Accounting for Equity and Other Comprehensive Income: Dual Reporting Under U.S. GAAP and IFRS, by Francesco Bellandi

The book “Accounting for Equity and Other Comprehensive Income: Dual Reporting Under U.S. GAAP and IFRS” by Francesco Bellandi, (631 pages, published by Sapienza Rome State University Press, 2009) discusses the similarities and differences in accounting for equity and other comprehensive income under the United States Generally Accepted Accounting Principles (U.S. GAAP) and the International Financial Reporting Standards (IFRS). It also discusses the accounting requirements under the United State’s Stock Exchange Commission’s (U. S. SEC) rules and regulations. The author have also gone to great length to review relevant Exposure Drafts (both U.S. GAAP and IFRS), Discussion Papers, research literature and other convergence efforts of the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) related to this topic following what the author calls a ‘multidisciplinary and multi-standard comparison approach’ (p14). In this book, the author also proposes an overall approach to equity which preserves the clean-surplus concept of income and which would not violate the corporate governance of the various accounting jurisdictions.

The U.S. GAAP and the IFRS has been widely accepted as two of the more prominent international accounting standards. The convergence of the U.S. GAAP to IFRS has created a demand for the understanding of the workings and applications of both standards. According to the American Institute of Certified Public Accountants (AICPA), many companies (users of U.S. GAAP and other non-users of IFRS) would use IFRS if they, their auditors and other users of their financial statements understand IFRS (AICPA, 2010). Thus, this book is timely. Not only has the author addressed the informational needs of the players in the accounting industry, he has also drawn, based on his vast experience, practical implications of reporting under both standards.

This book comprises eight chapters and a worksheets section. Chapter 1, Introduction and Scope of Book, provides the reader with an overview and significance of the discussions that will follow in the various chapters. In this chapter, the author also discusses the Financial Statement Presentation Project, a joint project between FASB and IASB to provide a more consistent and comprehensive financial statements presentation. This project is significant as it is the standard setters’ attempt to enhance the credibility and usefulness of financial reporting which includes the reporting of equity and other comprehensive income. This Project is also discussed in other chapters especially when it pertains to the presentation of the topic at hand in the financial statements signifying that presentation is an important and integral part of producing high quality financial reports.

In chapters II to VII, the accounting treatment and concepts of equity, retained earnings, other comprehensive income and each caption of the equity section in the statement of financial position are discussed in great detail, not only under the different accounting jurisdictions but also from different perspectives including owners’/investors’ and legal capital perspectives. Chapter IV also provides a detailed discussion of the presentation of the equity and its components in the statement of financial position.

Chapter VIII discusses the treatment and presentation of taxes on equity items or intraperiod tax allocation, including income tax on equity issuing costs, share-based payment transactions, revaluation surplus and other items of comprehensive income. There is also a section on the income tax impact from first time adoption of IFRS.

The multitude of concepts and accounting treatments leads to various implications and raises several issues in the implementation of the accounting standards. Thus to facilitate the reader’s understanding, each chapter begins with an in-depth discussion of terminology and definitions of terms gleaned from the relevant standards and frameworks under U.S. GAAP and IFRS as well as other literature. Numerous examples are provided to illustrate salient points.

The worksheet section at the end of the book contains 81 worksheets which provide illustrations to enhance further the readers’ understanding of the subject matter. The worksheets include summaries of the significant points of the Financial Statement Presentation Project, findings of the author’s comparative studies, illustrations of reporting under U.S. GAAP and IFRS and alternative presentation models under U.S. GAAP.

A notable strength of this book, compared to other books on comparative financial reporting standards. is that in each chapter, there are commentary sections where the author highlights the similarities, differences, and grey areas on the subject matter between U.S. GAAP and IFRS as well as other accounting jurisdictions. In these sections, the author also provides criticism of related literature. These are especially useful for researchers. Worthy of mention is the planning point sections within each chapter where the author provides recommendations and proposes several resolutions to issues that may be faced by practitioners and other corporate staff.

The U.S. SEC had proposed a roadmap to IFRS in 2008 which would probably make it mandatory for all U.S. public companies to file their financial statements in IFRS beginning in 2014 (AICPA, 2010). This roadmap also allowed some U.S. companies which met certain criteria to use IFRS to file their financial statements for the financial year ending on or after 15 December 2009 using IFRS (www.dualgaap.com). Hence, it is recommended that the practitioners and preparers of financial statements associated with these companies as well as the corporate staff of those multinational entities who have to prepare financial reports under both IFRS and U.S. GAAP refer to this book to understand better the complexities of such work. They may find the discussion on the major implications of dual reporting for companies in chapter II and the illustrations on differences between reporting under IFRS and U.S. GAAP in the worksheet section particularly useful.

Although a large number of companies, particular those in the European Union, adopted IFRS for the first time in 2005 (AICPA, 2010; www.dualgaap.com), there are still many more companies all over the world who have yet to adopt the IFRS. Thus it is also recommended that these first time adopters of IFRS use this book as a point of reference. Although the book is not focused on first time adoption of IFRS, there are plenty of discussions pertaining to this area of interest.

In conclusion, this book would make an excellent reference for researchers, academics, and students of international accounting. This book is also recommended to practitioners, preparers of financial statements and other corporate staff especially those involved in multinational corporations. Non-native speakers of English may find the book heavy reading but this should not detract the book’s significant contribution towards the understanding of IFRS and U.S. GAAP.