How do you reconcile local GAAP reporting packages to IFRS for consolidation? Give an example of a common adjustment (e.g., property revaluation under local GAAP vs cost model under IFRS).
A core Group Accounting interview question — asked in analyst and associate interviews across IB, PE, and the Big 4.
THE SHORT ANSWER
Local GAAP packages are adjusted to IFRS through a bridge. Common adjustments include: property revaluation (if local GAAP allows revaluation but IFRS uses cost model), deferred tax recognition, revenue recognition differences, and lease accounting. For example, if local GAAP revalues property annually, under IFRS cost model, the revaluation surplus is reversed, and depreciation is based on cost. The adjustment entry: debit revaluation surplus, debit retained earnings (for additional depreciation), credit property. This ensures consistency in the consolidation.
WHAT INTERVIEWERS LISTEN FOR
- ✓Bridge adjustments from local GAAP to IFRS
- ✓Example: reversal of revaluation surplus
- ✓Depreciation adjustment to cost basis
COMMON MISTAKES
- ✗Assuming local GAAP equals IFRS
- ✗Ignoring deferred tax on adjustments
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