IAS 37 vsUS GAAP ASC 450

FAKHRI . JEFRI . AIDIL . HUSNA . HAJAR

KEY DIFFERENCES• TERMINOLOGY• RECOGNITION• MEASUREMENT• DISCOUNTING• ONEROUS CONTRACTS• CONTINGENT ASSET AND

GAIN CONTINGENCIES

IFRS US GAAPTerminology Three categories:

• Provision.

• Contingent liability.

• Contingent asset.

Three categories:• Estimated loss

accrued for a loss contingency (i.e, a contingent loss that is recognized as a liability).

• Contingent loss that is not recognized as a liability.

• Contingent gain.

IFRS US GAAPRecognition A loss must be

probable to be recognized. Probable is interpreted as more likely than not (i.e., a probability of greater than 50 percent).

To recognize a general loss contingency, the loss must be probable. Probable is generally interpreted as “likely” and is not defined by reference to a single percentage threshold. The intent is that probable be interpreted as a high likelihood.

IFRS US GAAPMeasurement If no amount in the

range is more likely than any other amount in the range, the midpoint of the range is used to measure the liability.

If no amount in the range is more likely than any other amount in the range, the minimum amount in the range is used to measure the amount to be accrued for a loss contingency.

IFRS US GAAPDiscounting The anticipated cash

flows to settle an obligation are discounted using a pre-tax discount rate that reflects the current market assessments of the time value of money and the risks specific to the liability, if the effect is material.

Loss contingency is not discounted unless the aggregate amount of the liability and the timing of cash payments for the liability are fixed or determinable.

IFRS US GAAPOnerous contracts

If an entity has a contract that is onerous (e.g., an operating lease), the present obligation under the contract should be recognized as a liability.

Losses on firmly committed onerous contracts are usually not recognized.

IFRS US GAAPContingent asset and gain contingencies

Prohibits the recognition of contingent assetsHowever, if an inflow of economic benefits is probable the contingent asset should be disclosed.If a contingent asset becomes virtually certain, then it is no longer contingent and is recognized

Does not allow for such recognition until the asset is actually realized,

GENERAL IFRS