1、Liabilities:whatarethedifferencesbetweenIFRSandUSGAAP?•Contingent Liabilities Contingent LiabilitiesHowareIFRSandUSGAAPdifferent?Under US GAAP, probable contingent liabilities are recorded in journal entries, and therefore directly impact the financia
2、l statements. Reasonably possible contingent liabilities are only disclosed in the notes to the financial statements. Under IFRS, reasonably possible and probable contingent liabilities are treated in the same manner. All such liabilities are recorded
3、 in journal entries and impact the financial statements. Since more doubtful contingent liabilities are being recorded, under IFRS there are more adjustments to reverse previously recorded liabilities. Howwoulditchangethefinancialstatements?More liabi
4、lities will be recognized and reported on the balance sheet. This will result in more losses being reported on the income statement. In some cases, these liabilities will simply be recorded sooner than they would under US GAAP. In other situations, li
5、abilities may be recorded that do not come to pass. This would result in reverse recognition, which could result in gains being recorded on the income statement. Whatcoulditmeanforbusinesses?As companies record these provisions and their associated l
6、osses, their liabilities will increase and their net income will decrease. This will hurt their financial ratios, most notably the debt ratio, which may make it more difficult for businesses to obtain debt financing. Investors may be unhappy with incr
7、eased liability recognition, which could cause stock market prices to decrease.
