the balance sheet date). Management should continually evaluate the effects of COVID-19 on the company’s going concern assessment, including information obtained after the reporting date and up to the date the financial statements are authorized for issuance. When building forecasts or looking at management’s plans and realistically possible responses, management may need to consider different forecasting scenarios and perform more robust sensitivity analyses than previously to determine whether there are material uncertainties about the company’s ability to continue as a going concern. There are two types of disclosures under ASC 205-40. Illustrative financial statements and checklists of disclosures under IFRS® Standards. Management’s plans are ignored under Step 1, but considered under Step 2, to determine if they alleviate the substantial doubt raised in Step 1. IAS 1 only states that when a company has a history of profitable operations and ready access to financial resources, management may reach a conclusion on the appropriateness of the going concern assessment without detailed analysis. This guide does not discuss every possible difference; rather, it is a summary of those areas encountered frequently where the principles differ or where there is a difference in emphasis, specific application guidance or practice. 43/2020 | 14 Rapid changes in stakeholder expectations, technology and economic landscapes are creating Further, even if management concludes that there are no material uncertainties related to events or conditions that may cast significant doubt on the company’s ability to continue as a going concern, but reaching that conclusion involves significant judgement – i.e. This includes information known or reasonably knowable at the date the financial statements are issued (or available to be issued). Accordingly to throw light on the differences between IFRS and US GAAP, the 2016 edition of IFRS compared to US GAAP was released on 13 December 2016, along with an overview version, which provides a high-level briefing for audit committees and boards. The going concern presumption – i.e. As the 2020 reliefs continue to demonstrate, the effective dates of different requirements play a key role in understanding the GAAP differences at any particular point in time. KPMG does not provide legal advice. For example, a company may have a profitable track record or prior success at refinancing. GAAP comparison: IFRS compared to US GAAP - An Overview 2015 (KPMG IFRG Limited, 1 December, 2016 ) (KPMG IFRG Limited, 1 December, 2015 ) All rights reserved. Assessment is performed for a period of 12 months from the date the financial statements are issued (or available to be issued). Key impacts. of Professional Practice, KPMG US. Although the terminology varies slightly, both GAAPs share the same objective of informing users of the financial statements early about the company’s potential financial difficulties. See our US GAAP Handbook, Going concern. KPMG is ready to help you understand regulatory changes, anticipate government policies and their implications, and prepare for the projected recovery of the global economy. © 2020 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. While the objective is conceptually simple, implementing the component approach can be challenging. Unlike IFRS Standards, US GAAP includes examples of events and conditions that may adversely affect a company’s ability to meet its financial obligations, and therefore raise substantial doubt about its ability to continue as a going concern. Under US GAAP, management’s plans are ignored under Step 1 of the going concern assessment. If you’re a preparer, it may help you to identify areas to emphasise in your financial statements; if you’re a user, it may help you spot areas to focus on in your dialogue with preparers. Under Step 1, management determines whether events and conditions raise substantial doubt about the company’s ability to continue as a going concern. KPMG US. Latest edition: In this handbook, KPMG explains the new leases standard (ASC 842) in detail. Partner, Dept. KPMG refers to the global organization or to one or more of the member firms of KPMG International Limited (“KPMG International”), each of which is a separate legal entity. © 2020 Copyright owned by one or more of the KPMG International entities. Partner, Dept. While US GAAP has extensive guidance around going concern, IFRS Standards do not. Management may have a history of successful refinancing or carrying out other plans. This means management needs to run two sets of forecasts, before and after management’s plans, whereas IFRS Standards are not prescriptive in this regard. Please take a moment to review these changes. Unlike IFRS Standards, if substantial doubt is raised in Step 1 about the company’s ability to continue as a going concern, the extent of disclosure depends on the outcome of Step 2 and whether that doubt is alleviated by management’s plans. When adopting IFRS 17, US insurers are trying to minimize disruption to their primary basis of reporting. Our team of professionals has the depth and breadth of knowledge and experience to address the challenges posed by US GAAP. If liquidation becomes imminent after the reporting date but before the financial statements are issued (or available to be issued), the financial statements would still be prepared under the going concern basis; the fact that liquidation is imminent would be disclosed.7. Accounting and Auditing Update - Issue no. Find out how KPMG's expertise can help you and your company. There is typically heightened sensitivity around this assessment and required disclosures. In our view, if there are such material uncertainties, a company should disclose the following, at a minimum: In our experience, if there are such material uncertainties, then the company usually provides disclosure as part of the basis of preparation note in the financial statements. Under US GAAP, plans must be approved before the financial statements are issued (or available to be issued), and management needs to demonstrate that it is probable the plans will be timely and successfully implemented, mitigating the conditions and events that raised the substantial doubt. A robust framework under US GAAP vs limited guidance under IFRS Standards. It follows that when this is not the case, a detailed analysis will be necessary, which likely includes robust cash flow forecasts and a review of existing and forthcoming financial obligations. that the company will be able to meet its obligations when they become due – is fundamental to financial reporting. Our accounting advisory professionals bring in-depth technical accounting knowledge, capital markets insight and substantial industry experience. Corporate strategy insights for your industry, Explore Corporate strategy insights for your industry, Financial Services Regulatory Insights Center, Explore Financial Services Regulatory Insights Center, Explore Risk, Regulatory and Compliance Insights, Explore Corporate Strategy and Mergers & Acquisitions, Customer service transformation & technology. Known or knowable events beyond the look-forward period can be ignored in the going concern assessment, although disclosure of their potential effects may still be required by other standards. KPMG International entities provide no services to clients. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. US GAAP. Partner, Dept. After more than five years of unprecedented accounting change under both IFRS Standards and US GAAP, timelines were extended and the International Accounting Standards Board and the FASB provided targeted guidance offering some accounting relief. is not alleviated by management’s plans), disclosures are more prescriptive. Further, under IFRS Standards, if the company ceases to be a going concern after the reporting date but before its financial statements are authorized for issuance, IAS 104 requires a change in the basis of accounting, as opposed to adjustments to the amounts recognized under the going concern basis of accounting. Ref. The new edition (PDF 1.8 MB) of our comparison of IFRS Standards and US GAAP highlights the key differences between the two frameworks, based on 2020 calendar year ends. * Get a 10% discount on KPMG Executive Education digital self-studies when you purchase four or more courses in a single transaction. We want to make sure you're kept up to date. US GAAP also has specific requirements for motion picture films, website development, cloud computing costs and software development costs. Further, under US GAAP, certain requirements apply … The assessment typically requires significant judgment. At the start of each chapter is a brief summary of the key requirements of IFRS, contrasted with the parallel requirements of US GAAP. Location: Luchthaven Brussel Nationaal 1K 1930 Zaventem. Please note that your account has not been verified - unverified account will be deleted 48 hours after initial registration. Improving business performance, turning risk and compliance into opportunities, developing strategies and enhancing value are at the core of what we do for leading organizations. At KPMG, our accounting advisory services team are committed to helping you reach the right accounting solution, in the context of reporting objectives, commercial reality and regulatory requirements. Ask about our group discounts too. US GAAP includes examples of such adverse events and conditions. You will not receive KPMG subscription messages until you agree to the new policy. All rights reserved. US GAAP - Facing COVID-19 challenges In 2020, nothing in the world was left untouched by the effects of COVID-19, including the standard-setting agenda. All rights reserved. KPMG is a global network of professional firms providing Audit, Tax & Advisory services. To meet these disclosure requirements, in our view, similar information to that in respect of material uncertainties may be relevant to the users’ understanding of the company’s financial statements, as appropriate. of Professional Practice, KPMG US +1 212-909-5664. Events and conditions to consider in the assessment. Disclosures are required if events and circumstances raise substantial doubt about the entity’s ability to continue as a going concern. of Professional Practice, KPMG US, Partner in Charge, US Germany Corridor, KPMG US, Managing Director, Dept. Management should critically assess the disclosure requirements of IAS 1 and consider drafting required disclosure language early in the financial reporting process. You will not continue to receive KPMG subscriptions until you accept the changes. Explore challenges and top-of-mind concerns of business leaders today. Under US GAAP, R&D costs within the scope of ASC 730 1 are expensed as incurred. Comparison to US GAAP: Amendments to IFRS 3, Business Combinations, clarify the definition of a business by providing a new framework for determining whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. For more information, call 201-505-6062 or email us-kpmglearning@kpmg.com. Impacts from a fall and winter COVID-19 surge may bring further uncertainty to many companies. Your guide to the key differences between IFRS Standards and US GAAP. The survey indicates that the IFRS/US GAAP funding level of a typical plan might have improved by around 5 … We want to ensure that you are kept up to date with any changes and as such would ask that you take a moment to review the changes. KPMG’s experienced teams of professionals, in Ireland and globally, can assist you with US GAAP (Generally Accepted Accounting Principles), helping to ensure that your reporting requirements are fulfilled and continue to offer transparency and integrity. Their mitigating effect is considered under Step 2 to determine if they alleviate the substantial doubt raised in Step 1, but only if certain conditions are met. Unlike IFRS Standards, the going concern assessment is performed for a finite period of 12 months from the date the financial statements are issued (or available to be issued for nonpublic entities). 3. While IFRS Standards do not provide guidance on the placement of disclosure in a close-call scenario, in our experience such disclosure may be provided as part of the basis of preparation note or elsewhere in the financial statements. However, current economic and market conditions are likely very different from those of the past. Given the significant effects of COVID-19, management may need to reassess the company’s access to financing sources; they may not be easily replaced and the costs may be higher in the current circumstances. With the timing of the economic recovery from COVID-19 yet unknown, this year many companies may need to approach their going concern assessment differently. Further, under US GAAP, the liquidation basis of accounting6 applies only from the point that liquidation becomes imminent. Disclose principal conditions or events that raise substantial doubt (before consideration of management’s plans), Disclose principal conditions or events that raise substantial doubt, Disclose management’s evaluation of the significance of those conditions or events in relation to the company’s ability to meet its obligations, Disclose management’s plans that alleviated substantial doubt, Disclose management’s plans intended to alleviate substantial doubt, No statement that substantial doubt was raised is required, Include an explicit statement in the notes that indicates there is substantial doubt. +1 212-954-1086. Partner, Dept. Since the last time you logged in our privacy statement has been updated. When management becomes aware of material uncertainties related to events or conditions that may cast significant doubt on the company’s ability to continue as a going concern, those uncertainties must be disclosed in the financial statements. US GAAP requires companies to perform an initial screen test as part of their assessment. Job KPMG Audit of ‘Audit (Sr) Manager - US GAAP Knowledge’. The focus of this publication is primarily on recognition, measurement and presentation. KPMG in India’s cross functional teams can. A. Succeeding in the new reality IFRS compared to US GAAP, from which this overview has been extracted, is to assist you in understanding the significant differences between IFRS and US GAAP. These examples include effects such as negative financial trends, negative cash flows from operating activities, default on loans, denial of usual trade credit from suppliers, work stoppages and external matters such as legal proceedings.5. However, we believe that the information disclosed in a close-call scenario should be appropriately cross-referenced to the note discussing significant judgements.8. Our semi-annual outlook helps IFRS Standards preparers in the US keep track of financial reporting changes and assess relevance. Date: 02/12/2020. We expand on each of these areas further below. This guide explains in depth the financial reporting implications of the CARES Act under US GAAP, followed by a high-level comparison to IFRS; this comparison is intended to provide directional guidance related to the application of IFRS. US GAAP includes a two-step process that first determines whether substantial doubt about the company’s ability to continue as a going concern is raised. Assessment is performed for a period of at least, but not limited to, 12 months from the reporting date (i.e. Disclosure of material uncertainties related to events or conditions that may cast significant doubt on a company’s ability to continue as a going concern are required. Volume Discount! of Professional Practice, KPMG US. When substantial doubt exists (i.e. Get the latest KPMG thought leadership directly to your individual personalized dashboard. The 2017 edition of KPMG’s comparison of IFRS and US GAAP, including updated chapters on the new revenue and leases standards. This means the 12-month period is a minimum and management needs to exercise judgment to determine the appropriate look-forward period under the circumstances. Here we offer our latest thinking and top-of-mind resources. Management should carefully consider the requirements of IFRS Standards and reevaluate their historical approach to the going concern analysis; it may no longer be sufficient given the current economic environment. Unlike US GAAP, there is no liquidation basis of accounting under IFRS; when a company determines it is no longer a going concern, it does not prepare financial statements on a going concern basis. The Darkest Hour is Just Before Dawn: Challenges remain before vaccinations can save the day. The new edition (PDF 1.8 MB) of our comparison of IFRS Standards and US GAAP highlights the key differences between the two frameworks, based on 2020 calendar year ends. However, in our view, there is no general dispensation from the measurement, recognition and disclosure requirements of the Standards in this case, and these requirements are applied in a manner appropriate to the circumstances. Click anywhere on the bar, to resend verification email. financing may be significantly more difficult and more costly to obtain now. a 'close-call’ scenario, disclosure of the judgements made is required3. Because the US GAAP guidance is more developed in this area, it may provide certain useful reference points for IFRS Standards preparers – e.g. Going concern – the underlying basis of financial statements. Our multi-disciplinary approach and deep, practical industry knowledge, skills and capabilities help our clients meet challenges and respond to opportunities. Perform an initial impact assessment, highlight the differences between local GAAP and IFRS or accounting changes; Assist in the implementation of accounting differences and draw up financial statements; Identify likely impacts of key accounting differences on the profit and loss For example, Question C90 discusses a difference related to ‘unit of account’, which is prescribed by other US GAAP that requires or permits the fair value measurement. If substantial doubt is raised, management then assesses whether that substantial doubt is alleviated by management’s plans. Both IFRS Standards 1 and US GAAP 2 prescribe specific recognition and measurement requirements for determining interim period balances, the minimum content of interim financial statements and presentation of comparatives. Tune in to KPMG Advisory podcasts to hear perspectives on today's business issues. US GAAP IFRS Standards 2020 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. events or conditions requiring disclosure may arise after the reporting period. Disclosures of material uncertainties that may cast doubt on a company’s ability to continue as a going concern as well as significant judgments involved in close-call scenarios may be more frequent as a result of COVID-19, given the continued economic uncertainty. The going concern assessment is inherently complex and judgmental and will be under heightened scrutiny for many companies this year due to COVID-19. Management assesses all available information about the future. Our IFRS Standards resources will help you to better understand the potential accounting and disclosure implications of COVID-19 for your company, and the actions management can take now. For more detail about our structure please visit https://home.kpmg/governance. This includes information that becomes available on or before the financial statements are authorized for issuance – i.e. Member firms of the KPMG network of independent firms are affiliated with KPMG International. In addition to IAS 1, IFRS 79 requires disclosure of information about the significance of financial instruments to a company, and the nature and extent of risks arising from those financial instruments, both in qualitative and quantitative terms. Further, other actions such as deferring capital expenditures or adjusting the workforce may be needed to generate enough cash flow to meet the company’s financial obligations. a close-call scenario)3, disclosure of the judgments is required. Involuntary termination benefits – timing of recognition. Join us for upcoming webcast events. Reporting period Standards do not plans to meet its obligations when they become due is. 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