Question

4. Describe at least two differences in disclosure provided in the footnotes of the competitors under IFRS and US GAAP. Example: – The Property, Plant and Equipment footnote is much more detailed for Company X in IFRS than for Company Y using US GAAP. For each PP&E component, it reconciles the differences beginning and ending net book values including additions, disposals, currency translation effects, depreciation and impairments. Company Y lists the PP&E components only.

Answer 1

The main difference in diclossures between IFRS and US GAAP are

Particulars	IFRS	US GAAP
Historical cost or fair valuation	Historical cost is the main accounting convention. However, IFRS permits the revaluation of intangible assets, property, plant and equipment, investment property, inventories in certain industries (e.g. commodity broker/dealer). IFRS also requires certain categories of financial instruments and certain biological assets to be reported at fair value.	Similar to IFRS but prohibits revaluations except for certain categories of financial instruments, which are carried at fair value.
Fair presentation override	An entity may depart from a standard under IFRS, extremely rare in practice, if the management of that entity concludes that compliance with the standard or interpretation would render financials to be misleading. Reasons for such conclusion and departure along with the financial impact needs to be disclosed.	Extremely rare in practice. The SEC will generally not accept such an override.
Balance sheet asset limitation	Asset limited to the lower of: (1) The asset resulting from applying the standard; or (2) The total of any unrecognised actuarial losses and past-service cost, and the present value of any available refunds from the plan or reduction in future contributions to the plan. The guidance also governs the treatment and disclosure of amounts, if any, in excess of the asset ceiling.	There is no limitation on the size of the pension asset that can be recorded.
Substantive commitment to provide pension or other post-retirement benefits	In certain circumstances, a history of regular increases may indicate (1) A present commitment to make future plan amendments (2) That additional benefits will accrue to prior-service periods. In such cases, the substantive commitment (to increased benefits) is the basis for determination of the obligation.	The determination of whether a substantive commitment exists to provide pension or other post retirement benefits for employees beyond the written terms of a given plan’s formula requires careful consideration Although actions taken by an employer can demonstrate the existence of a substantive commitment, a history of retroactive plan amendments is not sufficient on its own.