Reporting Difference Under Ifrs and Usgapp

In: Business and Management

Submitted By azalar
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Reporting

Discuss how your company’s financial statement would differ if they reported under IFRS. Be as specific as possible and discuss any costs and benefits to the company.

There are many similarities in US GAAP and IFRS. Convergence continued to be a high priority for both the US Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB). However, the convergence process is designed to address only the most significant differences. While standards will be more similar, differences will continue to exist. In general, US GAAP tends to have more specific rules while IFRS rules are more flexible and requires more interpretation.
The materiality of the reporting difference to a company’s financial statements depends on a variety of factors, including the nature of the company, the details of the transactions and interpretation of rules. Discussed below are some major aspects that would change if Colgate reports under IFRS.
1. Classification of deferred tax assets and liabilities on balance sheet
Under US GAAP, for deferred tax asset, current or non-current classification is required. In the perspective of IFRS reporting rules, all deferred tax asset amounts should be classified as non-current in balance sheet. Referring to the footnote on Income Taxes (page 80 of 10k), Colgate included 284 of deferred tax asset in other current asset in compliance with US GAAP, while under IFRS, the 284 current deferred tax asset should be reclassified as non- current asset.

2. Costing method for inventory
Referring to Colgate’s footnote on summary on significant accounting policies, the company accounts for inventories using both the first-in, first-out (FIFO) method (80% of inventories) and the last-in, first-out (LIFO) method (20% of inventories) (page 55 of 10k). There’s a significant difference for inventory costing method…...

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