Hi Please refer IAS37 for detail understanding of restructuring.
Both IFRS and US GAAP require certain restructuring costs to be recognized in the financial statements before the restructuring actually occurs. However, determining the timing of liability recognition, and which costs to include, differs. We revisit the IFRS requirements for restructuring, highlighting some of the practical accounting considerations and comparing them to US GAAP.
A restructuring can comprise numerous activities, including termination or relocation of a business, a change in management structure and lay-offs. At a high level, the associated costs are recognized when (1) the program is of such scale that it meets the IFRS definition of a restructuring, and (2) management has an obligation to proceed with the restructuring. In addition, the nature of the costs matters – certain costs cannot be recognized before being incurred, and employment termination costs may need to be recognized earlier than other restructuring costs.
Restructuring costs are in the scope of IAS 371 with the exception of employee termination benefits, which are accounted for under IAS 19.2
Restructuring vs. exit activities
IAS 37 defines a restructuring as a program that materially changes the scope of a business or the manner in which it is conducted. US GAAP uses the term 'exit activities', which may be broader than a 'restructuring' under IFRS. Understanding the scale of the restructuring is therefore important because not all programs may qualify for cost recognition under IFRS.
Constructive obligation
Restructuring costs are recognized as soon as there is a present obligation (legal or constructive) resulting from a past event, and a reliable estimate of costs can be made. Restructurings are rarely conducted for legal reasons. Therefore, determining whether a constructive obligation exists is the key challenge for deciding when to record a restructuring provision.
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Eknath Dhamankar CMA
Supervisor
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Original Message:
Sent: 09-26-2022 08:57 AM
From: Jordan Mescher
Subject: Restructuring
I am working on something for work regarding restructuring charges. See the question below. Is there any resource that would give me the GAAP guidance?
Guidance on restructuring charges to show 1) where they go on the income statement 2) What can be included? 3) When is it posted? Can you accumulate over a period of time?
Any help is appreciated.
Thanks
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Jordan Mescher CMA
Accountant
Delaware OH
United States
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