In: Accounting
Enumerate and briefly explain the differences between the IFRS and US GAAP on the following issues:
Treatment of Contingent Assets and Liabilities
Treatment of Asset Recognition
Treatment of Revenue Recognition
Treatment of Options
Treatment of Onerous Contracts
Treatment of Restructuring Provision
Treatment of Measurement of Deferred Taxes
Treatment of Service Contracts
Treatment of Financial Assets
In the case of contingent assets and liabilities
Companies operating in the United States rely on the guidelines established in the generally accepted accounting principles (GAAP). Under GAAP, a contingent liability is defined as any potential future loss that depends on a "triggering event" to turn into an actual expense.
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IAS 37 Provisions, Contingent Liabilities and Contingent Assets outlines the accounting for provisions (liabilities of uncertain timing or amount), together with contingent assets (possible assets) and contingent liabilities (possible obligations and present obligations that are not probable or not reliably measurable). Provisions are measured at the best estimate (including risks and uncertainties) of the expenditure required to settle the present obligation, and reflects the present value of expenditures required to settle the obligation where the time value of money is material.
With IAS 371, IFRS has one-stop guidance to account for provisions, contingent assets and contingent liabilities. Therefore, there is a single recognition, measurement and disclosure model for obligations such as legal claims and litigation, onerous contracts, restructuring2, assurance warranties, non-income tax exposures, environmental provisions and decommissioning
This contrasts with US GAAP, which has a number of Codification
topics that, in combination, cover the same overall scope as IAS
37.
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