IFRS AND US GAAP CONVERGENCE IN AREA OF MERGES AND ACQUISITIONS

Abstract

The representation of business transactions was significantly different in the IFRS reporting system and in the US GAAP reporting system. Since transactions of this kind are mostly supranational transactions at the global level, it is important that their representation in the accounting and reporting system should be compatible. The objective of this paper is to point out the significant differences in the financial statements of a combining enterprise, which might arise if two different methodological procedures were used to record the business combinations. The theoretical section analyses the main reasons for the convergence of the accounting reporting systems in the area of business combinations and the approaches of the two basic global organizations in the area of regulation of accounting reporting. Firstly, IAS 22, IFRS 3 and SFAS 141 are analyzed. Analysis is concerned with the changes of this standards since 2001, when the Business Combination project started. Based on the comparative analysis of the both systems, there are defined the areas for biggest changes in amendments of both standards. The base for the identification of the differences represents US GAAP. Then the different approaches to Business Combinations reporting (pooling interest method and purchase method) are analyzed with respect to their impact on the balance and recorded profit or loss from this operations. In the end, the topical stage of the convergence process in this area is evaluated and areas for further convergence of business combination reporting are designed.