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WILEY
Dual Reporting for
Equity and Other
Comprehensive
Income
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WILEY
Dual Reporting
for Equity and
Other
Comprehensive
Income
Under IFRS and U.S. GAAP
By
Francesco Bellandi, CPA, CA, ACCADipIFR, MBA
A John Wiley & Sons, Ltd., Publication
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This edition first published in 2012
© 2012 Francesco Bellandi
Registered office
John Wiley & Sons Ltd, The Atrium, Southern Gate, Chichester, West Sussex, PO19 8SQ, United Kingdom
For details of our global editorial offices, for customer services and for information about how to apply for permission to
reuse the copyright material in this book please see our website at www.wiley.com.
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Designs and Patents Act 1988, without the prior permission of the publisher.
This book contains criticism, contrast and commentary that may have origin in material copyrighted by the IASCF
International Accounting Standards Committee Foundation, Copyright © by the International Accounting Standards
Committee Foundation, material copyrighted by the FAF/FASB the Financial Accounting Foundation and the Financial
Accounting Standards Board, Copyright © by the Financial Accounting Standards Board, or material copyrighted by the
AICPA, Copyright © by the American Institute of Certified Public Accountants, Inc.
A previous version of this book was published as Bellandi, F., 2009. Accounting for Equity and Other Comprehensive Income,
Dual Reporting under U.S. GAAP and IFRSs. [e-book] Rome, Casa Editrice Universita` “La Sapienza”.
Some portions of this Book and some Exhibits are reused or adapted, with permission, from Bellandi, F., The Handbook to
IFRS Transition and to IFRS U.S. GAAP Dual Reporting, John Wiley & Sons Ltd, 2012.
This Book is not a substitution for reading the full text of all IFRSs and U.S. GAAP pronouncements. Complete copies can be
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Tomysons
thattheymayfollow
myparents’example
ofintellectualhonesty
Nonestvirfortisetstrenuusquilaboremfugit,
nisicrescitillianimusipsadifficultate.
Nonsumuniangulonatus,
patriameatotushicmundusest.
Seneca,AdLucilium,EpistularumLibriI,VII.
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CONTENTS
Page
Chapter Title No.
Preface ........................................................ xix
AbouttheAuthor ............................................... xxi
1 IntroductionandScopeofBook .................................. 1
1.1 NatureofAccountingLiteratureandPertinent
Pronouncements ........................................... 1
1.2 PerspectivesandMajorImplicationsoftheConcept
ofEquity .................................................. 1
1.3 TheConceptofOtherComprehensiveIncome ................ 3
1.4 TheFinancialStatementPresentationProject ................. 3
1.4.1 ProjectHistory ...................................... 3
1.4.2 ScopeandObjectivesoftheProject ................... 4
1.4.3 WorkingPrinciples .................................. 5
1.4.3.1 Cohesiveness ............................... 5
1.4.3.2 Categorization .............................. 6
1.4.3.3 Liquidity ................................... 6
1.4.3.4 Measurement ............................... 6
1.4.3.5 Disaggregation ............................. 6
1.4.3.6 CashFlowAssessment ...................... 7
1.4.3.7 SelectionofWorkingPrinciplesintheFinancial
StatementPresentationProject ............... 7
1.4.4 InterrelationshipsandConflictsamongWorking
Principles ........................................... 7
1.4.5 LinktotheTopicofThisBook ....................... 8
1.5 MainInterrelationshipswithOtherProjects ................... 8
1.6 SignificanceofEquity ...................................... 9
1.7 ScopeofBook ............................................. 10
2 ViewsonEquityandImplications ................................ 17
2.1 TerminologyandDefinitionsofTerms ....................... 17
2.1.1 Equity .............................................. 18
2.1.2 EquityOwners ...................................... 19
2.1.2.1 Shareholders ............................... 19
2.1.2.2 Owners .................................... 20
2.1.2.3 EquityHolders ............................. 21
2.1.2.4 Beneficiaries ............................... 21
2.1.2.5 EquityInvestors ............................ 21
2.1.2.6 EquityParticipants .......................... 22
2.1.2.7 Interchangeability,Inconsistency,and
Dissimilarity ............................... 22
2.1.3 EquityInstruments .................................. 23
2.1.4 EquityInterest ...................................... 26
2.1.4.1 ResidualInterest ............................ 26
(1) DefinitionofResidualInterest .......... 26
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viii Contents
(2) ImplicationsoftheResidualInterest
Model ................................ 26
(3) TheBalanceSheetApproach ........... 28
2.1.4.2 OwnershipInterest ......................... 31
(1) OwnershipVersusResidualInterest ..... 32
(2) TheInvestedandEarnedEquity
Model ................................ 33
2.1.4.3 EconomicInterest .......................... 33
2.1.4.4 VotingInterest ............................. 35
2.1.4.5 ControllingFinancialInterest ................ 37
2.1.4.6 VariableInterest ............................ 38
2.2 BasicCharacteristicsofEquity .............................. 39
2.2.1 OwnershipRights ................................... 40
2.2.2 DependencyonanEntity’sDynamics ................. 40
2.2.3 RisksandRewardsofOwnership ..................... 41
2.2.4 Subordination ...................................... 43
2.2.5 DiscretiononDistributionstoOwners ................. 45
2.3 MajorImplicationsforCompanies ........................... 47
2.3.1 FinancialImpact .................................... 51
2.3.1.1 FinancialStatementPerformance ............. 51
2.3.1.2 Taxation ................................... 52
2.3.1.3 FinancialAnalysis .......................... 52
2.3.2 StrategicImpact .................................... 53
2.3.2.1 InternationalExpansion ..................... 53
2.3.2.2 BoardDecisions ............................ 56
2.3.2.3 TopManagementRole ...................... 57
2.3.3 BusinessProcessesImpact ........................... 57
2.3.4 ImplementationConsiderations ....................... 58
2.3.4.1 MigrationProjectManagement .............. 58
2.3.4.2 AccountingProcedures ...................... 58
2.3.4.3 ManagementReportingSystems ............. 59
2.3.4.4 InformationSystems ........................ 59
2.3.4.5 InternalControl ............................ 59
2.3.4.6 Auditing ................................... 60
2.3.4.7 HumanResources .......................... 60
2.3.4.8 CommunicationandInvestorRelationship .... 60
3 Reserves ....................................................... 63
3.1 TerminologyandDefinitionsofTerms ....................... 63
3.1.1 U.S.GAAPTerminologyandPractice ................ 63
3.1.2 IFRSTerminology .................................. 64
3.2 Reconciliation ............................................. 65
3.2.1 ReservesVersusProvisions .......................... 65
3.2.2 ReservesVersusOtherComponentsofEquity .......... 65
3.2.3 ReservesVersusAdditionalPaid-InCapital ............ 65
3.2.4 ReservesVersusOtherComprehensiveIncome ......... 66
3.2.5 ReservesVersusRetainedEarnings ................... 67
3.3 TypesofReserves .......................................... 67
3.4 TrackingofEquity ......................................... 69
