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US GAAP versus IFRS - Long-lived assets - EY - United States


Long-lived assets

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Although US GAAP does not have a comprehensive standard that addresses long-lived assets, its definition of property, plant and equipment is similar to IAS 16, Property, Plant and Equipment, which addresses tangible assets held for use that are expected to be used for more than one reporting period. Other concepts that are similar include the following:


Both accounting models have similar recognition criteria, requiring that costs be included in the cost of the asset if future economic benefits are probable and can be reliably measured. Neither model allows the capitalization of start-up costs, general administrative and overhead costs or regular maintenance.

Both US GAAP and IFRS require that the costs of dismantling an asset and restoring its site (i.e., the costs of asset retirement under ASC 410-20, Asset Retirement and Environmental Obligations — Asset Retirement Obligations or IAS 37, Provisions, Contingent Liabilities and Contingent Assets) be included in the cost of the asset when there is a legal obligation, but IFRS requires provision in other circumstances as well.

Capitalized interest

ASC 835-20, Interest — Capitalization of Interest, and IAS 23, Borrowing Costs, require the capitalization of borrowing costs (e.g., interest costs) directly attributable to the acquisition, construction or production of a qualifying asset. Qualifying assets are generally defined similarly under both accounting models.

However, there are differences between US GAAP and IFRS in the measurement of eligible borrowing costs for capitalization.


Depreciation of long-lived assets is required on a systematic basis under both accounting models. ASC 250, Accounting Changes and Error Corrections, and IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors, both treat changes in residual value and useful economic life as a change in accounting estimate requiring prospective treatment.

Assets held for sale

Assets held for sale criteria are similar in the Impairment or Disposal of Long-Lived Assets subsections of ASC 360-10, Property, Plant and Equipment, and IFRS 5, Non-current Assets Held for Sale and Discontinued Operations. Under both standards, the asset is measured at the lower of its carrying amount or fair value less costs to sell, the assets are not depreciated and they are presented separately on the face of the balance sheet.

Exchanges of nonmonetary similar productive assets are also treated similarly under ASC 845, Nonmonetary Transactions, and IAS 16, both of which allow gain or loss recognition if the exchange has commercial substance and the fair value of the exchange can be reliably measured.

Significant differences

Revaluation of assetsRevaluation not permitted.Revaluation is a permitted accounting policy election for an entire class of assets, requiring revaluation to fair value on a regular basis.
Depreciation of asset componentsComponent depreciation permitted but not common.Component depreciation required if components of an asset have differing patterns of benefit.
Measurement of borrowing costsEligible borrowing costs do not include exchange rate differences. Interest earned on the investment of borrowed funds generally cannot offset interest costs incurred during the period.

For borrowings associated with a specific qualifying asset, borrowing costs equal to the weighted-average accumulated expenditures times the borrowing rate are capitalized.
Eligible borrowing costs include exchange rate differences from foreign currency borrowings. Borrowing costs are offset by investment income earned on those borrowings.

For borrowings associated with a specific qualifying asset, actual borrowing costs are capitalized.
Costs of a major overhaulMultiple accounting models have evolved in practice, including: expense costs as incurred, capitalize costs and amortize through the date of the next overhaul, or follow the IFRS approach.Costs that represent a replacement of a previously identified component of an asset are capitalized if future economic benefits are probable and the costs can be reliably measured.
Investment propertyInvestment property is not separately defined and, therefore, is accounted for as held for use or held for sale.Investment property is separately defined in IAS 40, Investment Property, as an asset held to earn rent or for capital appreciation (or both) and may include property held by lessees under a finance or operating lease. Investment property may be accounted for on a historical cost basis or on a fair value basis as an accounting policy election. Capitalized operating leases classified as investment property must be accounted for using the fair value model.

Other differences include: hedging gains and losses related to the purchase of assets, constructive obligations to retire assets, the discount rate used to calculate asset retirement costs and the accounting for changes in the residual value.


The FASB issued a proposal that would require an entity that meets certain criteria to measure its investment properties at fair value.

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