the employer is Recognise 22 Method of Pooling (uniting) of All business
demonstrably contractual accounting for interests required if combinations must
business the acquirer be accounted for as
committed to pay. termination benefits
combinations cannot be purchases.
when it is probable
that employees will identified.
be entitled and the Otherwise
acquisition
amount can be
(purchase)
reasonably
estimated. accounting must
be used.2
19 Recognition of Recognised Amortised over the
past service immediately. remaining service 22 Recognising a May be recognised Generally not
restructuring in limited recognised.
costs related to period or life liability as part of circumstances.2
vested expectancy.
employees a purchase
business
19 Multiemployer May be considered Always considered combination
plans defined benefit defined contribution 22 Purchased in- Capitalise and Expense.
plans. plans.
process R&D amortise over the
19 Minimum liability No minimum At a minimum, the estimated useful
recognition for liability unfunded life, which is
benefits under requirement. accumulated benefit presumed to be 20
defined benefit obligation is years or less.2
plans recognised.
22 Goodwill Must capitalise Must capitalise, but
19 Pension assets Limitation on the No limitation on the and amortise not amortise,
amount that can amount that can be goodwill over its subject to an
be recognised. recognised. estimated useful impairment test.
21 Translation of May use either Must use current life, which is
presumed to be 20
fair value current or historic exchange rate. years or less,
adjustments and exchange rate.1 subject to an
goodwill relating
impairment test.2
to a prior
business
combination

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 COMPARISON OF IAS AND US GAAP COMPARISON OF IAS AND US GAAP

IAS Topic IFRS US GAAP IAS Topic IFRS US GAAP

22 Measuring the May measure at Must measure at 23 Types of Includes interest, Generally includes
minority interest either fair value or historical cost. borrowing costs certain ancillary only interest.
portion of historical cost.2 eligible for costs, and
acquired assets capitalisation exchange
and liabilities in differences that
a purchase are regarded as an
business adjustment of
combination interest.
22 Adjustment Through the end of One year from the 23 Income on Reduces Generally does not
period for the first full year acquisition date. temporary borrowing cost reduce borrowing
subsequently after acquisition.2 investment of eligible for cost eligible for
recognised funds borrowed capitalisation. capitalisation.
assets and for construction
liabilities in a of an asset
purchase
27 Basis of Control (look to Majority voting
business consolidation governance and rights.
combination
policy risk and benefits).
22 Negative Initially offset Initially allocate on a
goodwill against any pro-rata basis 27 Special purpose Consolidate if Consolidate if
expected future against the carrying entities “controlled”. certain criteria for
Generally follow “qualifying SPEs”
losses, then amounts of certain
the same are not met.
amortise any acquired non-
amounts not financial assets, principles for Generally look to
commercial whether or not the
exceeding the with any excess entities in SPE has a sufficient
value of acquired recognised as an
non-monetary extraordinary gain. determining level of equity “at
assets, any excess whether or not risk”.
control exists.
is included in net
profit or loss.2 27 Impact of Must either (a) No requirement to
different conform conform reporting
22 Combinations of Not addressed. Pooling of interests
entities under method. accounting accounting policies dates or accounting
common control policies or and reporting policies. Need not
reporting dates dates or, (b) if that adjust for any
23 Borrowing costs May either Must capitalise as of parent and is not practical, significant
related to assets capitalise as part part of the asset’s subsidiaries must adjust for any differences in policy
that take a of the asset’s basis basis. significant or subsequent
substantial time or expense. differences in transactions or
to complete policy and events.
subsequent
transactions or
events.

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 COMPARISON OF IAS AND US GAAP COMPARISON OF IAS AND US GAAP

IAS Topic IFRS US GAAP IAS Topic IFRS US GAAP

27 Enterprises that Excluded from Must be 32 Classification of Liability. Presented between
are temporarily consolidation only consolidated. mandatorily liabilities and equity
controlled if acquired and redeemable (sometimes called
held exclusively for preferred shares the “mezzanine”).
disposal in the (stock)
near future.
33 Disclosures of Basic and diluted Basic and diluted
28 Impact of Must either (a) No requirement to earnings per net profit or loss income from
different conform conform reporting share per share. 1 continuing
accounting accounting policies dates or accounting operations,
policies or and reporting policies. Need not discontinuing
reporting dates dates or (b) if that adjust for any operations,
of investor and is not practical, significant extraordinary items,
associate (or must adjust for any differences in policy cumulative effect of
investee) significant or subsequent a change in
differences in transactions or accounting policy,
policy and events. and net profit or loss
subsequent per share.
transactions or
events. 33 Base for Net profit or loss Income from
measuring anti - per share.1 continuing
28 Losses in Are recognised to Are used to reduce dilution operations per
excess of equity the extent there is the basis of other share.
investment an obligation to investments such as
fund such loans to the 35 Initial disclosure Public Internal agreement
trigger for announcement of on a disposal plan.
amounts. investee. discontinuing a disposal plan.
29 Hyperinflati on Would adjust the Would remeasure operation
subsidiary financial the subsidiary
statements for the accounts using the 36 Impairment Impairment is Impairment is
general effects of “functional currency” “trigger” triggered if an triggered if an
asset's carrying asset's carrying
inflation, with the of the parent.
amount exceeds amount exceeds the
gain or loss on net
monetary position the higher of the expected future
in net income (that asset’s value-in- cash flows to be
is, the restate and use (discounted derived from the
present value of asset on an
translate method).
the asset’s undiscounted basis.
31 Investments in May use either the Generally use the expected future
joint ventures equity method or equity method cash flows) and
proportionate (except in net selling price.
consolidation. construction and oil
and gas industries). 36 Measurement of Based on the Based on fair value.
impairment loss recoverable
32 Classification of Split the Classify the entire amount (the higher
convertible debt instrument into its instrument as a of the asset’s
instruments liability and equity liability. value-in-use and
components. net selling price).

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 COMPARISON OF IAS AND US GAAP COMPARISON OF IAS AND US GAAP

IAS Topic IFRS US GAAP IAS Topic IFRS US GAAP

36 Subsequent Required, if certain Prohibited. 38 Revaluation of Permitted only if Generally
reversal of an criteria are met. intangible assets the intangible prohibited.
impairment loss asset trades in an
active market.
37 Probability “More likely than “Probable”, which
threshold for not”, that is, more generally is higher 39 Change in value Recognise either Recognise in equity
recognising a than 50% than a 50% of non-trading in net profit or loss (with recycling).
provision probable. probability. investment or in equity (with
(liability) recycling).3
37 Measurement of Best estimate to Low end of the 39 Accounting for Cash flow hedge. 3 Fair value hedge.
provisions settle the range of possible hedges of a firm
obligation, which amounts. Some commitment
generally involves provisions are not
39 Use of partial- Allowed. Prohibited.
the expected value discounted.
method. term hedges
Discounting 39 Effect of selling Prohibited from Prohibited from
required. investments using held-to- using held-to-
37 Disclosures that “In extremely rare Disclosure is classified as maturity maturity
may prejudice cases” amounts required. held-to-maturity classification for classification (no
the next two years. two year limit).
seriously the and details need
position of the not be disclosed, 39 Use of “basis Gain/loss on Gain/loss on
enterprise in a but disclosure is adjustment” hedging instrument hedging instrument
dispute required of the that had been that had been
general nature of reported in equity reported in equity
the dispute and the becomes an remains in equity
fact that, and adjustment of the and is amortised
reason why, the carrying amount of over the same
information has not the asset.3 period as the asset.
been disclosed.
39 Derecognition of No “isolation in Derecognition
38 Development Capitalise, if Expense. financial assets bankruptcy” test.3 prohibited unless
costs certain criteria are the transferred
met. asset is beyond the
38 Purchased Capitalise and Capitalise. reach of the
intangibles amortise over the Amortise if the asset transferor even in
(other than in- estimated useful has a finite life. Do bankruptcy.
process R&D) life, which is not amortise if the 39 Subsequent Required, if certain Prohibited.
presumed to be 20 asset has an reversal of an criteria are met. 3
years or less.2 indefinite life, but impairment loss
test regularly for
impairment. 39 Use of Prohibited. Allowed.
“Qualifying
SPEs”

Deloitte Touche Tohmatsu 17 18 Deloitte Touche Tohmatsu

 COMPARISON OF IAS AND US GAAP ABOUT DELOITTE TOUCHE TOHMATSU

IAS Topic IFRS US GAAP Deloitte Touche Tohmatsu is one of the world’s leading
professional services organisations, delivering world -
40 Measurement May use either fair Generally required
basis of value or historical to use historical class assurance and advisory, tax, and consulting
investment cost. cost. services through its national practices. More than
property 95,000 people in 140 countries serve over one-quarter
of the world’s largest companies, as well as large
Endnotes: national enterprises, public institutions, and successful
1 fast-growing global growth companies.
This topic is being addressed as part of the IASB’s
Improvements Project.
2
This topic is being addressed as part of the IASB’s In addition to complete geographic coverage, Deloitte
Business Combinations Project. Touche Tohmatsu offers clients deep industry strengths
3
This topic is being addressed as part of the IASB’s IAS and outstanding services delivered consistently
39 Amendments Project. throughout the world. Our integrated teams of
internationally experienced professionals are well
versed in addressing today's challenges linked to
globalisation and the network economy. Our mission is
to help our clients and our people excel.
Our IAS contact people:

DELOITTE TOUCHE TOHMATSU IAS

GLOBAL OFFICE
Ken Wild, Global IAS Leader kwild@deloitte.co.uk
Paul Pacter paupacter@deloitte.com.hk
IAS CENTRES OF EXCELLENCE
Americas:
John T. Smith iasplusamericas@deloitte.com
Asia-Pacific:
Stephen Taylor iasplus@deloitte.com.hk
Europe -Africa:
Graeme Berry, Johannesburg iasplus@deloitte.co.za
Stig Enevoldsen, Copenhagen iasplus@deloitte.dk
Veronica Poole, London iasplus@deloitte.co.uk
Laurence Rivat, Paris iasplus@deloitte.fr
This booklet is available in electronic form at
www.iasplus.com.

Deloitte Touche Tohmatsu 19

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