Us Gaap and Ifrs Difference in Income Statement

Income Statement Income statements present an ordered list, grouped by large categories of revenues and expenses. The income statement begins with revenues followed by a list of expenses. U. S. generally accepted accounting principles and IFRS acceptments for the presentation of income statements ar similar, with slightly important differences. *Other than separating revenues from expenses, U. S. GAAP provides little counselling more or less which items the firm must separately display or their order. IFRS requires, at a minimum, the separate display of revenues, financing costs (for example, interest expense), income tax expense, gelt or passage for the period, and certain other items. *Both U. S. GAAP and IFRS require the separate display of items whose size, nature, or frequency of occurrence make such(prenominal) separate display necessary for accurately portraying performance. *Both U. S. GAAP and IFRS require separate display of items related to discontinued operations , a progeny discussed in Chapter 14. *IFRS requires separate display of the portion of profit or loss attributable to the minor- ity (noncontrolling) interest and the portion attributable to the p bent entity, a matter dis- cussed in more detail in Chapter 13. U. S. GAAP contains a similar requirement starting in 2009 for most firms. IFRS permits firms to present expenses by either nature or function although U. S. GAAP is silent on this issue, guidance from the Securities and Exchange Commission requires registrants to classify expenses by function. 4 tax revenue RECOGNITION Revenue recognition refers to the timing and measurement of revenues. Management applies the revenue recognition criteria of authoritative guidance to decide whether a given transac- tion meets the criteria and so moments in recording revenues (and the related expenses). Reve- nue recognition is among the most complex issues in financial account.As of the writing of this textbook, U. S. GAAP contains over 200 pieces of authoritative guidance for recognizing revenues. The quantity and complexity of this guidance result from several factors. First, mis- reporting of revenues (either reporting revenues before the firm earns them or reporting non- existent revenues) is the most putting surface form of discovered accounting fraud. 9 Second, firms often bundle products and function and sell them in multiple-element orders, and each element of the arrangement has the potential to result in revenue recognition.An example of a multiple-element arrangement is the sale of a machine with an extended five-year war- ranty, installation operate, training for employees to learn how to operate the machine, and software product upgrades as they become available. This bundled arrangement can contain five or more elements, delivered at different times, but with a single sales price. The selling firm faces difficult recognition and measurement issues in deciding (1 ) whether a given element of the a rrangement has separable revenues, and (2) when, and in what amounts, to describe rev- enues for the separate elements of the arrangement.CRITERIA FOR REVENUE RECOGNITION As a general principle, low the accrual basis of accounting, the firm recognizes revenue when the transaction meets both of the chase conditions 1 . Completion of the net process. The trafficker has done all (or well all) that it has prom- ised to do for the client. That is, the seller has delivered all (or nearly all) of the goods and services it has agreed to provide. 2. receipt of assets from the customer. The seller has received currency or some other asset that it can convert to cash, for example, by collecting an account receivable.The first touchstone focuses on the sellers performance. Firms recognize revenues from many sales of goods and services at the time of sale (delivery) because that is often the point of completion of the earnings process, in the sense that the seller has transferred the p romised goods to the customer or has performed the promised services. Even if some items remain unperformed (for example, promises to provide warranty services and promises to accept cus- tomer returns), the seller can recognize revenues as long as the unperformed items are not too great a portion of the total arrangement with the customer, and the seller can easonably measure the cost of the unperformed items. 11 The piece criterion for revenue recognition focuses on measuring the amount of cash the seller will ultimately receive. The exchange price between the customer (buyer) and seller represents the assets exchanged by the customer for goods and services, and provides the ini- tial measure of revenue.