Level 2: IFRS vs US GAAP
Topic Area IFRS U.S. GAAP
Intercorporate Investments
Passive investments Equity: irrevocable choice at the time of Equity: cannot be classified as FVOCI.
– reclassification purchase to account for other equity No choice is unavailable.
securities through FVOCI. Equity held for
trading must be FVPL. Allows equity or debt securities to be
reclassified.
Debt: only if business model test has
changed
(and expected credit loss model).
Equity method at FV FV accounting only allowed for venture FV accounting allowed for all
capital, mutual funds, and similar entities
(i.e. investment managers).
Choice is irrevocable, no proportionate
share of earnings in IS, but changes in FV
Equity method - Impairment indicator / loss event, If carrying value > FV, and decline is
impairment investment is written down and loss in IS. other-than-temporary / deemed
Goodwill is not separately tested. permanent, investment is written down
and loss in IS. Goodwill is not separately
tested.
No reversals allowed No reversals allowed
Acquisition method - Partial or full goodwill allowed. Only full goodwill allowed
goodwill
Partial = purchase price - proportionate % Full = FV target - FV net identifiable
of FV net identifiable assets assets
Bargain purchase Recognized as gain in IS Recognized as gain in IS
Acquisition method - 1-step process: 2-step process:
Goodwill impairment 1. Impairment = carrying value - 1. Impairment if carrying value > FV of
recoverable amount CGU reporting unit
2. Impairment = goodwill - implied
goodwill
Implied goodwill = goodwill recalculated
with current FV of target and net
identifiable assets, as of impairment date.
No reversals allowed No reversals allowed
Dividends received / CFI or CFO / CFF or CFO CFO / CFF
paid
Topic Area IFRS U.S. GAAP
Intercorporate Investments
Passive investments Equity: irrevocable choice at the time of Equity: cannot be classified as FVOCI.
– reclassification purchase to account for other equity No choice is unavailable.
securities through FVOCI. Equity held for
trading must be FVPL. Allows equity or debt securities to be
reclassified.
Debt: only if business model test has
changed
(and expected credit loss model).
Equity method at FV FV accounting only allowed for venture FV accounting allowed for all
capital, mutual funds, and similar entities
(i.e. investment managers).
Choice is irrevocable, no proportionate
share of earnings in IS, but changes in FV
Equity method - Impairment indicator / loss event, If carrying value > FV, and decline is
impairment investment is written down and loss in IS. other-than-temporary / deemed
Goodwill is not separately tested. permanent, investment is written down
and loss in IS. Goodwill is not separately
tested.
No reversals allowed No reversals allowed
Acquisition method - Partial or full goodwill allowed. Only full goodwill allowed
goodwill
Partial = purchase price - proportionate % Full = FV target - FV net identifiable
of FV net identifiable assets assets
Bargain purchase Recognized as gain in IS Recognized as gain in IS
Acquisition method - 1-step process: 2-step process:
Goodwill impairment 1. Impairment = carrying value - 1. Impairment if carrying value > FV of
recoverable amount CGU reporting unit
2. Impairment = goodwill - implied
goodwill
Implied goodwill = goodwill recalculated
with current FV of target and net
identifiable assets, as of impairment date.
No reversals allowed No reversals allowed
Dividends received / CFI or CFO / CFF or CFO CFO / CFF
paid