Global Finance 395SEC Requirements for Disclosing the Effects
of GAAP Differences
With the continuing globalization of financial markets, international firms
have become more sensitive to the analytical burdens that result from differ-
ences between foreign and domestic GAAP. Further, the U.S. Securities
and Exchange Commission requires that some foreign firms file reports that
EXHIBIT 12.25 Examples of U.S. and international GAAP differences.
Accounting Policy Country/Company GAAP DifferenceSoftware costs England /Reuters Holdings Reuters expenses all software costs;
a portion of such cost would
normally be capitalized under U.S.
GAAP.
Tax accounting Malaysia /United Malacca Deferred taxes are not booked if
Rubber Estates temporary differences are deferred
indefinitely; deferred taxes are
booked on all temporary differences
under U.S. GAAP.
Investments Australia /BHP Limited Equity accounting is not applied to
investments in excess of 20% of
voting shares; U.S. GAAP generally
requires application of the equity
method.
Property Hong Kong/Hong Kong Tangible fixed assets and property
Telecommunications may be restated on the basis of
appraised values; upward revaluations
are not permitted under U.S. GAAP.
Sale/leaseback gains Netherlands/PolyGram Gains on sale/leaseback transactions
are recognized in the year of sale;
such gains are normally deferred and
amortized into future earnings under
U.S. GAAP.
Construction interest Sweden/Pharmacia Interest related to the construction of
assets is expensed; U.S. GAAP requires
capitalization and amortization.
Foreign exchange gains England /British Air ways Foreign exchange gains and losses are
and losses (on loans to deducted from or added to the cost of
acquire aircraft) aircraft; included in income as
incurred under U.S. GAAP.
Unrealized foreign Germany/Continental Losses are deducted from income but
exchange gains and Aktiengesellschaft gains are not recorded; U.S. GAAP
losses recognizes both in earnings.