A company located in a foreign country is preparing for a listing of its common shares on the New York Stock Exchange in the United States. The company must decide whether to use U.S. GAAP or IFRS in preparing the financial statements that will accompany its registration with the U.S. Securities and Exchange Commission and has hired you to research several accounting issues related to making this decision. The accounting issues and specific questions the company would like you to research are the following:

1. The equity method of accounting is used to account for investments in investee companies over which the investor has significant influence. Should “potential voting rights” be considered in determining whether the investor has significant influence?

2. Contingent liabilities (provisions) must be recognized on the balance sheet when certain conditions are met. Should contingent liabilities (provisions) be measured at a discounted amount (that is, at present value)?

3. Some gains and losses are included in other comprehensive income (rather than net income). Should these items be accumulated and reported separately on the statement of financial position (balance sheet)?

4. An event that occurs after the balance sheet date that provides additional evidence about conditions existing at the balance sheet date usually requires an adjustment to the financial statements. What is the post-balance-sheet cutoff date for determining events that require an adjustment?

Comparisons of U.S. GAAP and IFRS prepared by international public accounting firms are readily available on the internet. An example is the “US GAAP/IFRS Accounting Differences Identifier Tool: January 2019” prepared by Ernst & Young LLP (EY), available at www.ey.com.

Required

Prepare a brief report answering the questions in items 1–4 for both IFRS and U.S. GAAP. Summarize the implications any differences between the two sets of standards with regard to these questions would have for financial reporting.