Identify and describe the types of differences that exist between IFRS and U.S. GAAP.
Foreign companies whose stocks are listed on United States Stock Exchanges are required to file Form 20-F reconciliations with the Securities and Exchange Commission if they prepare their consolidated financial statements in accordance with any standards different from current U.S. GAAP or IFRS.
Prior to 2014, AngloGold Ashanti prepared their annual audited consolidated financial statements contained in the annual report on Form 20-F for years ending on or before December 31, 2012, in accordance with U.S. GAAP. However, the company made a change in 2014 and prepared the annual audited consolidated financial statements contained in the annual report on Form 20-F for the year ending December 31, 2013, in accordance with IFRS as issued by the IASB.
For this assignment, you are going to analyze the differences in the year ending 12/31/2012 figures found in the 2012 and 2013 Form 20-F Reconciliations.
Download the 2013 Form 20-F and the 2012 Form 20-F using the links below.
2013 Form 20-F
AngloGold Ashanti Limited. (2013). Form 20-F. https://www.sec.gov/Archives/edgar/data/1067428/000119312514141938/d709051d20f.htm
2012 Form 20-F
AngloGold Ashanti Limited. (2012). Form 20-F. https://www.sec.gov/Archives/edgar/data/1067428/000119312513175850/d508552d20f.htm
Compare the 2012 financial data found in the 2013 Form 20-F with the 2012 financial data found in the 2012 Form 20-F Reconciliation. Analyze the differences in the key financial indicators used by financial analysts and comment on your findings. Make sure you include, at a minimum, answers to the following questions in your analysis.
What is the difference between IFRS revenues and U.S. GAAP revenues for 2012? Use the percent difference to help highlight the significance.
What is the difference between IFRS net income and U.S. GAAP net income for 2012? Use the percent difference to help highlight the significance.
What is the difference between IFRS current assets and U.S. GAAP current assets? Use the percent difference to help highlight the significance.
What is the difference between IFRS total stockholders’ equity and U.S. GAAP total stockholders’ equity? Use the percent difference to help highlight the significance.
How might these differences influence investor decisions and financial analysts’ assessment of the company? Consider using financial ratios to support your answer.
Which method would the AngloGold Ashanti management prefer to report to stakeholders? Why?
How is an impairment loss on property, plant, and equipment determined and measured under IFRS? How does this differ from U.S. GAAP?
On 01/01/XX01 AI Inc entered into a contract to lease technology equipment from IBM for 3 years. The lease agreement requires AI to pay $60,000 at the end of each year of the lease. The company’s borrowing rate is 8%. Under U.S. GAAP, the lease would be classified as operating. However, AI is based in Slovenia and will account for the lease using IFRS 16.
Required:
Compute the value of the lease liability that AI will record under IFRS 16 on January 1, Year 1.
In each year of the lease, AI will record depreciation expense on the leasehold asset and interest expense on the lease obligation. Compute the amount of the two expenses in the lease’s first year.
How much expense would AI recognize for the lease if it were a U.S. company that reported it under U.S. GAAP, and how does this amount differ from the total lease expense recognized under IFRS?
How will the lease affect operating cash flow, and how would it affect operating cash flow under U.S. GAAP? Assume that AI classifies interest paid as a financing flow in its statement of cash flows.
How do IFRS 16 and the new U.S. lease accounting standard, ASC 842, differ? Under ASC 842, are there disclosure requirements for reporting operating leases on a company’s balance sheet?
