Question

Discuss the plan for convergence of the U.S. GAAP in regards to the statement of net income, which includes the multiple and single step income statement formats with IFRS.

In this standard, the U.S. GAAP has single step and multiple step income statement formats that combine revenues and gains and all expenses and losses. Multiple step income statement formats report numerous important performance measures before calculating income from continuing operations and net income. This also includes gross profit, operating income, income before tax, income from continuing operations, net income and earnings per share.

If the standard is not converged, discuss the plan for and/or obstacles to convergence.

If the standard is converged, discuss the rationale behind any remaining differences between the two sets of standards

Answer 1

The converged standard has following differences
S No.	Heading	UGAAP	IFRS
1	Extraordinary Items	allows this line item in the statement.	prohibited from being included in the income statement when it is prepared under IFRS.
2	Revenue Recognition	Extensive guidelines for revenue recognition have been provided	The concept behind revenue recofnition is economic benefits of transactions will flow to the entity, and revenue and cost can be measured reliably.
		_Step wise revenue recognization	Recognization step will be different for construction contract , interest income, sale of services and sale of goods
		_Revenue earned
		_Revenue realized
3	Development Cost	Development cost is treated as an expenses, but it is capitalized if certain conditions are satisfied.	development cost is treated as an expense.
4	Prior-Service Cost in Employee Benefit Plan	This cost is recognized under other comprehensive income (OCI) at the date when amendment of the plan is adopted, and it is then amortized as income over the remaining years of services of participants to complete eligibility date or life expectancy.	All prior service cost, whether it is positive or negative, is recognized in the profit and loss (P&L) account when the amendment takes place in the employee benefit plan, and it is prohibited to be spread over a future service period, which may give rise to volatility in P&L.
5	Accounting for Taxes	ax related to the contribution should be recognized as a part of the net benefit cost when the contribution is made.	such taxes on benefit plans should be included in return-on-asset or while computing benefit obligation, based on their nature. For instance, in the plan, tax payable on contribution is typically included in actuarial assumptions for the calculation of benefit obligations.