Converged or Deconverged: Comparing IFRS 2 and ASC 718

International Financial Reporting Standards (IFRS) provides a globally converged accounting framework that individual countries can use in place of their local, generally accepted accounting principles (GAAP). The intent of IFRS is to enhance financial statement comparability across borders, and for that reason is widely used outside the US.

Although the FASB and SEC do not aim to harmonize every new or revised accounting standard, they do look for conceptual alignment when possible. They have identified ASC 718 and IFRS 2 as converged, but this is merely at a theoretical or framework level. There are numerous areas of considerable difference.

This white paper reviews the most important questions that affect all companies obligated to report under both US GAAP and IFRS. There is additional focus on the implications US multinational companies face as a result of their subsidiaries needing to comply with IFRS 2 for their statutory accounting, as well as on the many ways IFRS 2 diverges with ASC 718.