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KPMG by Mind Map: KPMG

1. 1 Background

1.1. 1.1 Introduction

1.1.1. (IFRS Foundation Constitution, IASB and IFRS Interpretations Committee Due Process Handbooks, Preface to IFRSs, IAS 1)

1.1.2. Topic 105, Master Glossary, SEC Rules and Regulations)

1.2. 1.2 The Conceptual Framework

1.2.1. (Conceptual Framework for Financial Reporting)

1.2.2. (CON Statements, Topic 105, SAB Topics 1.M, 1.N, 5.T)

1.2.3. Unlike IFRS, financial statements are generally prepared on a going concern basis (i.e. the usual requirements of US GAAP apply) unless liquidation is imminent. Unlike IFRS, there is no specific guidance under US GAAP regarding the assessment of going concern or the required disclosures. However, the US auditing literature requires the auditor to consider whether there is substantial doubt about the entity’s ability to continue as a going concern, like IFRS. Unlike IFRS, the assessment of going concern is for a period of time that does not exceed one year from the issuance date of the financial statements. Unlike IFRS, this assessment is for the purpose of determining whether the disclosures in the financial statements are appropriate, and the basis of preparation is not affected unless liquidation is imminent.

2. 2 General issues

2.1. Basis of preparation of financial statements

2.1.1. USGAAP

2.1.1.1. Unlike IFRS, financial statements are generally prepared on a going concern basis (i.e. the usual requirements of US GAAP apply) unless liquidation is imminent.

2.1.1.2. Unlike IFRS, there is no specific guidance under US GAAP regarding the assessment of going concern or the required disclosures.

2.1.1.3. However, the US auditing literature requires the auditor to consider whether there is substantial doubt about the entity’s ability to continue as a going concern, like IFRS.

2.1.1.4. Unlike IFRS, the assessment of going concern is for a period of time that does not exceed one year from the issuance date of the

2.1.1.5. financial statements. Unlike IFRS, this assessment is for the purpose of determining whether the disclosures in the financial statements are appropriate, and the basis of preparation is not affected unless liquidation is imminent.

2.1.1.6. Unlike IFRS, if liquidation is imminent, then there are specific requirements for the measurement, recognition and disclosures under US GAAP

2.2. Form and components of financial statements

2.2.1. USGAAP

2.2.1.1. Unlike IFRS, there are no exemptions, other than for investment companies, from preparing consolidated financial statements if an entity has one or more subsidiaries.

2.2.1.2. Unlike IFRS, US GAAP does not require presentation of comparative information. However, like IFRS, SEC registrants are required to present statements of financial position as at the end of the current and prior reporting periods; unlike IFRS, all other statements are presented for the three most recent reporting periods.

2.2.1.3. Unlike IFRS, a statement of financial position as at the beginning of the earliest comparative period is not required in any circumstances.

2.3. Statement of cash flows

2.3.1. USGAAP

2.3.1.1. Unlike IFRS, cash receipts and payments with attributes of more than one class of cash flows are classified based on the predominant source of the cash flows unless the underlying transaction is accounted for as having different components.

2.3.1.2. Unlike IFRS, interest received and paid (net of interest capitalised) and dividends received from previously undistributed earnings are required to be classified as operating activities. Also unlike IFRS, dividends paid are required to be classified as financing activities.

2.4. Fair value measurement

2.4.1. USGAAP

2.4.1.1. Unlike IFRS, a practical expedient allows entities to measure the fair value of certain investments at net asset value.

2.5. Consolidation

2.5.1. USGAAP

2.5.1.1. Unlike IFRS, consolidation is based on a controlling financial interest model, which differs in certain respects from IFRS.

2.5.1.2. Unlike IFRS, US GAAP does not define returns for the purpose of determining whether an investor has control over a VIE. Nevertheless, the decision maker must have the obligation to absorb losses of the VIE, or rights to receive benefits from the VIE, that could potentially be significant to the VIE

2.5.1.3. Unlike IFRS, uniform accounting policies within the group are not required.

2.5.1.4. Unlike IFRS, NCI are generally measured initially at fair value.

2.5.1.5. Unlike IFRS, there is specific guidance on the accounting for put options held by NCI, which results in a liability recognised at fair value or redemption amount, or the presentation of NCI as ‘temporary equity’, depending on the terms of the arrangement and whether the entity is an SEC registrant.

2.5.1.6. Unlike IFRS, pro rata spin-offs are accounted for on the basis of book values, and no gain or loss is recognised. Non-pro rata spin-offs are accounted for on the basis of fair values, and a gain or loss is recognised in profit or loss, like IFRS.

2.6. Business combinations

2.6.1. USGAAP

2.6.1.1. Unlike IFRS, consolidation is based on a controlling financial interest model, which differs in certain respects from IFRS. –or noFn-variable interest entities, ‘control’ is the continuing power to govern the financial and operating policies of an entity. –or vaFriable interest entities (VIEs), control is the power to direct the activities that most significantly impact the VIE’s economic performance and either the obligation to absorb losses of the VIE, or rights to receive benefits from the VIE, that could potentially be significant to the VIE.

2.6.1.2. Unlike IFRS, US GAAP does not define returns for the purpose of determining whether an investor has control over a VIE. Nevertheless, the decision maker must have the obligation to absorb losses of the VIE, or rights to receive benefits from the VIE, that could potentially be significant to the VIE.

2.6.1.3. Unlike IFRS, uniform accounting policies within the group are not required.

2.6.1.4. Unlike IFRS, NCI are generally measured initially at fair value.

2.6.1.5. Unlike IFRS, there is specific guidance on the accounting for put options held by NCI, which results in a liability recognised at fair value or redemption amount, or the presentation of NCI as ‘temporary equity’, depending on the terms of the arrangement and whether the entity is an SEC registrant.

2.6.1.6. Unlike IFRS, pro rata spin-offs are accounted for on the basis of book values, and no gain or loss is recognised. Non-pro rata spin-offs are accounted for on the basis of fair values, and a gain or loss is recognised in profit or loss, like IFRS.

2.6.2. USGAAP

2.6.2.1. Unlike IFRS, the acquirer in a business combination generally measures NCI at fair value at the date of acquisition.

2.6.2.2. Unlike IFRS, ‘push-down’ accounting, whereby fair value adjustments are recognised in the financial statements of the acquiree, is permitted.

2.7. Foreign currency translation

2.7.1. USGAAP

2.7.1.1. Unlike IFRS, the financial statements of a foreign operation in a highly inflationary economy are remeasured as if the parent’s reporting currency were its functional currency.

2.8. Accounting policies, errors and estimates

2.8.1. USGAAP

2.8.1.1. Unlike IFRS, a statement of financial position as at the beginning of the earliest comparative period is not required in any circumstances.

2.9. Events after the reporting date

2.9.1. USGAAP

2.10. Hyperinflation

3. 3 Statement of financial position

3.1. General

3.1.1. USGAAP

3.1.1.1. Unlike IFRS, US GAAP does not contain a requirement to present a classified statement of financial position. Unlike IFRS, there is no restriction on when an unclassified statement of financial position based on the order of liquidity can be presented.

3.1.1.2. Unlike IFRS, SEC regulations prescribe the format and certain minimum line item disclosures for SEC registrants. For non-SEC registrants, there is limited guidance on the presentation of the statement of financial position, like IFRS.

3.1.1.3. Unlike IFRS, there is specific guidance when an otherwise long- term debt agreement includes a subjective acceleration clause. Classification is based on the likelihood that the creditor will choose to accelerate repayment of the liability, which may result in differences from IFRS.

3.2. Property, plant and equipment

3.2.1. USGAAP

3.2.1.1. Unlike IFRS, component accounting is permitted but not required. When component accounting is used, its application may differ from IFRS.

3.2.1.2. Unlike IFRS, compensation for the loss or impairment of property, plant and equipment, to the extent of losses and expenses recognised, is recognised in profit or loss when receipt is likely to occur. Compensation in excess of that amount is recognised only when it is receivable, like IFRS.

3.3. Intangible assets and goodwill

3.3.1. USGAAP

3.3.1.1. Unlike IFRS, because several different Codification topics/subtopics apply to the accounting for intangible assets, there are different measurement bases on initial recognition.

3.3.1.2. Unlike IFRS, the revaluation of intangible assets is not permitted.

3.3.1.3. Unlike IFRS, both internal research and development (R&D) expenditure is expensed as it is incurred. Special capitalisation criteria apply to in-process R&D acquired in a business combination, direct- response advertising, software developed for internal use, software developed for sale to third parties and motion picture film costs, which differ from the general criteria under IFRS.

3.3.1.4. Unlike IFRS, direct-response advertising expenditure is capitalised if certain criteria are met. Other advertising and promotional expenditure is expensed as it is incurred, like IFRS, or deferred until the advertisement is shown, unlike IFRS.

3.4. Investment property

3.4.1. USGAAP

3.4.1.1. Unlike IFRS, there is no specific definition of ‘investment property’; such property is accounted for as property, plant and equipment unless it meets the criteria to be classified as held-for-sale.

3.4.1.2. Unlike IFRS, property held by a lessee under an operating lease cannot be recognised in the statement of financial position.

3.4.1.3. Unlike IFRS, there is no guidance on how to classify dual-use property. Instead, the entire property is accounted for as property, plant and equipment.

3.4.1.4. Unlike IFRS, ancillary services provided by a lessor do not affect the treatment of a property as property, plant and equipment.

3.4.1.5. Unlike IFRS, there is no requirement to disclose the fair value of investment property.

3.4.1.6. Unlike IFRS, investment property is accounted for as property, plant and equipment, and there are no transfers to or from an ‘investment property’ category.

3.5. Associates and the equity method (Equity-method investees

3.5.1. USGAAP

3.5.1.1. Unlike IFRS, for partnerships and similar entities the equity method is applicable unless the investor has virtually no influence over the investee’s operating and financial policies.

3.5.1.2. Unlike IFRS, the role of currently exercisable potential voting rights is not explicitly addressed. However, because all factors are required to be considered, in effect any such voting rights would need to be assessed, which may result in the same outcome as IFRS.

3.5.1.3. Unlike IFRS, an entity may elect to account for equity-method investees at fair value regardless of whether it is a venture capital or similar organisation. Additionally, investment companies account for investments in equity-method investees at fair value, like IFRS.

3.5.1.4. Unlike IFRS, in applying the equity method, an investee’s accounting policies need not be consistent with those of the investor.

3.5.1.5. Unlike IFRS, if an entity contributes a subsidiary or group of assets that constitutes a business in exchange for an interest in an equity- method investee, then the entity is required to recognise any gain or loss in full.

3.5.1.6. Unlike IFRS, the carrying amount of an equity-method investee is written down only if there is an impairment of the carrying amount that is considered to be ‘other than temporary’.

3.5.1.7. Unlike IFRS, if an equity-method investee becomes an investment, then any retained investment is measured based on the investor’s carrying amount of the investment at the date of the change in status of the investment, adjusted for the reclassification of items recognised previously in accumulated OCI.

3.6. Joint arrangements (Investments in joint ventures)

3.6.1. USGAAP

3.6.1.1. Unlike IFRS, there is no definition of a ‘joint arrangement’, and the accounting distinction largely depends on whether the arrangement is conducted with the use of a legal entity.

3.6.1.2. Unlike IFRS, there is no definition of a ‘joint operation’. In practice it is understood to be an arrangement conducted without the use of a legal entity.

3.6.1.3. Unlike IFRS, the definition of a ‘joint venture’ refers to a jointly controlled activity conducted with the use of a legal entity.

3.6.1.4. Unlike IFRS, a jointly controlled activity conducted with the use of a legal entity is referred to as a joint venture.

3.7. [Not used]

3.8. Inventories

3.8.1. USGAAP

3.8.1.1. Unlike IFRS, inventories are generally measured at the lower of cost and market.

3.8.1.2. Like IFRS, ‘cost’ includes all direct expenditure to get inventory ready for sale, including attributable overheads.

3.8.1.3. Unlike IFRS, asset retirement obligations (decommissioning costs) incurred through the production of inventory are added to the carrying amount of the related item of property, plant and equipment.

3.8.1.4. Unlike IFRS, the cost of inventory may be determined using the last- in, first-out (LIFO) method in addition to the first-in, first-out (FIFO) or weighted-average cost method.

3.8.1.5. Unlike IFRS, the same cost formula need not be applied to all inventories having a similar nature and use to the entity.

3.8.1.6. Unlike IFRS, inventory is written down to market value when market value is less than cost.

3.8.1.7. Unlike IFRS, ‘market value’ is current replacement cost limited by net realisable value (ceiling) and net realisable value less a normal profit margin (floor). Like IFRS, ‘net realisable value’ is the estimated selling price less the estimated costs of completion and sale.

3.8.1.8. Unlike IFRS, a write-down of inventory to market is not reversed for subsequent recoveries in value unless it relates to changes in exchange rates.

3.8.1.9. USGAAP

3.9. Biological assets

3.9.1. USGAAP

3.9.1.1. Unlike IFRS, biological assets are stated at the lower of cost and market. The terms ‘growing crops’ and ‘animals being developed for sale’ are used to describe what would be biological assets under IFRS.

3.9.1.2. Unlike IFRS, agricultural produce is measured either at the lower of cost and market, or at sales price (fair value) less costs of disposal when certain conditions are met. The terms ‘harvested crops’

3.9.1.3. and ‘animals held for sale’ are used to describe what would be agricultural produce under IFRS.

3.10. Impairment of non-financial assets

3.10.1. USGAAP

3.10.1.1. Unlike IFRS, depending on the specific asset and circumstances, assets are tested for impairment as an individual asset, as part of an asset group or at the reporting unit (RU) level. – An asset group is the lowest level for which there are identifiable cash flows (i.e. both cash inflows and cash outflows) that are largely independent of the net cash flows of other groups of assets, which may differ from a CGU under IFRS. –U isAann Roperating segment or one level below an operating segment if certain conditions are met, unlike IFRS.

3.10.1.2. Unlike IFRS, goodwill is allocated to RUs that are expected to benefit from the synergies of the business combination from which it arose.

3.10.1.3. Unlike IFRS, the carrying amount of goodwill is not grossed up for impairment testing because NCI are measured at fair value in the acquisition accounting.

3.10.1.4. Unlike IFRS, an impairment loss is triggered for assets other than goodwill and identifiable intangibles with indefinite lives only if the asset’s, or asset group’s, carrying amount exceeds its recoverable amount (i.e. the carrying amount is less than the undiscounted cash flows of the asset or asset group). If the carrying amount is not recoverable, then the impairment loss is the difference between the carrying amount of the asset (asset group) and the fair value of the asset (asset group), unlike IFRS.

3.10.1.5. Unlike IFRS, estimates of future cash flows used to assess the recoverability of depreciable or amortisable assets (asset groups) are always consistent with those of a market participant. Unlike IFRS, the cash flows used to determine recoverability (before calculating an impairment loss) are not discounted.

3.10.1.6. Unlike IFRS, an impairment loss for an asset group is allocated pro rata to assets in the asset group, excluding working capital, goodwill, corporate assets and indefinite-lived intangible assets. Goodwill and indefinite-lived intangible assets are tested after the asset group

3.10.1.7. has been tested for impairment and separately as a reporting unit, unlike IFRS.

3.10.1.8. Unlike IFRS, impairment losses are always recognised directly in profit or loss and the revaluation of property, plant and equipment and intangible assets is not permitted.

3.10.1.9. Unlike IFRS, reversals of impairments are prohibited.

3.11. Provisions, contingent assets and liabilities (Recognised contingencies and

3.11.1. USGAAP

3.11.1.1. Unlike IFRS, a recognised contingency is measured using a ‘reasonable estimate’. However, under some Codification topics obligations that would be deemed a provision under IFRS are measured at fair value, unlike IFRS.

3.11.1.2. Unlike IFRS, if no amount within a range is a better estimate than any other, then the obligation is measured at the low end of the range.

3.11.1.3. Unlike IFRS, an obligation is measured at the single most likely outcome even if the possible outcomes are mostly higher or lower than that amount.

3.11.1.4. Unlike IFRS, recognised contingencies are not discounted except in limited cases, in which case specific requirements apply that may differ from IFRS.

3.11.1.5. Unlike IFRS, a liability for contract termination costs is recognised only when the contract has been terminated pursuant to its terms or the entity has permanently ceased using the rights granted under the contract.

3.11.1.6. Unlike IFRS, there is no general requirement to recognise a loss for onerous contracts; such a provision is recognised only when required by a specific Codification topic/subtopic.

3.11.1.7. Unlike IFRS, ‘loss contingencies’ are uncertain obligations, both recognised and unrecognised.

3.11.1.8. Unlike IFRS, contingent liabilities may be either recognised or unrecognised. Additionally, contingent liabilities are recognised in a business combination only when the acquisition date fair value is

3.11.1.9. determinable within the measurement period, unlike IFRS, or if the contingency is probable and the amount is reasonably estimable, unlike IFRS.

3.12. (Other ‘provisions’)

3.12.1. USGAAP

3.13. Income taxes

3.13.1. USGAAP

3.13.1.1. Unlike IFRS, there is no exemption from recognising a deferred tax asset or liability for the initial recognition of an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither accounting profit nor taxable profit.

3.13.1.2. Unlike IFRS, the tax effects for the seller are deferred and a deferred tax liability (asset) is not recognised for the step-up in tax bases for the buyer as a result of an intra-group transfer of assets between jurisdictions.

3.13.1.3. Unlike IFRS, if the reporting currency is the functional currency, then a deferred tax liability (asset) is not recognised for exchange gains and losses related to foreign non-monetary assets and liabilities that are remeasured into the reporting currency using historical exchange rates or indexing for tax purposes.

3.13.1.4. Unlike IFRS, all deferred tax assets are recognised and a valuation allowance is recognised to the extent that it is more likely than not that the deferred tax assets will not be realised – i.e. a

3.13.1.5. gross approach.

3.13.1.6. Unlike IFRS, current and deferred tax are only measured based on rates and tax laws that are enacted at the reporting date.

3.13.1.7. Unlike IFRS, deferred tax assets and liabilities, but not the valuation allowance, are classified as either current or non-current in the statement of financial position according to the classification of the related asset or liability. The valuation allowance is allocated against current and non-current deferred tax assets for the relevant tax jurisdiction on a pro rata basis.

3.13.1.8. Unlike IFRS, temporary differences related to share-based payment arrangements are based on the amount of compensation cost that is recognised in profit or loss without any adjustment for the entity’s current share price until the tax benefit is realised.

3.13.1.9. Unlike IFRS, for a particular tax-paying component of an entity and within a particular tax jurisdiction, all current deferred tax liabilities and assets are offset and presented as a single amount and all non- current deferred tax liabilities and assets are offset and presented as a single amount. Deferred tax liabilities and assets attributable to different tax-paying components of the entity or to different

3.13.1.10. tax jurisdictions may not be offset, which differs from IFRS in certain aspects.

3.13.1.11. Unlike IFRS, US GAAP has specific guidance on the recognition of uncertain tax positions (income tax exposures). The benefits of uncertain tax positions are recognised only if it is more likely than not that the positions are sustainable based on their technical merits. For tax positions that are more likely than not of being sustained, the largest amount of tax benefit that is greater than 50 percent likely of being realised on settlement is recognised.

4. 4 Specific items of profit or loss and OCI

4.1. General

4.1.1. USGAAP

4.1.1.1. Unlike IFRS, SEC regulations prescribe the format and minimum line item presentation for SEC registrants. For non-SEC registrants, there is limited guidance on the presentation of the income statement or statement of comprehensive income, like IFRS.

4.1.1.2. Unlike IFRS, there is no requirement for expenses to be classified according to their nature or function. SEC regulations prescribe expense classification requirements for certain specialised industries, unlike IFRS.

4.1.1.3. Unlike IFRS, the presentation of non-GAAP measures in the financial statements by SEC registrants is prohibited. In practice, non-GAAP measures are also not presented in the financial statements by non- SEC registrants, unlike IFRS.

4.1.1.4. Unlike IFRS, transactions of an ‘unusual’ nature are defined as possessing a high degree of abnormality and of a type clearly unrelated to, or only incidentally related to, the ordinary and typical activities of the entity. Unlike IFRS, material events or transactions that are unusual or occur infrequently, but not both, can be presented separately in the income statement.

4.1.1.5. Unlike IFRS, the presentation of certain items as ‘extraordinary items’ is required if the criteria are met, but in practice this is rare. An

4.1.1.6. extraordinary item is one that is both unusual in nature and infrequent in occurrence.

4.2. Revenue

4.2.1. Topic 605, Subtopic 905-605, Subtopic 920-605, Subtopic 922-605, Subtopic 926-605, Subtopic 928-605, Subtopic 932-605, Subtopic 944-605, Subtopic 946-605, Subtopic 952-605, Subtopic 976-605, Subtopic 980-605, Subtopic 985-605, SAB Topic 13)

4.2.2. USGAAP

4.2.2.1. Unlike IFRS, there is extensive guidance on revenue recognition specific to the industry and type of contract.

4.2.2.2. Under the percentage-of-completion method, both contract revenue and costs may be recognised with reference to the stage of completion of the work, like IFRS. However, unlike IFRS, entities are also permitted to recognise all costs incurred, with revenue calculated with reference to the gross margin earned on the contract during

4.2.2.3. the period.

4.2.2.4. Unlike IFRS, construction contracts may, but are not required, to be segmented when certain criteria are met; additionally, the criteria differ from IFRS.

4.2.2.5. Unlike IFRS, there is specific guidance on software revenue recognition.

4.3. Revenue from contracts with customers

4.3.1. USGAAP

4.3.1.1. Unlike IFRS, the new Codification Topic is effective for annual periods beginning after 15 December 2017 (public business entities) or after 15 December 2018 (other entities). Early adoption is permitted but not before annual periods beginning after 15 December 2016.

4.4. Government grants

4.4.1. USGAAP

4.4.1.1. Unlike IFRS, there is no specific US GAAP guidance on the accounting for grants from governments to profit-oriented entities. However, US practice may look to IFRS as a source of non- authoritative guidance.

4.4.1.2. Unlike IFRS, a contributed non-monetary asset is recognised at fair value if fair value can be measured reliably.

4.4.1.3. Unlike IFRS, interest may not always be imputed on low-interest or interest-free loans from a government.

4.4.1.4. USGAAP

4.5. Employee benefits

4.5.1. USGAAP

4.5.1.1. Unlike IFRS, US GAAP does not contain specific guidance on short-term employee benefits other than compensated absences. However, accrual accounting principles are generally applied in accounting for short-term employee benefits.

4.5.1.2. Unlike IFRS, post-employment benefits are divided into ‘post- retirement benefits’ (provided during retirement) and ‘other post- employment benefits’ (provided after the cessation of employment but before retirement). The accounting for post-employment benefits depends on the type of benefit provided, unlike IFRS.

4.5.1.3. Unlike IFRS, the recognition of an asset in respect of a defined benefit plan is not restricted.

4.5.1.4. Unlike IFRS, the funded status is recognised as a liability if the plan is underfunded; the liability is not subject to additional adjustments related to minimum funding requirements.

4.5.1.5. Unlike IFRS, curtailment gains are recognised when they occur. Also unlike IFRS, curtailment losses are recognised when they are probable.

4.5.1.6. Unlike IFRS, even if there is an agreement that determines how the surplus in a multi-employer plan would be distributed or a deficit in the plan funded, an asset or liability is not recognised until the liability is assessed or the refund received.

4.5.1.7. Unlike IFRS, there is specific guidance on the application of defined benefit accounting to certain plans that would be defined contribution plans except that they contain minimum benefit guarantees.

4.5.1.8. Depending on the form of the minimum guarantee, the plan would be accounted for as a defined benefit plan or as a cash balance plan.

4.5.1.9. Unlike IFRS, termination benefits are categorised into different types of benefits: ongoing benefit arrangements, contractual terminations, special terminations and one-time terminations.

4.5.1.10. Unlike IFRS, there is not a single model for the recognition of termination benefits, and the timing of recognition depends on the category of termination benefit.

4.5.1.11. Unlike IFRS, US GAAP does not distinguish between long- and short- term employee benefits.

4.5.1.12. USGAAP

4.6. Share-based payments

4.6.1. USGAAP

4.6.1.1. Unlike IFRS, equity-classified share-based payment transactions with non-employees are measured based on the fair value of the goods or services received or the fair value of the equity-based instruments issued, whichever is more reliably measurable. Unlike IFRS, the measurement date is the earlier of the date on which performance is complete and when completion of performance is probable because there is a sufficiently large disincentive for failure to perform.

4.6.1.2. Unlike IFRS, the concept of ‘non-vesting conditions’ is separated into two separate concepts: post-vesting restrictions and other conditions. Post-vesting restrictions are reflected in the initial measurement of fair value and there is no subsequent true-up for differences between the expected and the actual outcome, like IFRS. However, unlike IFRS, other conditions require the award to be liability-classified, irrespective of the settlement provisions of the award.

4.6.1.3. Unlike IFRS, an award for which the employee has the choice of equity or cash settlement is generally liability-classified in its entirety unless the award is a ‘combination’ award, which might be treated like a compound instrument.

4.6.1.4. Unlike IFRS, US GAAP does not contain specific guidance on group share-based payment arrangements, which may give rise to differences in practice.

4.7. Borrowing costs (Financial income and expense)

5. 5 Special topics

5.1. Leases

5.1.1. USGAAP

5.1.1.1. Unlike IFRS, the lease

5.1.1.2. Unlike IFRS, a lease of land with a building is treated as two separate leases only if the fair value of the land is at least 25 percent of the fair value of the leased property as a whole. Like IFRS, the two leases may be classified differently.

5.1.1.3. Unlike IFRS, a lease of land is generally classified as an operating lease unless title transfers to the lessee.

5.1.1.4. Unlike IFRS, US GAAP does not generally permit immediate gain recognition on sale-leaseback transactions unless the leaseback is considered to be ‘minor’.

5.1.1.5. Unlike IFRS, there is no explicit requirement that a series of linked transactions in the legal form of a lease be accounted for based on the substance of the arrangement.

5.1.1.6. US GAAP contains specific requirements for revenue recognition that apply to sales-type leases. However, these requirements differ from IFRS in respect of the discount rate used to calculate revenue.

5.2. Operating segments

5.3. Earnings per share

5.3.1. USGAAP

5.3.1.1. Unlike IFRS, entities with an ‘extraordinary item’ also present EPS data for that item, either in the statement that reports profit or loss or in the notes to the financial statements.

5.3.1.2. Unlike IFRS, the computation of diluted EPS for year-to-date (including annual) periods is based on the weighted average of incremental shares included in each interim period making up the year-to-date period.

5.4. Non-current assets held for sale and discontinued operations

5.4.1. USGAAP

5.4.1.1. Unlike IFRS, there is no special designation for assets held for distribution.

5.4.1.2. Unlike IFRS, there is no special designation for assets held for distribution.

5.4.1.3. Unlike IFRS, there is no specific guidance on whether the comparative statement of financial position is re-presented when a long-lived asset (or disposal group) is classified as held-for-sale.

5.4.1.4. Unlike IFRS, a discontinued operation is either (1) a component of an entity that has been disposed of, meets the criteria to be classified as held-for-sale, or has been abandoned/spun-off; and represents

5.4.1.5. a strategic shift that has (or will have) a major effect on an entity’s operations and financial results; or (2) a business or non-profit activity that, on acquisition, meets the criteria to be classified as held-for sale

5.5. Related party disclosures

5.5.1. USGAAP

5.5.1.1. Unlike IFRS, management compensation is not required to be disclosed in the financial statements; however, SEC registrants are required to provide compensation information outside the financial statements for specified members of management and the board.

5.5.1.2. Unlike IFRS, there is no partial disclosure exemption for government- related entities that prepare financial statements in accordance with US GAAP. However, such entities’ financial statements will often be prepared in accordance with US governmental accounting standards, rather than in accordance with US GAAP.

5.6. Investment entity consolidation exception (Investment company consolidation exception)

5.6.1. USGAAP

5.6.1.1. Unlike IFRS, an investment company is required to provide only a statement of changes in net assets, a schedule of investments and financial highlights. In addition, unlike IFRS, there is no requirement to present comparative financial statements and US GAAP only requires a statement of cash flows in certain circumstances.

5.6.1.2. Unlike IFRS, consolidation by an investment company of an investment company subsidiary is not precluded.

5.6.1.3. Unlike IFRS, for the purpose of consolidating an investment company, a non-investment company parent retains the investment company accounting applied by the subsidiary investment company.

5.7. Non-monetary transactions

5.7.1. USGAAP

5.7.1.1. Unlike IFRS, US GAAP does not require an exchange of dissimilar items in a barter transaction to be recognised as revenue. No revenue is recognised for barter transactions that facilitate sales to customers. US GAAP provides explicit guidance to support the fair value measurement of a barter revenue transaction, unlike IFRS.

5.8. Accompanying financial and other information

5.8.1. USGAAP

5.8.1.1. Unlike IFRS, SEC registrants are required to include an MD&A in their annual and interim reports. Although this is not required for non-SEC registrants, sometimes they include an MD&A in their annual reports.

5.9. Interim financial reporting

5.9.1. USGAAP

5.9.1.1. Unlike IFRS, each interim period is viewed as an integral part of the annual period to which it relates.

5.10. Disclosure of interests in other entities

5.10.1. USGAAP

5.10.1.1. Unlike IFRS, there is no single Codification Topic under US GAAP that deals with the disclosure of information about an entity’s interests in other entities.

5.10.1.2. Unlike IFRS, US GAAP does not explicitly require disclosure about an entity’s interests in joint arrangements. While disclosures are required about corporate joint ventures and other equity-method investees that are material in aggregate, the overall approach to disclosure may result in differences from IFRS in practice.

5.11. Extractive activities

5.11.1. USGAAP

5.11.1.1. Unlike IFRS, US GAAP provides detailed guidance on the accounting and reporting by oil- and gas-producing entities for expenditure incurred before, during and after exploration and evaluation (E&E) activities. US GAAP does not contain extensive authoritative guidance for other extractive industries.

5.11.1.2. Unlike IFRS, there is industry-specific guidance on the recognition and measurement of pre-exploration expenditure and development expenditure for oil- and gas-producing entities. For other extractive industries, pre-E&E expenditure is generally expensed as it is incurred, like IFRS.

5.11.1.3. Unlike IFRS, the accounting for oil- and gas-producing activities covers pre-exploration expenditure, E&E expenditure and development expenditure. Other extractive industries account for pre-exploration and E&E separately from development expenditure.

5.11.1.4. Unlike IFRS, all costs related to oil- and gas-producing activities are accounted for under either the successful efforts method or the full cost method, and the type of E&E costs capitalised under each method differs. For other extractive industries, E&E costs are

5.11.1.5. generally expensed as they are incurred unless an identifiable asset is created by the activity.

5.11.1.6. Unlike IFRS, the test for recoverability is usually conducted at the oil and gas field level under the successful efforts method, or by geographic region under the full cost method. For other extractive

5.11.1.7. industries, the test for recoverability is generally at the mine or group of mines level, unlike IFRS.

5.11.1.8. Unlike IFRS, the guidance on production stripping applies to all extractive activities other than oil and gas. Unlike IFRS, stripping costs incurred during the production phase of a mine are included in the cost of inventory extracted during the period.

5.12. Service concession arrangements

5.12.1. USGAAP

5.12.1.1. US GAAP provides limited guidance on the accounting by operators for service concession arrangements. Unlike IFRS, the guidance applies only to service concession arrangements that are not regulated operations. Like IFRS, the guidance applies only to service concession arrangements in which the public sector (the grantor) controls: –vicetshperosveirded with the infrastructure; – to whom the operator must provide those services; – the price charged for the services; and –y resaindual interest in the infrastructure

5.12.1.2. Unlike IFRS, the operator evaluates construction and upgrade services as separate deliverables to determine whether they constitute separate units of accounting. The operator accounts for revenue and costs relating to construction, upgrade or operation services in accordance with the revenue Codification Topic and relevant cost Codification Topics, which differ in some respects from IFRS.

5.12.1.3. Unlike IFRS, the operator evaluates the arrangement to determine whether it comprises a single or multiple units of accounting.

5.12.1.4. US GAAP does not provide specific guidance on the classification of a resulting asset, unlike IFRS.

5.12.1.5. Unlike IFRS, an intangible asset generally would not be recognised. Instead, an ‘other’ asset might be recognised, but only if its realisation is not contingent on providing future service under the service concession arrangement.

5.12.1.6. Unlike IFRS, the operator would apply the general guidance applicable to separate deliverables (performance obligations) to determine whether a deliverable (obligation) to maintain or restore infrastructure, including any construction or upgrade element, is

5.12.1.7. a separate unit of accounting and whether the related deliverable (obligation) should be recognised and measured.

5.13. Common control transactions and Newco formations

5.13.1. US

5.13.1.1. Unlike IFRS, the acquirer in a common control transaction applies book value accounting in its consolidated financial statements.

5.13.1.2. Unlike IFRS, the transferor in a common control transaction that is a demerger applies book value accounting in its consolidated financial statements. In other disposals that are common control transactions, the transferor applies book value accounting, unlike IFRS.

6. 6 [Not used]

7. 7 Financial instruments

7.1. Scope and definitions

7.2. Derivatives and embedded derivatives

7.2.1. USGAAP

7.2.1.1. (Subtopics 310-10, 20, Subtopic 320-10, Subtopic 325-20, Subtopic 405-20, Topic 450, Subtopic 460-10, Subtopics 470-20, 50, 60, Subtopic 480-10, Subtopic 505-10, Subtopic 810- 10, Subtopics 815-10, 15, 25, Subtopic 820-10, Subtopic 825-10, Subtopic 830-20, Topic 840, Topic 860, Subtopic 940-320, Subtopics 946- 320, 830, Subtopic 948-10, SAB Topic 5.M, SAB Topic 6.L)

7.3. Equity and financial liabilities

7.3.1. USGAAP

7.3.1.1. Unlike IFRS, securities may be reclassified into the trading category in certain rare circumstances.

7.4. Classification of financial assets and financial liabilities

7.4.1. USGAAP

7.4.1.1. Unlike IFRS, securities may be reclassified into the trading category in certain rare circumstances.

7.5. Recognition and derecognition

7.5.1. USGAAP

7.5.1.1. Unlike IFRS, the derecognition model for transfers of financial assets focuses on surrendering control over the transferred assets; the transferor has ‘surrendered’ control over transferred assets only if certain conditions are met.

7.5.1.2. Unlike IFRS, a financial asset is ‘transferred’ when it has been conveyed by and to someone other than its issuer.

7.5.1.3. Unlike IFRS, ‘risks and rewards’ is not an explicit consideration when testing a transfer for derecognition. Rather, an entity derecognises

7.5.1.4. a transferred financial asset or a participating interest therein if it surrenders legal, actual and effective control of the financial asset or participating interest; otherwise, it continues to recognise the asset.

7.5.1.5. Unlike IFRS, there is not a single overarching requirement for objective evidence of impairment in assessing the impairment of financial assets. Instead, different impairment models are applied to different categories of financial instruments. Unlike IFRS, an impairment loss on a security is recognised only if it is other than temporary, even if there is objective evidence that the security may be impaired. If the impairment is other than temporary, then any impairment loss is recognised in profit or loss, except in certain situations involving debt securities, in which case the impairment loss is split between profit or loss and OCI.

7.6. Measurement and gains and losses

7.6.1. US

7.7. Hedge accounting

7.7.1. USGAAP

7.8. Presentation and disclosure

7.8.1. USGAAP

7.8.1.1. (Topic 815, Topic 860, Subtopic 320-10, Subtopic 405-20, Subtopic 460-10, Subtopic 470-20, Subtopic 480-10, Subtopic 505-10, Subtopic 825-10, Reg S-K, Reg S-X, SAB Topic 4-E, para 310-10-S99-2)

7.8.1.2. Unlike IFRS, US GAAP does not require specific qualitative disclosures in respect of financial instruments other than related to significant concentrations of credit risk. Instead, qualitative disclosures about market risk including interest rate risk, foreign currency risk, commodity price risk and other relevant price risk are required to be disclosed by SEC registrants outside the financial statements in the management discussion and analysis (MD&A).

7.8.1.3. currency risk, commodity price risk and other relevant price risk are required to be disclosed by SEC registrants outside the financial statements in the management discussion and analysis (MD&A).

7.8.1.4. Unlike IFRS, non-SEC registrants are not required to make specific quantitative risk-related disclosures in respect of financial

7.8.1.5. instruments, other than related to concentrations of credit risk. The SEC does require certain quantitative disclosures; however, unlike IFRS, these disclosures are limited to market risk disclosures and are provided outside the financial statements in the MD&A.

8. 8 Insurance contracts

8.1. Insurance contracts