What are the key differences between IFRS 3 and ASC 805 for intangible assets?

Full Explanation

Both IFRS 3 and ASC 805 require the acquisition method for business combinations, but several differences affect intangible asset accounting. Contingent consideration: under IFRS 3, all remeasurements flow through profit or loss; under ASC 805, equity-classified contingent consideration is not remeasured. Bargain purchases (negative goodwill): IFRS 3 requires immediate recognition in profit or loss after reassessing the PPA; ASC 805 follows the same approach but with different disclosure requirements. Goodwill impairment: IFRS uses a one-step test comparing the CGU's carrying amount to recoverable amount (higher of fair value and value-in-use); US GAAP uses a simplified one-step test comparing carrying amount to fair value (no value-in-use concept). In-process R&D: both standards recognise IPR&D as a separate intangible asset at fair value, but the subsequent accounting differs — under IFRS, IPR&D is not amortised until the project is complete; US GAAP follows the same approach. Assembled workforce: neither standard allows separate recognition (it is subsumed in goodwill), but both allow it as a contributory asset in valuation models. For companies operating across both frameworks, understanding these differences is essential for consistent reporting and investor communication.

Related Glossary Terms

Related Questions