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1 Comparison between and International Financial Reporting Standards May 2013

2 Comparison between and International Financial Reporting Standards 2 Contents 1. Introduction... 6 International standards and the IASB... 6 Financial accounting and reporting in the United States... 6 and comparison Overall financial statement presentation General Statement of financial position / balance sheet Statement of comprehensive income / income statement Statement of changes in equity Statement of cash flows Non-current assets held for sale and discontinued operations Accounting policies general Selection of accounting policies Changes in accounting policy and correction of errors Assets Property, plant and equipment Investment property Intangible assets Impairment Inventories Liabilities Leases Provisions, contingent liabilities, and contingent assets Taxation Income and expenditure Revenue general Revenue long-term contracts/construction contracts Employee benefits (reflects IAS 19 revised in June 2011) Share-based payments Financial instruments Recognition and measurement of financial assets Presentation, recognition, and measurement of financial liabilities and equity Recognition and measurement of derivatives Hedge accounting a Recognition and measurement of financial assets a Recognition and measurement of financial liabilities and equity a Recognition and measurement of derivatives a Hedge accounting Group accounts, associates, equity method investees, and joint ventures Basic requirements for group accounts (reflects 10 and 12 issued in May 2011) Joint arrangements (reflects 11 issued in May 2011) Associates, joint ventures, and equity method investees equity method

3 Comparison between and International Financial Reporting Standards 3 9. Business combinations Other matters Fair value measurement (reflects 13 issued in May 2011) Foreign currency translation Government grants and disclosure of government assistance Earnings per share Events after the reporting period Operating segments Related party disclosures Appendix A Listing of standards Appendix B Listing of FASB Codification Topics Appendix C standards (Accounting Standards Updates (ASUs)) Appendix D Listing of pre-codification standards Appendix E Listing of SEC standards This Grant Thornton LLP document provides information and comments on current accounting issues and developments as of May It is not a comprehensive analysis of the subject matter covered and is not intended to provide accounting or other advice with respect to the matters addressed. This document supports Grant Thornton LLP s marketing of professional services, and is not written accounting or tax advice directed at the particular facts and circumstances of any person. If you are interested in the subject of this document we encourage you to contact us or an independent accounting or tax adviser to discuss the potential application to your particular situation. All relevant facts and circumstances, including the pertinent authoritative literature, need to be considered to arrive at conclusions that comply with matters addressed in this document. Moreover, nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein. To the extent this document may be considered to contain written tax advice, any written advice contained in, forwarded with, or attached to this document is not intended by Grant Thornton LLP to be used, and cannot be used, by any person for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code. For additional information on topics covered in this document, contact your Grant Thornton LLP Adviser.

4 Comparison between and International Financial Reporting Standards 4 Preface Approximately 120 countries currently require or permit the use of International Financial Reporting Standards (). Although the United States is not one of those countries, over the past few years the Securities and Exchange Commission (SEC) has been exploring whether, and if so, when and how to incorporate into the U.S. financial reporting system. On several occasions, the SEC has expressed support for a single set of high-quality global accounting standards. In February 2010, the SEC issued the Commission Statement in Support of Convergence and Global Accounting Standards (Statement), which identifies several issues the SEC needs to evaluate before it can make a final decision on whether to incorporate into the U.S. financial reporting system. The Statement also directed the SEC staff to develop a Work Plan for the Consideration of Incorporating International Financial Reporting Standards into the Financial Reporting System for U.S. Issuers (Work Plan) to address many of the concerns raised by constituents in response to the SEC s 2008 proposed Roadmap for the Potential Use of Financial Statements Prepared in Accordance with International Financial Reporting Standards by U.S. Issuers. The SEC staff has been executing the Work Plan over the last few years. In May 2011, the staff issued a Staff Paper, Exploring a Possible Method of Incorporation, which discusses a standard-by-standard approach to incorporating into the U.S. financial reporting system. The approach, referred to as the Framework, would replace with through a process under which the FASB endorses individual over a transitional period of between five to seven years. The endorsement process would follow an established protocol for incorporating, and both the SEC and the FASB would retain the ability to modify or supplement individual throughout the process. Then in November 2011, the staff issued two additional Staff Papers. The first, An Analysis of in Practice, summarizes the findings of the staff s review of the financial statements of 183 Fortune Global 500 companies that currently report under. The analysis evaluates the manner in which is applied in practice, with a focus on the recognition and measurement of transactions. The second, A Comparison of and, summarizes the major differences between and for certain standards, excluding standards that are currently joint projects between the IASB and the FASB. The staff performed the comparison to help it assess the sufficient development and application of. In July 2012, the SEC staff issued a Final Staff Report (Report) on it Work Plan. The 2010 Work Plan sets out six areas relevant for the SEC to determine whether, when, and how the current reporting system for U.S. issuers should be transitioned to a system that incorporates. The Report summarizes the Staff s analyses of the six areas identified in the Work Plan: Sufficient development and application of for the U.S. domestic reporting system Independent standard setting for the benefit of investors Investor understanding and education regarding Regulatory environment

5 Comparison between and International Financial Reporting Standards 5 Impact on issuers Human capital readiness The information in the Report, along with other information, is intended to assist the SEC in determining whether and how to incorporate for use by U.S. registrants. The Report does not contain a Staff recommendation nor does it provide any insight into whether a transition to is in the best interest of the U.S. securities markets and U.S. investors. Although the Staff asked for comments on its Report, the next steps in the process and the timing of any decision by the SEC Commissioners is unknown at this time. An integral part of the process to incorporate into the U.S. financial reporting system is the effort by the Financial Accounting Standards Board (FASB) and the IASB to converge with. The quest to converge the two sets of standards formally began in September 2002 when the Boards issued a memorandum of understanding, referred to as the Norwalk Agreement, wherein they acknowledged their commitment to high-quality, compatible accounting standards that could be used for both domestic and cross-border financial reporting. That agreement has been updated and reaffirmed several times, most recently in June During 2012, the Boards made progress on converging guidance on revenue recognition and leases. A revised Exposure Draft on leases was issued in May 2013 and a final revenue Standard is expected in the third quarter of Even though the SEC has delayed making a final decision, many observers still believe that the U.S. capital markets eventually will incorporate into the U.S. financial reporting system in some manner. In the meantime, it is incumbent on preparers, auditors, and regulators to be aware of the differences that currently exist between and. We have prepared the Comparison between and International Financial Reporting Standards (Comparison) to help readers grasp some of the major similarities and differences between and. More emphasis is placed on recognition, measurement, and presentation guidelines, and less emphasis is placed on disclosure requirements. As more fully explained in Section 1, Introduction, this Comparison covers only those differences that we believe are most commonly encountered in practice. The Comparison includes standards issued as of May Recently issued guidance included in this Comparison but that is not yet effective has been shaded in the tables below for those entities that may wish to early adopt the guidance. We have included Appendices that list the titles of all and standards, as well as SEC rules, regulations, and practices, that are referred to in this document. The Comparison is written by the Consulting Group of Grant Thornton LLP. The contributors are: Gary Illiano, Partner-in-Charge Sheri Fabian, Partner Joseph Graziano, Retired Partner Helen Bachman, Managing Director

6 Comparison between and International Financial Reporting Standards 6 1. Introduction International standards and the IASB The IASB is responsible for the preparation and issuance of. Upon its inception in 2001, the IASB adopted the body of International Accounting Standards (IAS) issued by its predecessor, the International Accounting Standards Committee (IASC). The Interpretations Committee (IFRIC) assists the IASB in establishing and improving standards of financial accounting and reporting for the benefit of users, preparers, and auditors of financial statements. The IFRIC was established in 2002 when it replaced its predecessor, the Standing Interpretations Committee (SIC). Under, when a standard or an interpretation specifically applies to a transaction, other event, or condition, an entity would apply that guidance as well as any relevant implementation guidance issued by the IASB. In this document, the term refers collectively to standards issued by the IASB, IAS issued by the IASC, and Interpretations issued by the IFRIC and the SIC. Financial accounting and reporting in the United States The FASB is the designated private-sector body responsible for establishing and improving standards of financial accounting and reporting in the United States for nongovernmental public and private enterprises, including small businesses and not-for-profit organizations. Those standards, collectively referred to as, govern the preparation of financial reports and are provided for the guidance and education of the public, including issuers, auditors, and users of financial information. The FASB Accounting Standards Codification TM is the sole source of authoritative nongovernmental GAAP, except SEC guidance. SEC registrants must also comply with the Commission s financial reporting requirements, including those promulgated in SEC Regulations S-X and S-K, Financial Reporting Releases (FRR), and Staff Accounting Bulletins (SAB). The SABs represent practices followed by the staff in administering SEC disclosure requirements. and comparison This Comparison highlights some significant and requirements, as well as the major similarities and differences between the two sets of standards. While not an exhaustive listing, this document highlights some of the more significant differences between and that we believe are most commonly encountered in practice. The Comparison may be helpful to individuals that are new to who are trying to gain an appreciation of the more significant requirements of and how these requirements differ from those in the United States. Disclosure requirements are not addressed, except in some exceptional cases where those requirements constitute major differences between and. This Comparison has been updated for standards issued as of May Effective dates for standards vary and are generally noted where relevant. Companies reporting under requirements established for the European Union must comply with as adopted by the European Commission (EC). Those standards may differ from as issued by the IASB

7 Comparison between and International Financial Reporting Standards 7 because of the timing or scope of endorsement by the EC. Other jurisdictions may have similar endorsementrelated differences. Such differences are not addressed in this document. This Comparison does not address industry-specific requirements for banks, other financial institutions, insurance companies, not-for-profit organizations, retirement benefit plans, extractive industries, or agriculture. In particular, the following pronouncements have not been included in the document due to their specialized nature: 4, Insurance Contracts 6, Exploration for and Evaluation of Mineral Resources IAS 26, Accounting and Reporting by Retirement Benefit Plans IAS 41, Agriculture IFRIC 20, Stripping Costs in the Production Phase of a Surface Mine In addition, the Comparison does not include 1, First-time Adoption of International Financial Reporting Standards, as well as International Financial Reporting Standard for Small and Medium-sized Entities. 1 covers the requirements for applying in a company s first financial statements. It starts with the basic premise that an entity applies for the first time on a fully retrospective basis. However, acknowledging the cost and complexity of that approach, the standard then establishes various exemptions for topics where retrospective application would be too burdensome or impractical (for example, business combinations and pension liabilities). International Financial Reporting Standard for Small and Medium-sized Entities ( for SMEs) is designed to meet the financial reporting needs of entities that (a) do not have public accountability and (b) publish general purpose financial statements for external users. The term small and medium-sized entities is not associated with any size criteria. The standard has essentially been designed to work as a stand-alone document, with no mandatory cross-references to full. for SMEs often permits simplified recognition and measurement requirements and reduces the amount of disclosures compared to full. This Comparison is only a guide; it is not all-encompassing. For the complete details of and requirements, as well as SEC rules, regulations, and practices, readers should refer to the complete text of the standards, rules, regulations, and practices themselves.

8 Comparison between and International Financial Reporting Standards 8 2. Overall financial statement presentation 2.1 General Relevant guidance: IAS 1 Relevant guidance: ASC 205, 505; SEC Regulation S- X, Article 3 An entity applies IAS 1 in preparing and presenting general purpose financial statements in accordance with (IAS 1.2). A complete set of financial statements comprises the following (IAS 1.10): A statement of financial position as at the end of the period A statement of profit or loss and other comprehensive income for the period A statement of changes in equity for the period A statement of cash flows for the period Notes, comprising a summary of significant accounting policies and other explanatory information Comparative information in respect of the preceding period as specified in IAS 1.38 and.38a A statement of financial position as at the beginning of the preceding period when an entity applies an accounting policy retrospectively or makes a retrospective restatement of items in its financial statements, or when it reclassifies items in its financial statements in accordance with IAS 1.40A through.40d Except when permit or require otherwise, an entity presents comparative information in respect of the preceding period for all amounts reported in the current period s financial statements. An entity includes comparative information for narrative and descriptive information if it is relevant to understanding the current period s financial statements (IAS 1.38 and.38b). An entity presents, at a minimum, two statements of financial position, two statements of profit or loss and other comprehensive income, two separate statements of profit or loss (if presented), two statements of cash flows and two statements of changes in equity, and related notes (IAS 1.38A and.38b). An entity whose financial statements comply with The guidance on the presentation of financial statements is primarily included in the FASB Codification (ASC 205 through 280). SEC registrants are also required to follow the guidance in SEC Regulations, such as Regulation S- X and S-K. Financial statements comprise: A statement of financial position / balance sheet An income statement A statement that displays total comprehensive income either in a single continuous financial statement or in two separate but consecutive financial statements (ASC and.1a) A statement of changes in stockholders equity. Alternatively, disclosure of changes in the separate accounts comprising stockholders equity (in addition to retained earnings) could be made in the notes to financial statements (ASC ) A statement of cash flows (limited exemptions; see Section 2.5, Statement of cash flows ) Notes to financial statements Unlike, does not have a similar requirement for a third balance sheet Unlike, under there is no specific requirement to provide comparative statements but it is desirable to do so (ASC ). SEC rules require balance sheets for the two most recent fiscal years and three years of statements of income and cash flows (SEC Regulation S-X; Rule 3-01(a) and Rule 3-02(a)). Unlike, does not have a similar

9 Comparison between and International Financial Reporting Standards 9 makes an explicit and unreserved statement of such compliance in the notes. An entity does not describe financial statements as complying with unless they comply with all the requirements of (IAS 1.16). An entity may present comparative information in addition to the minimum comparative financial statements noted above as long as that information is prepared in accordance with. The comparative information may consist of one or more statements referred to in IAS 1.10, but need not comprise a complete set of financial statements. The entity includes related note information for those additional financial statements (IAS1.38C and D). An entity cannot rectify inappropriate accounting policies by disclosure of the accounting policies used or by notes or explanatory material (IAS 1.18). An entity clearly identifies each financial statement and the notes. In addition, an entity displays the following information prominently, and repeats it when necessary for the information presented to be understandable (IAS 1.51): requirement. In any one year it is ordinarily desirable that the statement of financial position, the income statement, and the statement of changes in equity be presented for one or more preceding years, as well as for the current year (ASC ). Similar to. Similar to. The name of the reporting entity or other means of identification, and any change in that information from the end of the preceding reporting period Whether the financial statements are of an individual entity or a group of entities The date of the end of the reporting period or the period covered by the set of financial statements or notes The presentation currency; as defined in IAS 21 The level of rounding used in presenting amounts in the financial statements 2.2 Statement of financial position / balance sheet Relevant guidance: IAS 1 Relevant guidance: ASC 210, 470, 505, and 740; SEC Regulation S-X, Rule 5-02 Introduction IAS 1 specifies items that must be presented on the face of the statement of financial position, and lists additional information that must be either on the face or in the notes (IAS ). An entity presents additional line items, headings and Unlike, does not prescribe a standard format. However, SEC Regulation S-X, Rule 5-02 does require specific line items to appear on the face of the balance sheet, where applicable. Similar to.

10 Comparison between and International Financial Reporting Standards 10 subtotals in the statement of financial position when such presentation is relevant to an understanding of the entity s financial position (IAS 1.55). Classification An entity presents current and non-current assets, and current and non-current liabilities, as separate classifications in its statement of financial position in accordance with IAS , except when a presentation based on liquidity provides information that is reliable and more relevant. When that exception applies, an entity presents all assets and liabilities in order of liquidity (IAS 1.60). No subtotals are specified in IAS 1. The balance sheets of most enterprises show separate classifications of current assets and liabilities (ASC ). However, in certain specialized industries an unclassified balance sheet is used when the distinction between current and noncurrent assets and liabilities is deemed to have little or no relevance. Unlike, non-sec reporting entities are required by ASC to present a total of current liabilities if they present a classified balance sheet. As a matter of practice, these non-sec reporting entities also present a subtotal for current assets as well. SEC rules explicitly require subtotals for current assets and current liabilities (Regulation S-X, Rule 5-02). When an entity presents current and non-current assets and current and non-current liabilities as separate classifications in its statement of financial position, it does not classify deferred tax assets (liabilities) as current assets (liabilities) (IAS 1.56). An entity classifies an asset as current when any of the following apply (IAS 1.66): It expects to realise the asset, or intends to sell or consume it, in its normal operating cycle. The normal operating cycle where not clearly identifiable is assumed to be 12 months (IAS 1.68). It holds the asset primarily for the purpose of trading It expects to realise the asset within 12 months after the reporting period The asset is cash or a cash equivalent (as defined in IAS 7) unless the asset is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period An entity classifies a liability as current when any of the following apply (IAS 1.69): It expects to settle the liability in its normal operating cycle. The normal operating cycle where not clearly identifiable is assumed to be 12 months (IAS 1.70). Unlike, deferred tax assets and liabilities are separated into current and non-current amounts (ASC ). (See Section 5.3, Taxation ) Current assets are cash and other assets or resources commonly identified as those which are reasonably expected to be realized in cash or sold or consumed during the normal operating cycle of the business (ASC Master Glossary, Current Assets ). In businesses where the period of the operating cycle is more than 12 months, the longer period is required to be used. Where a particular business has no clearly defined operating cycle, the one-year rule governs (ASC ). Current liabilities are obligations whose liquidation is reasonably expected to require the use of existing resources properly classifiable as current assets, or the creation of other current liabilities (ASC Master Glossary, Current Liabilities ). It holds the liability primarily for the purpose of trading The liability is due to be settled within 12 months

11 Comparison between and International Financial Reporting Standards 11 after the reporting period The entity does not have an unconditional right to defer settlement of the liability for at least 12 months after the reporting period An entity classifies its financial liabilities as current when they are due to be settled within 12 months after the reporting period, even if (IAS 1.72): The original term was for a period longer than 12 months, and An agreement to refinance, or to reschedule payments, on a long-term basis is completed after the reporting period and before the financial statements are authorised for issue If an entity expects, and has the discretion, to refinance or roll over an obligation for at least 12 months after the reporting period under an existing loan agreement, it classifies the obligation as noncurrent, even if it would otherwise be due within a shorter period. However, if refinancing or rolling over the obligation is not at the discretion of the entity, the entity does not consider the potential to refinance the obligation and classifies the obligation as current (IAS 1.73). An entity classifies a liability as current at the end of the reporting period, if it does not have an unconditional right to defer its settlement for at least 12 months after that date. Therefore, when an entity breaches a provision of a long-term loan arrangement on or before the end of the reporting period with the effect that the liability becomes payable on demand, it classifies the liability as current, even if the lender has agreed, after the reporting period and before authorisation of the financial statements for issue, not to demand payment as a consequence of the breach (IAS 1.74). Short-term obligations, other than those arising from transactions in the normal course of business that are due in customary terms, are excluded from current liabilities only if the entity intends to refinance the obligation on a long-term basis and (ASC ): Before the balance sheet is issued or available to be issued there is a post-balance sheet issuance of a long-term obligation or equity securities for the purpose of refinancing the obligation on a long-term basis; or Before the balance sheet is issued or available to be issued the entity has entered into a financing agreement that permits it to refinance the short-term obligation on a long-term basis and certain conditions are met An entity classifies as current a long-term obligation that is or will be callable by a creditor because of the entity s violation of a provision of the debt agreement at the balance sheet date or because the violation, if not cured within a specified grace period, will make the obligation callable unless (ASC ): The creditor has waived or subsequently lost the right to demand repayment for more than one year (or operating cycle, if longer) from the balance sheet date; or For long-term obligations containing a grace period within which the entity may cure the violation, it is probable that the violation will be cured within that period Unlike, under the debt would be classified as noncurrent if the lender has agreed, after the reporting period and before the financial statements are issued or are available to be issued, not to demand payment as a consequence of the violation. Offsetting An entity does not offset assets and liabilities or income and expenses, unless required or permitted by an (IAS 1.32). See Section 7, Financial instruments for further information on offsetting. Unlike, offsetting is permitted only when a right of set-off exists. A right of set-off exists when (ASC ): The parties owe each other determinable amounts

12 Comparison between and International Financial Reporting Standards 12 There is a right and intention to set-off The right of set-off is enforceable by law See Section 7, Financial instruments for further information on offsetting. Disclosure An entity discloses, either in the statement of financial position or in the notes, further subclassifications of the line items presented, classified in a manner appropriate to the entity s operations (IAS 1.77). An entity discloses the following information, either in the statement of financial position or the statement of changes in equity, or in the notes (IAS 1.79): For each class of share capital: The number of shares authorised Similar to. Disclosure of changes in the separate accounts comprising stockholders' equity (in addition to retained earnings) is required. These disclosures may be made in the notes to the financial statements or through a separate financial statement (ASC ). The number of shares issued and fully paid, and issued but not fully paid Par value per share, or that the shares have no par value A reconciliation of the number of shares outstanding at the beginning and at the end of the period The rights, preferences and restrictions attaching to that class including restrictions on the distributions of dividends and the repayment of capital Shares in the entity held by the entity or by its subsidiaries or associates Shares reserved for issue under options and contracts for the sale of shares, including terms and amounts A description of the nature and purpose of each reserve within equity 2.3 Statement of comprehensive income / income statement Relevant guidance: IAS 1 Relevant guidance: ASC 220, 225, 320, 715, and 810; SEC Regulation S-X, Rule 5-03 Statement format and presentation An entity may present either a single statement of profit or loss and other comprehensive income or two separate Similar to, an entity may report comprehensive income either in a single continuous statement or in two

13 Comparison between and International Financial Reporting Standards 13 statements (IAS 1.10A). Single statement of comprehensive income If a single statement of profit or loss and other comprehensive income (statement of comprehensive income) is presented, profit or loss and other comprehensive income are presented in two sections with the profit or loss section presented first followed directly by the other comprehensive income section (IAS 1.10A). separate but consecutive financial statements (ASC ). Single statement of comprehensive income Similar to (ASC A and 45-5). In addition to the profit or loss and other comprehensive income sections, the statement of comprehensive income presents (IAS 1.81A): Profit or loss Total other comprehensive income Comprehensive income for the period, being the total of profit or loss and other comprehensive income An entity also presents the following items, in addition to the profit or loss and other comprehensive income sections, as allocation of profit or loss and other comprehensive income for the period (IAS 1.81B): Profit or loss for the period attributable to: Non-controlling interests Owners of the parent Comprehensive income for the period attributable to: Non-controlling interests Owners of the parent Two separate statements If an entity presents two separate statements, the separate statement of profit or loss immediately precedes the statement presenting comprehensive income, which begins with profit or loss (IAS 1.10A). Two separate statements Similar to (ASC B and 45-5). The separate statement of profit or loss includes the following information as allocation of profit or loss for the period (IAS 1.81B): Profit or loss for the period attributable to: Non-controlling interests Owners of the parent The separate statement presenting comprehensive income includes the following information as allocation of other comprehensive income for the period: Comprehensive income for the period attributable to:

14 Comparison between and International Financial Reporting Standards 14 Non-controlling interests Owners of the parent General IAS 1 does not require a specific format for the statement of comprehensive income; however, it does require certain minimum line items to be presented for the period in addition to those required by other. Expenses recognised in profit or loss are presented based on either their nature or function within the entity depending on which is reliable and more relevant (IAS1.99). If an entity classifies expenses by function, it discloses additional information on the nature of expenses (IAS 1.104). The other comprehensive income section presents line items for amounts of other comprehensive income in the period, classified by nature (including share of the other comprehensive income of associates and joint ventures accounted for using the equity method) and grouped into those that, in accordance with other (IAS 1.82A): Will not be reclassified subsequently to profit or loss Will be reclassified subsequently to profit or loss when specific conditions are met Other comprehensive income Other comprehensive income comprises items of income and expense (including reclassification adjustments) that are not recognised in profit or loss as required or permitted by Examples of items in other comprehensive income include the following (IAS 1.7): Exchange differences on translating foreign operations (IAS 21) Gains and losses from investments in equity instruments measured at fair value through other comprehensive income ( ) For particular liabilities designated as at fair value through profit or loss, the amount of the change in fair value that is attributable to changes in the liability s credit risk ( ) Effective portion of gains and losses on hedging instruments in cash flow hedges (IAS 39) Changes in revaluation surplus (IAS 16) Remeasurements of defined benefit pension plans (IAS 19) General does not prescribe a standard format for the income statement. Either the single-step format (expenses are classified by function) or multiple-step format (operating and nonoperating items are displayed separately) is acceptable. However, SEC Regulation S-X, Rule 5-03 requires specific line items to appear on the face of the income statement, where applicable. Other comprehensive income Other comprehensive income comprises revenues, expenses, gains, and losses that under are included in comprehensive income but excluded from net income (see Master Glossary, Other Comprehensive Income ). Examples of some of the items that are required to be reported as other comprehensive income include the following (ASC A through 10B): Foreign currency items Gains or losses associated with pension or other postretirement benefits Prior service costs or credits associated with pension or other postretirement benefits Transition assets or obligations associated with pension or other postretirement benefits Unrealized holding gains and losses on availablefor-sale securities Unrealized holding gains and losses that result from a debt security being transferred into the availablefor-sale category from the held-to-maturity category Amounts recognized in other comprehensive income for debt securities classified as available-for-sale and held-to-maturity related to an other-than-

15 Comparison between and International Financial Reporting Standards 15 temporary impairment Subsequent decreases (if not other-than-temporary impairment) or increases in the fair value of available-for-sale securities previously written down as impaired Effective portion of gains and losses on derivative instruments in cash flow hedges Other comprehensive income reclassification adjustments Reclassification adjustments are amounts reclassified to profit or loss in the current period that were recognised in other comprehensive income in the current or previous periods (IAS 1.7). Reclassification adjustments may be presented either in the statement(s) of profit or loss and other comprehensive income or in the notes (IAS 1.94). Other comprehensive income reclassification adjustments Similar to (ASC A). Note: In February 2013, the FASB issued ASU , Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, to improve the transparency of reporting reclassifications out of accumulated other comprehensive income by requiring entities to present in one place information about significant amounts reclassified and, in some cases, to provide cross-references to related footnote disclosures. The amendments do not change the current requirements for reporting net income or other comprehensive income in the financial statements, nor do they require new information to be disclosed. The new guidance requires the following: An entity is required to present, either on the face of the statement where net income is presented or as a separate disclosure in the notes, the effect on the respective line items of net income for items required to be reclassified out of accumulated other comprehensive income to net income in their entirety in the same reporting period. For other amounts that are not required to be reclassified in their entirety to net income in the same reporting period, an entity is required to crossreference to other required disclosures that provide additional details about those amounts. Public entities are required to comply with the amendments for all reporting periods presented, including interim periods. Nonpublic entities are required to (1) comply with the amendments for annual reporting periods and (2) report information about the amounts reclassified out of accumulated OCI by component for each reporting period. However, nonpublic entities are not required to report the effects of reclassifications on net income in interim reporting periods. Not-for-profit entities that report under ASC , Not-for-Profit Entities: Presentation of Financial Statements, are excluded from the scope of these amendments.

16 Comparison between and International Financial Reporting Standards 16 Other comprehensive income income tax An entity may present components of other comprehensive income either (a) net of related tax effects, or (b) before related tax effects with one amount shown for the aggregate amount of income tax relating to those components. If an entity elects alternative (b), it allocates the tax between the items that might be reclassified subsequently to the profit or loss section and those that will not be reclassified subsequently to the profit or loss section (IAS 1.91). The amendments are applied prospectively and are effective for public entities in reporting periods beginning after December 15, 2012 and for nonpublic entities in reporting periods beginning after December 15, Early adoption is permitted. The disclosure requirements under do not include the specific presentation requirements in ASU Other comprehensive income income tax Similar to (ASC ). Presentation and disclosure An entity does not present any items of income or expense as extraordinary items, in the statement(s) presenting profit or loss and other comprehensive income or in the notes (IAS 1.87). When items of income or expense are material, an entity discloses their nature and amount separately (IAS 1.97). Unlike, requires extraordinary items to be segregated from ordinary operations and shown separately in the income statement (ASC ). Extraordinary items are defined as material items that are both unusual and infrequently occurring (ASC ). Extraordinary items are rare. A material event or transaction that is unusual in nature or occurs infrequently but not both is reported as a separate component of income from continuing operations (ASC ). 2.4 Statement of changes in equity Relevant guidance: IAS 1 Relevant guidance: ASC 505 and 810 Introduction An entity presents a statement of changes in equity that displays the following (IAS 1.106): Total comprehensive income for the period, showing separately the total amounts attributable to owners of the parent and to non-controlling interests For each component of equity, the effects of retrospective application or retrospective restatement recognised in accordance with IAS 8 For each component of equity, a reconciliation If both financial position and results of operations are presented, an entity discloses changes in the separate accounts comprising shareholder s equity (in addition to retained earnings) in either a statement of changes in stockholders equity, in the basic statements, or in the notes to financial statements (ASC ). A parent with one or more less-than-wholly-owned subsidiaries discloses for each reporting period either in the consolidated statement of changes in equity, if presented, or in the notes to consolidated financial

17 Comparison between and International Financial Reporting Standards 17 between the carrying amount at the beginning and the end of the period, separately disclosing changes resulting from: Profit or loss Each item of other comprehensive income Transactions with owners in their capacity as owners, showing separately contributions by and distributions to owners and changes in ownership interests in subsidiaries that do not result in a loss of control An entity presents, either in the statement of changes in equity or in the notes: statements, a reconciliation at the beginning and the end of the period of the carrying amount of total equity, equity attributable to the parent, and equity attributable to the noncontrolling interest. That reconciliation separately discloses (ASC A): Net income Each component of other comprehensive income Transactions with owners acting in their capacity as owners, showing separately contributions from and distributions to owners The amount of dividends recognised as distributions to owners during the period and the amount per share (IAS 1.107) For each component of equity, an analysis of other comprehensive income by item (IAS 1.106A) 2.5 Statement of cash flows Relevant guidance: IAS 7; 5 Relevant guidance: ASC 230 and 830 Introduction All entities are required to present a statement of cash flows that provides information about its historical changes in cash and cash equivalents (IAS 7.1 and 7.4). Similar to, except under a statement of cash flows is not required to be provided by (ASC ): Defined benefit pension plans and certain other employee benefit plans that present financial information in accordance with ASC 960 Certain investment companies that meet specified criteria Cash and cash equivalents Cash comprises cash on hand and demand deposits (IAS 7.6). Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value (IAS 7.6). Cash equivalents are held for the purpose of meeting short-term cash commitments rather that for investment or other purposes. An investment normally qualifies as a cash equivalent only when it has a short maturity of, say, three months or less from the date of acquisition (IAS 7.7). Cash comprises cash on hand and demand deposits (ASC Master Glossary, Cash ). Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and so near their maturity that they present insignificant risk of changes in value because of changes in interest rates. Generally, only investments with original maturities of three months or less are cash equivalents (ASC Master Glossary, Cash Equivalents ).

18 Comparison between and International Financial Reporting Standards 18 In some countries, bank overdrafts which are repayable on demand form an integral part of an entity's cash management. In these circumstances, bank overdrafts are included as a component of cash and cash equivalents. A characteristic of such banking arrangements is that the bank balance often fluctuates from being positive to overdrawn. Bank borrowings are generally considered to be financing activities (IAS 7.8). Unlike, bank overdrafts are included in liabilities and excluded from cash equivalents. Changes in overdraft balances are financing activities. Presentation and disclosure The statement of cash flows reports cash flows during the period classified by the following (IAS 7.10): Operating activities Investing activities Financing activities Cash flows from operating activities are reported using either the direct or the indirect method (IAS 7.18). Cash flows arising from the following operating, investing or financing activities may be reported on a net basis (IAS 7.22): Cash receipts and payments on behalf of customers when the cash flows reflect the activities of the customer rather than those of the entity Cash receipts and payments for items in which the turnover is quick, the amounts are large, and the maturities are short Interest and dividends received and paid are classified in a consistent manner from period to period as operating, investing, or financing activities (IAS 7.31 and.33). Interest paid and interest and dividends received are usually classified as operating cash flows for a financial institution (IAS 7.33). Taxes paid are classified as cash flows from operating activities unless they can be specifically identified with financing and investing activities (IAS ). 5.33(c) requires disclosure in the notes or in the financial statements of the amount of the net cash flows attributable to the operating, investing and financing activities of discontinued operations. Similar to (ASC , 45-25, and 45-28). Receipts and payments are generally shown gross. Certain items may be presented net because their turnover is quick, the amounts are large, and the maturities are short. Items that qualify for net reporting are cash flows pertaining to (a) investments (other than cash equivalents), (b) loans receivable, and (c) debt, provided that the original maturity of the asset or liability is three months or less (ASC through 45-9). Interest and dividends received and interest paid (and expensed) are classified as operating activities (ASC b and 45-25e). Dividends paid are classified as financing activities (ASC ). Taxes are generally classified as operating activities (ASC c). Unlike, separate disclosure of cash flows related to discontinued operations is not required to be presented in net cash provided or used by operating, investing, and financing activities and the net effect of those flows on cash and cash equivalents. An entity that nevertheless chooses to report separately operating cash flows of discontinued operations does so consistently for all periods affected, which may include periods long after sale or liquidation of the operation. (ASC ). Note: In April 2013, the FASB issued proposed ASU,

19 Comparison between and International Financial Reporting Standards 19 Reporting Discontinued Operations, to address concerns that too many disposals of assets qualify as discontinued operations and to improve disclosures of discontinued operations of major lines of business or geographic locations, including cash flows from discontinued operations. An entity discloses the components of cash and cash equivalents and presents a reconciliation of the amounts in its statement of cash flows with the equivalent items in the statement of financial position (IAS 7.45). An entity discloses its policy for determining which items are treated as cash equivalents (ASC ). Total cash and cash equivalents at the beginning and end of the period shown in the statement of cash flows must be the same as similarly titled line items or subtotals in the balance sheet (ASC ). 2.6 Non-current assets held for sale and discontinued operations Proposed guidance on reporting discontinued operations In April 2013, the FASB issued proposed ASU, Reporting Discontinued Operations, to address concerns that too many disposals of assets qualify as discontinued operations and to improve disclosures of discontinued operations of major lines of business or geographic locations. Under existing, a component of an entity that is a reportable segment, an operating segment, a reporting unit, a subsidiary, or an asset group is eligible for presentation as discontinued operations in the financial statements. The proposed ASU would raise the threshold for reporting discontinued operations by redefining discontinued operation as either of the following: A component or a group of components of an entity that represents a separate major line of business or major geographical area of operations that either has been disposed of or is part of a single plan to be classified as heldfor-sale in accordance with ASC A business that, upon acquisition, meets the criteria in ASC to be classified as held-for-sale A component of an entity is a reportable segment, an operating segment, a reporting unit, a subsidiary, or an asset group for which there are operations and cash flows that are clearly distinguishable, both operationally and for financial reporting purposes, from the rest of the entity. The proposed guidance would also allow for an increased level of continuing involvement by an entity in discontinued operations and would require expanded disclosures about discontinued operations and about certain individually material dispositions that do not meet the definition of discontinued operations. The proposed amendments differ from in certain respects. The proposed ASU would require that a major line of business or major geographical area of operations comprise a component of an entity or a group of components of an entity, rather than a cash-generating unit or a group of cash-generating units. In addition, 5 includes in its definition of discontinued operation a subsidiary that is acquired exclusively with a view to resale, while the proposed amendments would include in the definition of discontinued operation a business that, on acquisition, is classified as held for sale. The comment period ends August 30, Relevant guidance: 5 and 13 Relevant guidance: ASC 205, 230, 360, and 810 Introduction A discontinued operation is a component of an entity that A component of an entity is reported in discontinued

20 Comparison between and International Financial Reporting Standards 20 either has been disposed of, or is classified as held for sale, and ( 5.32): Represents a separate major line of business or geographical area of operations Is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations; or Is a subsidiary acquired exclusively with a view to resale A component of an entity comprises operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the entity. In other words, a component of an entity will have been a cash-generating unit or a group of cashgenerating units while being held for use ( 5.31). A cash-generating unit is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets ( 5, Appendix A). operations if it is classified as held for sale or has been disposed of and both of the following conditions are met (ASC ): The operations and cash flows of the component have been or will be eliminated from the ongoing operations of the entity The entity will not have any significant continuing involvement in the operations of the component after the disposal transaction A component of an entity comprises operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the entity. A component of an entity may be a reportable segment or an operating segment; a reporting unit; a subsidiary; or an asset group (all as defined in the ASC Master Glossary) (ASC Master Glossary, Component of an Entity ). Held for sale An entity classifies a non-current asset (disposal group) as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use ( 5.6). For this to be the case the asset (disposal group) must be available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets (disposal groups) and its sale must be highly probable ( 5.7). For the sale to be highly probable ( 5.8): The appropriate level of management must be committed to a plan to sell the asset (disposal group) An active programme to locate a buyer and complete the plan must have been initiated The asset (disposal group) must be actively marketed for sale at a price that is reasonable in relation to its current fair value The sale is expected to qualify for recognition as a completed sale within one year from the date of classification (the one year limit is extended if conditions in 5, Appendix B apply) Actions required to complete the plan are required to indicate that it is unlikely that significant changes to the plan will be made or that it will be withdrawn The probability of shareholders approval (if required in An entity classifies a long lived asset (disposal group) as held for sale when it satisfies the criteria listed below that demonstrate that the entity is sufficiently committed to a plan to sell (ASC through 45-14): Management, having the authority to approve the action, commits to a plan to sell the asset (disposal group) The asset (disposal group) is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets (disposal groups) An active program to locate a buyer and other actions required to complete the plan to sell the asset (disposal group) has been initiated The sale of the asset (disposal group) is probable, and transfer of the asset (disposal group) is expected to qualify for recognition as a completed sale within one year except as permitted by ASC The asset (disposal group) is being actively marketed for sale at a price that is reasonable in relation to its current fair value Actions required to complete the plan indicate it is unlikely that significant changes to the plan will be made or that it will be withdrawn A disposal group for a long-lived asset or assets to be