Question

Provide the required journal entries for both Year 1 and Year 2 under both the US GAAP and IFRS for each respective date where you are provided information in the above scenario. In your explanation for each journal entry, make sure you document the basis for each journal entry amount. In other words, how did you obtain the figures? In addition, provide a detailed explanation for each respective journal entry with the appropriate Reference(s) to IAS12 and ASC 740-10, respectively.

Global Multinational Corporation (Global) is a U.S. company that owns and operates 100% of a consolidated subsidiary in a foreign jurisdiction where income taxes are payable at a higher rate on undistributed profits than on distributed earnings. For the year ending December 31, Year 1, Global’s foreign subsidiaries taxable income is $150,000. Global’s foreign subsidiary also has net taxable temporary differences amounting to $50,000 for the year, thus creating the need for a deferred tax liability on the balance sheet. The tax rate on distributed profits is 40%, and the tax rate on undistributed profits is 50%; the difference results in a credit if profits are distributed in the future. At the date of the balance sheet, no distributions have been proposed or declared. On March 31, Year 2, Global’s foreign consolidated subsidiary distributes dividends of $75,000.

Answer 1

A most important difference between GAAP and IFRS is that GAAP is rule-established, whereas IFRS is precept-situated.

Key aspects

one other change between IFRS and GAAP is the methodology used to check an accounting remedy. Underneath GAAP, the research is more taken with the literature whereas under IFRS, the overview of the facts sample is extra thorough.
The convergence of accounting requirements refers back to the purpose of starting a single set of accounting standards so as to be used internationally to lessen the diversities between US GAAP and IFRS.
Convergence can be taking location in other countries, with all most important economies planning to either undertake the IFRS or converge towards it, in the close future.
Term

convergenceThe act of moving towards union or uniformity.
  
GAAP vs. IFRS

concepts situated vs. Ideas situated

A fundamental change between GAAP and IFRS is that GAAP is rule-founded, whereas IFRS is principle-situated.

With a principle founded framework there's the expertise for specific interpretations of an identical transactions, which could result in huge disclosures in the fiscal statements. Although, the necessities surroundings board in a precept-established system can make clear areas which can be unclear. This might result in fewer exceptions than a principles-situated process.

An extra change between IFRS and GAAP is the methodology used to check an accounting therapy. Below GAAP, the study is extra fascinated by the literature whereas under IFRS, the overview of the info pattern is more thorough.

Some Examples of differences Between IFRS and U.S. GAAP

Consolidation IFRS favors a control mannequin whereas GAAP prefers a risks-and-rewards model. Some entities consolidated in accordance with FIN 46(R) could need to be proven individually underneath IFRS.
Assertion of earnings under IFRS, exotic gadgets will not be segregated within the revenue assertion. With GAAP, they're shown under the web sales.
Stock beneath IFRS, LIFO are not able to be used, however GAAP, organizations have the choice between LIFO and FIFO.
Incomes-per-Share beneath IFRS, the earning-per-share calculation does no longer traditional the man or woman period in-between interval calculations, whereas underneath GAAP the computation averages the man or woman meantime period incremental shares.
Development charges These fees can also be capitalized below IFRS if distinct criteria are met, whilst it is considered as expenditures below U.S. GAAP.
Convergence

The convergence of accounting requisites refers to the purpose of establishing a single set of accounting requisites so that it will be used internationally, and in detailed the trouble to lessen the variations between the us generally permitted Accounting concepts (US GAAP), and the global financial Reporting requisites (IFRS). Convergence in some kind has been taking position for several many years, and efforts today comprise projects that goal to diminish the variations between accounting requisites.

The intention of and various proposed steps to attain convergence of accounting standards has been criticized by using more than a few individuals and corporations. For illustration, in 2006 senior partners at PricewaterhouseCoopers (PwC) called for convergence to be shelved indefinitely in a draft paper, calling for the IASB to center of attention instead on making improvements to its own set of standards.

Convergence can also be taking location in different nations, with all essential economies planning to both undertake the IFRS or converge towards it, within the near future. For instance, Canada required all listed entities to use the IFRS from January 1, 2012, and Japan authorised the use of IFRS for unique multinational businesses from 2010, and is anticipated to make a decision on necessary adoption in round 2012.