Chargeable equity and liabilities: relevant foreign banks: attribution of chargeable equity and liabilities to a branch: calculation of branch liabilities: GAAP differences: US GAAP
US GAAP permits netting in a wider range of circumstances than IAS (for example derivatives, repos, certain customer balances where right of offset exists). Further, under IAS, financial assets and liabilities must be offset when the conditions are met, whereas under US GAAP such treatment is optional. In practice these netting differences should not require adjustment however, as the netting provisions of the levy permit such netting. However care will need to be taken to ensure that the criteria for netting all accord in each particular case with the bank levy rules.
Broker/dealers can under US GAAP apply netting to long and short positions over the same securities, even where no legal right of offset exists. Such netting is prohibited under IAS. Adjustment may be required where such netting is significant.
Under US GAAP instruments are recognised on balance sheet (a corresponding asset and liability representing rights and obligations under such an arrangement). Under IAS no such balances are recognised on balance sheet, so adjustment may be necessary to remove these amounts.
Fair value option
Liabilities can be designated at fair value through profit and loss more widely under US GAAP than IAS (which permits designation either to eliminate an accounting mismatch, or where managed and evaluated on a FV (fair value) basis). Where the fair value option has been applied in such circumstances, and as a result of this the value of reported liabilities is significantly different from the value which would be reported under IAS, an adjustment may be necessary.
Transaction costs relating to liabilities held at amortised cost are recognised as a separate asset under US GAAP. Under IAS liabilities are reported net of such transaction costs. Where such amounts are significant adjustment may be necessary to reflect amortised cost liabilities net of transaction costs.
Provisions (for example restructuring)
Recognition and measurement differences exist, which may lead to different timing (typically later recognition) or levels of provision under US GAAP. Where such provisions are significant, adjustment will be required.
Dividends declared after the balance sheet date but prior to approval of accounts are recognised as a year end liability for US GAAP purposes. Under IAS such dividends are not recognised as a liability at the balance sheet date. Adjustment may be necessary for significant dividend liabilities.
Share based payments
Certain index linked (for example consumer price index linked) equity settled share based payments may be accounted for as liabilities under US GAAP, and re-measured at each reporting date. Under IAS such payments would normally be recognised in equity, and not re-measured. Where such awards are significant, this measurement difference could give rise to a material difference requiring adjustment.