Although the US GAAP and IFRS guidance in this area are similar at a conceptual level, significant differences exist at the detailed application level.

Differences within the two frameworks may result in different classifications of an award as a component of equity or as a liability. This may result in different total compensation cost and it may impact earnings volatility and balance sheet metrics. Classification under IFRS is based solely on whether awards are ultimately settled in equity or cash. However, US GAAP has guidance for certain types of awards that are equity settled but may result in liability classification (e.g., awards with vesting conditions outside of service, performance, or market conditions), as well as guidance for some awards that may be cash settled but result in equity classification (e.g., puttable awards).

In addition, companies that issue awards with graded vesting (e.g., awards that vest ratably over time, such as 25 percent per year over a four-year period) may require faster expense recognition under IFRS than under US GAAP.

The deferred income tax accounting requirements for share-based payments under IFRS vary significantly from US GAAP. Companies can expect to experience greater period-to-period variability in their effective tax rate due to share-based payment awards under IFRS prior to the time of receiving the tax deduction. The extent of variability is linked to the movement of the issuing company’s stock price. However, companies reporting under US GAAP could have greater volatility upon receiving the tax deduction as a result of the treatment of the difference between the estimated deferred taxes recognized and the actual tax benefit received.

ASC 480, ASC 718, SAB Topic 14

IFRS 2

The following discussion captures a number of the more significant GAAP differences. It is important to note that the discussion is not inclusive of all GAAP differences in this area.