15. IFRS Differences in Accounting

Question 1

What is the difference between share-based compensation expense recognition between IFRS and U.S. GAAP?

Answer 1

• Share-based compensation must be measured using a fair value approach under IFRS; under U.S. GAAP, the intrinsic value method may sometimes be used.
• Total compensation expense is spread over the service period using the accelerated method under IFRS; under U.S. GAAP, the straight-line method or accelerated method can be used.

Question 2

What are the differences in accounting for intangible assets under IFRS vs. U.S. GAAP?

Answer 2

• Under U.S. GAAP, intangible assets are carried at amortized cost; under IFRS, intangible assets may be carried at amortized cost or revalued to fair value.
• Under IFRS, development costs for internally developed intangible assets may be capitalized once the technological feasibility of the project has been established and certain conditions are met; under U.S. GAAP, all development costs are expensed as incurred, except for software development once technological feasibility has been established.

Question 3

What are the differences in inventory accounting under IFRS vs. U.S. GAAP?

Answer 3

• IFRS does not allow the use of the last-in, first-out (LIFO) inventory costing method, which can be used for U.S. GAAP.
• Under IFRS, inventory previously written down for lower of cost or net realizable value issues can be written back up to original cost if there is a recovery; U.S. GAAP does not allow write-up of inventory previously written down

Question 4

What are the differences in impairment testing under IFRS vs. U.S. GAAP?

Answer 4

• Under U.S. GAAP, impairment is reviewed at the individual asset level; under IFRS, an organization should review for impairment at the cash-generation unit (CGU) level.
• Under IFRS, a one-step impairment test is used rather than the two-step model used for U.S. GAAP.
• Recognizing reversals of prior impairment losses is prohibited under U.S. GAAP, but allowed under IFRS.