“Differences between IFRS and U.S. GAAP in the recognition and measurement of assets, liabilities, revenues, and expenses can make consolidating an Ireland-based operation with a U.S.-based parent company more difficult.”

The significant differences between U.S. GAAP and IFRS with respect to the recognition and measurement of financial assets are summarized in the following table. U.S. GAAP and IFRS use different categories and measurement bases for financial assets, so the same item may be accounted for differently under each framework.

The Commission is adopting rules to accept from foreign private issuers in their filings with the Commission financial statements prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") without reconciliation to generally accepted accounting principles ("GAAP") as used in the United States. Current requirements regarding the reconciliation to U.S. GAAP do not change for a foreign private issuer that files its financial statements with the Commission using a basis of accounting other than IFRS as issued by the IASB.

A foreign private issuer that files using IFRS as issued by the IASB is not required to reconcile to U.S. GAAP. Foreign private issuers that comply with another basis of reporting (e.g., home-country GAAP) are not eligible to omit the U.S. GAAP reconciliation. In addition, foreign issuers that are not foreign private issuers or domestic subsidiary issuers of foreign companies must continue to provide the U.S. GAAP reconciliation. To assist U.S. investors in understanding the nature of the accounting differences and their effects on financial statements, foreign issuers that do not prepare statements in accordance with IFRS as issued by the IASB are required to provide a reconciliation to U.S. GAAP.

IFRS Accounting Standards prohibit the recognition of provisions for costs associated with future operating activities. Further, both US GAAP and IFRS Accounting Standards recognize many liabilities using different measurement concepts and thresholds, which can create conversion adjustments when moving between frameworks.

IFRS does not include the concept of probability in the definition of an asset or a liability, rather considering the probability of occurrence in the recognition requirements. IFRS requires reversal of inventory impairments in the period in which an impairment condition reverses, while U.S. GAAP precludes a reversal of previous inventory write-downs. These differences affect reported assets, liabilities, revenues, and expenses.

Most foreign SEC registrants are required to prepare and file their Annual Report on Form 20-F in accordance with either US GAAP or another comprehensive basis of accounting, in which case net income and shareholders’ equity are reconciled to US GAAP. The reconciliation is accompanied by a discussion of significant variations in accounting policies, practices and methods used in preparing the financial statements from US GAAP and Regulation S-X. However, a foreign private issuer that prepares its financial statements in accordance with IFRS Accounting Standards as issued by the IASB is not required to present such a reconciliation or the accompanying discussion of variations from US GAAP and Regulation S-X.

A foreign registrant may submit financial statements that conform to US GAAP or (starting 4 March 2008) financial statements that conform to International Financial Reporting Standards as adopted by the IASB (that is, not jurisdictional adaptations of IFRSs), without need to provide a reconciliation to US GAAP. Alternatively, a foreign registrant may submit financial statements prepared using its national GAAP or using a jurisdictional adaptation of IFRSs (such as IFRSs as adopted by the EU), but then a reconciliation of earnings and net assets to US GAAP figures is required.

The general guidance in US GAAP is that revenue is recognised when it is earned and realised or realisable. However, US GAAP includes specific revenue recognition criteria for different types of revenue-generating transactions, which in many cases differ from IFRS.

Under the new rules, foreign private issuers will be permitted to include in their SEC filings financial statements without reconciliation to U.S. GAAP if such financial statements are prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB"). The rules that require reconciliation of financial statements to U.S. GAAP will still apply to foreign private issuers that file financials statements using a basis of accounting other than IFRS as issued by the IASB. Any financial statements that include deviations from IFRS as issued by the IASB must be reconciled to U.S. GAAP.

IFRS and US GAAP are both high-quality global accounting standards. However, differences in specific recognition and measurement requirements continue to exist in many areas, including revenue recognition, financial instruments, impairment of assets, leases, and income taxes. When a multinational group prepares consolidated financial statements and includes subsidiaries that report under IFRS and others under US GAAP, these differences need to be identified and adjusted so that the group financial statements are prepared on a single basis of accounting.

Although the FASB and IASB have worked for many years to improve and converge U.S. GAAP and IFRS, differences remain. These differences can affect how transactions and events are recognized and measured in the financial statements (for example, assets, liabilities, revenues, and expenses). … Multinational companies that report under both U.S. GAAP (for SEC reporting) and IFRS (for local statutory reporting) must identify and adjust for these differences in consolidation to ensure that group financial statements are prepared on a consistent basis.

The reconciliation provided pursuant to Item 17 or 18 of Form 20-F must be included in notes to the financial statements and, accordingly, must be considered by the auditor when expressing an opinion of the financial statements taken as a whole. In a reconciliation to U.S. GAAP, the foreign private issuer identifies and quantifies material differences from the requirements of U.S. GAAP and Regulation S-X.

This publication compares IFRS Accounting Standards and US GAAP and focuses on recognition, measurement and presentation differences that are commonly encountered. … Unlike IFRS Accounting Standards, US GAAP does not permit the revaluation of property, plant and equipment or intangible assets. … In practice, when a group reporting under IFRS consolidates a subsidiary reporting under US GAAP (or vice versa), adjustments are often required to align accounting policies for areas such as PPE revaluation, impairment reversals, leases, and revenue recognition.

Both accounting standards recognize fixed assets when purchased, but their valuation can differ over time. US GAAP requires that fixed assets are measured at their initial cost; their value can decrease via depreciation or impairments, but it cannot increase. IFRS allows companies to elect fair value treatment of fixed assets, meaning their reported value can increase or decrease as fair value changes.

A foreign private issuer that uses a basis of accounting other than IFRS Standards as issued by the IASB and files financial statements with the SEC must provide a reconciliation to US GAAP. A reconciliation is required for each annual and interim period required to be included in a registration statement or annual report. Form 20-F provides two levels of reconciliation to U.S. GAAP – Item 17 and Item 18. Item 18 requires the same information as Item 17 plus all of the disclosures required by U.S. GAAP and Regulation S-X.

There are many differences in the specific accounting requirements, even though US GAAP and IFRS are built on largely similar concepts and often lead to similar accounting outcomes. Those differences can require reconciliation or conversion adjustments in consolidation processes.

Foreign private issuers that register securities with the SEC and report periodically thereafter must file audited statements of income, financial position, and changes in shareholders’ equity and cash flows generally for each of the past three financial years, prepared on a consistent basis of accounting. Such financial statements must be reconciled to U.S. GAAP. In a reconciliation to U.S. GAAP, the foreign private issuer identifies and quantifies material differences from the requirements of U.S. GAAP and Regulation S-X. Reconciliations in Item 17(c) of Form 20-F include a narrative discussion of reconciling differences and quantitative reconciliations of net income, major balance sheet captions, and cash flows.

Under EU-IFRS, costs relating to development projects are recognized as intangible assets when costs can be measured reliably, and the technical feasibility of the product, volumes and pricing support the view that the development expenditure will generate future economic benefits. Under U.S. GAAP, development costs are expensed as incurred. This difference affects both assets and expenses in consolidation.

In accounting, FPIs can file financial statements following International Financial Reporting Standards (IFRS) without reconciling to U.S. GAAP. However, if foreign issuers use home-country GAAP or jurisdictional IFRS (such as IFRS as adopted by the EU), the existing SEC rules require reconciliation of net income and shareholders’ equity to U.S. GAAP, including narrative explanations of material differences.

Despite extensive convergence efforts, significant differences remain. These differences affect the recognition, measurement, presentation, and disclosure of assets, liabilities, income, expenses, and cash flows. … IFRS generally allows more alternative treatments and escalates to managerial judgment; US GAAP often prescribes one method. For example, IFRS permits revaluing fixed assets to fair value, whereas US GAAP generally prohibits upward revaluation. … These conceptual differences mean identical transactions can produce different financial results (revenues, profits, asset values) under IFRS vs GAAP, which multinational groups must reconcile when preparing consolidated accounts.

Despite the convergence efforts, there are still major differences between IFRS and GAAP in many areas of accounting. These include inventory (LIFO not permitted under IFRS), impairment and revaluation of assets (IFRS allows certain reversals and upward revaluation that GAAP generally prohibits), and recognition of intangible assets. These differences can cause variations in the reported asset base, liabilities, and profit, which pose practical challenges when preparing consolidated financial statements for multinational groups.

US GAAP lists assets in decreasing order of liquidity, whereas IFRS reports assets in increasing order of liquidity. Revenue recognition and asset/liability measurement differences between the frameworks can affect how a foreign subsidiary's trial balance is converted for a U.S. parent's consolidation.

Significant differences between US GAAP and IFRS include inventory valuation (LIFO permitted under GAAP but not under IFRS), lease accounting (operating vs finance under GAAP vs mainly finance under IFRS 16), asset revaluation (historical cost only under GAAP vs fair value revaluation allowed under IFRS), impairment reversals (not permitted under GAAP vs permitted under IFRS except goodwill), and R&D costs (generally expensed under GAAP vs capitalization of qualifying development costs under IFRS). … These differences can lead to materially different asset, liability, revenue and expense balances, which companies must adjust when reporting to stakeholders using a single framework.

IFRS and US GAAP differ in several key areas, including revenue recognition, financial instruments, impairment of assets, inventory costing, and provisions. These differences can lead to significant variations in reported assets, liabilities, revenues and expenses between IFRS and US GAAP financial statements. When consolidating a group that includes both IFRS-reporting and US GAAP-reporting entities, these differences typically must be adjusted through consolidation entries or reconciliations in order to present group financial statements on a single reporting framework.

The guidance related to the recognition and measurement of financial assets in U.S. GAAP is included in ASC Topic 310, Receivables; ASC Topic 320, Investments – Debt Securities; ASC Topic 321, Investments – Equity Securities; ASC Topic 326, Financial Instruments – Credit Losses; ASC Topic 815, Derivatives and Hedging; and ASC Topic 825, Financial Instruments. In IFRS, the guidance related to the recognition and measurement of financial assets is included in IFRS 9, Financial Instruments. … The significant differences between U.S. GAAP and IFRS with respect to the recognition and measurement of financial assets are summarized in the following table. These differences may require consolidation adjustments when entities in a group apply different frameworks.