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1. External financial reporting decisions
2. Planning, budgeting, and forecasting
3. Performance management
4. Cost management
5. Internal control
6. Technology and analytics
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1.2.12.1 Learning outcomes
Achievable CMA Part 1
1. External financial reporting decisions
1.2. Financial transactions
1.2.12. US GAAP versus IFRS
Our CMA Part 1 course is currently in development and is a work-in-progress.

Learning outcomes

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The learning outcome statements related to the differences between US GAAP and IFRS comparisons are as follows:

  1. Expense recognition, with respect to share-based payments and employee benefits
  2. Intangible assets, with respect to development costs and revaluation
  3. Inventories, with respect to costing methods, valuation, and write-downs (e.g., LIFO)
  4. Leases, with respect to lessee operating and finance leases
  5. Long-lived assets, with respect to revaluation, depreciation, and capitalization of borrowing costs
  6. Impairment of assets, with respect to determination, calculation, and reversal of loss

Items 2-6 were covered under US GAAP in earlier chapters; the GAAP-vs-IFRS comparisons for those areas follow later. Share-based payments and employee benefits are covered only here: US GAAP allows straight-line or accelerated expense recognition for graded-vesting awards, while IFRS requires the accelerated method. Both standards recognize defined-benefit actuarial gains/losses in OCI, but US GAAP later amortizes them into profit or loss (the corridor approach), while IFRS never recycles them. Exam tip: Part 1 tests US GAAP - LIFO, impairment-loss reversal, and intangible revaluation are the top GAAP/IFRS divergences to remember.

Expense recognition: Share-based payments and employee benefits

  • US GAAP and IFRS both require fair value measurement for share-based payments
  • Differences in vesting conditions and classification of awards
  • Employee benefits: US GAAP uses corridor approach for actuarial gains/losses; IFRS recognizes in other comprehensive income

Intangible assets: Development costs and revaluation

  • US GAAP: research & development costs expensed as incurred
  • IFRS: development costs capitalized if criteria met
  • Revaluation: permitted under IFRS, not allowed under US GAAP

Inventories: Costing methods, valuation, and write-downs

  • US GAAP allows LIFO; IFRS prohibits LIFO
  • Inventory measured at lower of cost or market (US GAAP) vs. lower of cost or net realizable value (IFRS)
  • Write-down reversals: allowed under IFRS, not under US GAAP

Leases: Lessee operating and finance leases

  • US GAAP: classifies leases as operating or finance (capital)
  • IFRS: most leases treated as finance leases (right-of-use asset and liability)
  • Short-term and low-value lease exemptions under IFRS

Long-lived assets: Revaluation, depreciation, capitalization of borrowing costs

  • Revaluation model allowed under IFRS, not US GAAP
  • Depreciation methods similar, but component depreciation required under IFRS
  • Borrowing costs: capitalization required for qualifying assets under both, but definitions may differ

Impairment of assets: Determination, calculation, and reversal of loss

  • US GAAP: two-step impairment test (recoverability then measurement)
  • IFRS: one-step impairment test (recoverable amount vs. carrying value)
  • Reversal of impairment: allowed under IFRS, prohibited under US GAAP
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Next  | 1.2.12.2 DIfferences in expense recognition, intangible assets, inventories and leases
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Learning outcomes

The learning outcome statements related to the differences between US GAAP and IFRS comparisons are as follows:

  1. Expense recognition, with respect to share-based payments and employee benefits
  2. Intangible assets, with respect to development costs and revaluation
  3. Inventories, with respect to costing methods, valuation, and write-downs (e.g., LIFO)
  4. Leases, with respect to lessee operating and finance leases
  5. Long-lived assets, with respect to revaluation, depreciation, and capitalization of borrowing costs
  6. Impairment of assets, with respect to determination, calculation, and reversal of loss

Items 2-6 were covered under US GAAP in earlier chapters; the GAAP-vs-IFRS comparisons for those areas follow later. Share-based payments and employee benefits are covered only here: US GAAP allows straight-line or accelerated expense recognition for graded-vesting awards, while IFRS requires the accelerated method. Both standards recognize defined-benefit actuarial gains/losses in OCI, but US GAAP later amortizes them into profit or loss (the corridor approach), while IFRS never recycles them. Exam tip: Part 1 tests US GAAP - LIFO, impairment-loss reversal, and intangible revaluation are the top GAAP/IFRS divergences to remember.

Key points

Expense recognition: Share-based payments and employee benefits

  • US GAAP and IFRS both require fair value measurement for share-based payments
  • Differences in vesting conditions and classification of awards
  • Employee benefits: US GAAP uses corridor approach for actuarial gains/losses; IFRS recognizes in other comprehensive income

Intangible assets: Development costs and revaluation

  • US GAAP: research & development costs expensed as incurred
  • IFRS: development costs capitalized if criteria met
  • Revaluation: permitted under IFRS, not allowed under US GAAP

Inventories: Costing methods, valuation, and write-downs

  • US GAAP allows LIFO; IFRS prohibits LIFO
  • Inventory measured at lower of cost or market (US GAAP) vs. lower of cost or net realizable value (IFRS)
  • Write-down reversals: allowed under IFRS, not under US GAAP

Leases: Lessee operating and finance leases

  • US GAAP: classifies leases as operating or finance (capital)
  • IFRS: most leases treated as finance leases (right-of-use asset and liability)
  • Short-term and low-value lease exemptions under IFRS

Long-lived assets: Revaluation, depreciation, capitalization of borrowing costs

  • Revaluation model allowed under IFRS, not US GAAP
  • Depreciation methods similar, but component depreciation required under IFRS
  • Borrowing costs: capitalization required for qualifying assets under both, but definitions may differ

Impairment of assets: Determination, calculation, and reversal of loss

  • US GAAP: two-step impairment test (recoverability then measurement)
  • IFRS: one-step impairment test (recoverable amount vs. carrying value)
  • Reversal of impairment: allowed under IFRS, prohibited under US GAAP

More from US GAAP versus IFRS

  • DIfferences in expense recognition, intangible assets, inventories and leases
  • DIfferences in long-lived assets and impairment