IFRS 39 US GAAP differences.doc

parison of IAS 32 and IAS 39 and US GAAP The following table identifies differences between the accounting models included in IAS 32 and IAS 39 and the related US GAAP guidance that may result in significant differences between US GAAP and IFRS. Area IAS 32 and IAS 39 US parison 1 Definition - Derivative A derivative isa financial instrument: (a) whose value changes in response to the change ina specified interest rate, security price, commodity price, foreign exchange rate, index of prices or rates, a credit rating or credit index, or similar variable (sometimes called the 'underlying'); (b) that requires no investment or little investment relative to other types of contracts that have a similar response to changes in market conditions; and (c) that is settled ata future date. IAS A derivative instrument isa financial instrument or other contract with all three of the following characteristics: (a) It has (1) one or more underlyings and (2) one or more notional amounts or payment provisions or both. (b) It requires no investment or an investment that is smaller than would be required for other types of contracts that would be expected to have a similar response to changes in market factors. (c) Its terms require or settlement, it can readily be bya means outside the contract, or it provides for delivery of an asset that puts the recipient ina position not substantially different settlement. [FAS 133, para 6] The definitions ofa derivative in IAS 39 and FAS 133 are significantly different that the population of contracts meeting the definition under each standard will differ. FAS 133 requires a contract to have the ability to“ net settle ” whereas IAS 39 requires “ settlement ata future date. ” For example, prepaid contracts may not satisfy the settlement characteristic in IAS 39 however they may satisfy FAS 133 ’s“ net settlement requirement. ” IAS 39 does not define ‘ little investment ’, whereas FAS 149 provides a definition 2 Definition – mitment A