Question

Describe, in an appropriate level of detail, the differences that resulted when you recasted financial statements from the US GAAP to the IFRS, supported with references from the readings in this module or outside references, where appropriate.

Answer 1

There are many significant differences in US GAAP and IFRS when you recast financial statements from US GAAP to IFRS

	US GAAP	IFRS
Financial Periods Requirement	Comparative financial statements are presented. However, a single year may be required in some cases. Public companies must follow SEC rule which typically require balance sheets for the two most recent years, while other statements must cover the three year period ended on the balance sheet date.	Comparative information must be disclosed with respect to the previous period for all amounts reported in the current period’s financial statements.
Layout of balance sheet and income statement	There is no specific requirement of a layout for balance sheet and income statement except public companies which must follow the detailed requirements in regulation S-X.	IFRS does not include standard layout but includes a list of minimum line items which are less prescriptive than requirements in S-X.
Balance Sheet presentation of Debt (Current Vs Non Current)	Debt for which there has been a covenant violation may be presented as non current if a lender agreement to waive the right to demand repayment for more than one year exists before the financial statements are issued or available to be issued.	Debt associated with a covenant violation must be presented as current unless the lender agreement was reached prior to the balance sheet date.
Balance Sheet - classification of deferred tax assets and liabilities	After the adoption of ASU 2015-17, all deferred tax liabilities and assets will be classified as non current.	All amounts are classified as non current in the balance sheet.
Income Statement classification of expenses	No general requirement within US GAAP to classify income statement items by nature or function. However, there are requirements based on the specific cost incurred. For example, shipping and handling costs. SEC registrants are generally are required to present expenses based on function. For example, cost of sales, administrative costs.	Entities may present expenses based on either function or nature. For example, salaries, depreciation. However, if a function is selected, certain disclosures about the nature of expenses must be included in the notes.
Statement of Cash Flows - Restricted Cash	After the adoption of ASU 2016-18, changes in restricted cash and restricted cash equivalents will be shown in the statement of cash flows. When cash, cash equivalents, restricted cash and restricted cash equivalents are presented in more than one line item on the balance sheet, ASU requires a reconciliation of the totals in the statement of cash flows to the related captions in the balance sheet.	There is no specific guidance about the presentation of changes in restricted cash and restricted cash equivalents on the statement of cash flows.