Appendix A — Differences Between U.S. GAAP and IFRS Standards

Appendix A — Differences Between U.S. GAAP and IFRS Accounting Standards

Although the accounting for noncontrolling interests under U.S. GAAP is generally consistent with their treatment under IFRS® Accounting Standards, there are some differences, such as those summarized in the table below.1 The differences outlined are based on a comparison of authoritative literature under U.S. GAAP and IFRS Accounting Standards and do not necessarily include interpretations of such literature.

Subject	U.S. GAAP	IFRS Accounting Standards
Initial measurement of noncontrolling interests when a reporting entity first consolidates a partially owned subsidiary	If a reporting entity acquires a controlling financial interest in a legal entity that meets the definition of a business, it should account for the transaction as a business combination under ASC 805. That guidance generally requires an acquiring entity to initially recognize the assets and liabilities of, and noncontrolling interests in, the acquired business at fair value. Regardless of whether all assets or liabilities are recognized at fair value, noncontrolling interests recognized as the result of a business combination are always measured initially at fair value. For additional information, see Section 5.2.	Under IFRS 3, an entity may choose, on an acquisition-by-acquisition basis, to measure noncontrolling interest components that “are present ownership interests and entitle their holders to a proportionate share of the [acquiree’s] net assets in the event of liquidation” as of the acquisition date at either (1) the present ownership instruments’ proportionate share in the recognized amounts of the acquiree’s identifiable net assets (often referred to as the “proportionate share method”) or (2) fair value. All other noncontrolling interest components are measured at fair value. For additional information, see A25.7.3.1 of Deloitte’s iGAAP publication.
Scope — decreases in ownership without an accompanying change in control	ASC 810-10-45-21A provides separate scope guidance on the applicability of ASC 810-10-45-22 through 45-24 to a reporting entity parent’s decreases in ownership (without an accompanying change in control) of (1) certain subsidiaries that are businesses or nonprofit activities and (2) certain other subsidiaries that are not businesses or nonprofit activities. Essentially, ASC 810-10-45-21A(b) precludes a reporting entity from ignoring other applicable U.S. GAAP (e.g., guidance on conveyances of oil and gas mineral rights) simply because the parent has transferred an equity interest in a subsidiary to effect the transaction. For additional information, see Section 7.1.1.	IFRS 10 does not contain similar scope guidance. For additional information, see A24.11.4.1 of Deloitte’s iGAAP publication.
Attribution of eliminated income or loss (VIEs)	ASC 810-10-35-3 specifies that the effect of the eliminating entry for intercompany transactions between a primary beneficiary and its VIE subsidiary should not be attributed to the noncontrolling interests. For additional information, see Section 6.5.	IFRS 10 requires that intragroup transactions and the resulting unrealized profits and losses be eliminated in full. This requirement applies equally to all subsidiaries that are consolidated. For additional information, see A24.10.1.3.1 of Deloitte’s iGAAP publication.

Footnotes

In addition to the differences in the table, a reporting entity should consider any potential differences that could arise as a result of respective regulatory requirements. For example, the SEC staff announcement codified in ASC 480-10-S99-3A indicates that when an equity instrument (e.g., a common-share or preferred-share redeemable noncontrolling interest) has a redemption feature not solely within the control of the issuer, an SEC registrant is required to present the instrument on the balance sheet between permanent equity and liabilities in a section labeled “temporary equity” or “mezzanine equity.” Under IFRS Accounting Standards, however, there is no concept of temporary equity (noncontrolling interests that qualify for temporary equity presentation under ASC 480-10-S99-3A would typically need to be classified as liabilities under IFRS Accounting Standards). For additional information related to that difference specifically, see Section 9.4.1 of this publication and Section 10.2 of Deloitte’s Roadmap Distinguishing Liabilities From Equity.