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Compare the FASB and IAS consolidation standards Free essay! Download now

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Compare the FASB and IAS consolidation standards

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Downloads to date: N/A | Words: 1122 | Submitted: 05-May-2011
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accounting essay

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Compare the FASB and IAS consolidation standards

1. Executive summary: 2
2Business Combinations and Consolidated Financial Statement (IFRS Vs GAAP) 3
3Comments and Future Work 8

1. Executive summary:
There are some key differences between International Financial Reporting Standards (IFRSs) and United States generally accepted accounting principles (US GAAP). According to IFRS and IAS, these include classification of liabilities, asset exchanges, accounting changes, and financial instruments. Other differences include discontinued operations, provisions, and assets held for sale. Still other differences are more long-standing but may be capable of resolution in a relatively short time. These include inventories; accounting policies, changes in estimates, and errors; assets held for disposal; income taxes; construction contracts; joint ventures; interim financial reporting; and research and development costs. The two boards are also cooperating in a number of longer-term convergence projects. Issues include application of the purchase method of accounting for business combinations, concepts of revenue recognition, employee benefits, and comprehensive income.


2.Business Combinations and Consolidated Financial Statement (IFRS Vs GAAP)
List below are some main differences and similarities on Business Combinations and Consolidated Financial Statements in a table with column headings.
US GAAP treatment
IFRS treatment
Pooling prohibited by FAS 141; consolidation rules effectively based on majority ownership criterion; closing date generally used for recognizing acquisitions (purchases)


Pooling (unitings) eliminated by IFRS 3; consolidation rules based on control criterion; control date used for recognizing acquisitions (purchases)



Special consolidation requirements apply to Variable Interest Entities (VIE), consolidation by primary beneficiary generally required


VIEs not yet addressed by IFRS but Special Purpose Entities consolidated under concept of control



Recognize post-acquisition obligations only for exiting activities begun before merger, to be completed in one year




Recognize post-acquisition obligations only for provisions that had been recognized by acquired entity




Consolidation of majority owned subsidiaries required unless control is not exercised by parent



Consolidation required unless control is not exercised by parent, or unless control is temporary (to lapse within twelve months)


Non controlling interest measured at fair value




Non controlling interest measured either: 1) at fair value, or 2) as a proportionate share of identifiable net assets acquired; choice made on acquisition-by-acquisition basis

Acquiree deferred tax recognized only after date of acquisition (i.e., having full valuation allowance at acquisition date) used to offset goodwill, then offset intangible assets, finally to offset tax expense
Subsequent creation of allowance for tax asset recognized in acquisition transaction effected via charge to tax expense



Acquiree deferred tax recognized only after date of acquisition (i.e., having full valuation allowance at acquisition date) is effected as current period credit to tax expense and also goodwill adjustment as if adjustment occurred at acquisition date







No promulgated rules governing “parent company only” financial statements, but use of equity method would be acceptable



In “parent company only” financials, the investment in subsidiaries, equity investees, and joint ventures may ...

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