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9.5 Restructuring provisions (excluding business combinations)
Publication date: 30 Nov 2022
us IFRS & US GAAP guide
IFRS does not have the concept of an ongoing termination plan, whereas a severance liability is recognized under US GAAP once it is probable and reasonably estimable. This could lead companies to record restructuring provisions in periods later than they would under US GAAP.
US GAAP
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Guidance exists for different types of termination benefits (e.g., special termination benefits, contractual termination benefits, severance benefits, and one-time benefit arrangements).
If there is a pre-existing arrangement such that the employer and employees have a mutual understanding of the benefits the employee will receive if involuntarily terminated, the cost of the benefits are accrued when payment is probable and reasonably estimable. In this instance, no announcement to the workforce (nor initiation of the plan) is required prior to expense recognition.
| IFRS requires that a single approach be used to account for all types of termination benefits. Termination benefits are recognized at the earlier of (1) when an entity can no longer withdraw an offer of termination benefits, or (2) when it would recognize restructuring costs in accordance with IAS 37 (i.e., upon communication to those affected employees laid out in a detailed formal restructuring plan).
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