US GAAP

What it means

US GAAP are the generally accepted accounting principles in the United States, the body of financial reporting rules issued by the US Financial Accounting Standards Board. They are used by American companies and by companies listed on US stock exchanges.

Unlike IFRS, which rely more on principles and judgement, US GAAP are more detailed in many areas and contain more specific rules for particular industries and transactions. In recent years, however, the two systems have converged in key areas such as revenue and leases.

A Slovak company cannot use US GAAP instead of Slovak accounting rules for its statutory financial statements. If it belongs to an American group, it prepares US GAAP figures as additional reporting for the parent company.

How it works in practice

Slovak subsidiaries of American groups usually keep their books under Slovak rules and convert the figures to US GAAP monthly or quarterly for the parent. A reconciliation bridge explaining the differences between the two systems is used for this.

Typical differences concern leases, depreciation, provisions, impairment, revenue from long-term contracts and the capitalisation of development costs. Some rules, such as those on leases, resemble IFRS 16 but are not identical.

Deadlines also matter for the group's consolidated financial statements. American groups often require the month-end close within a few working days, which places high demands on the speed and accuracy of the Slovak subsidiary's bookkeeping.

What to watch out for

Differences between the Slovak statements and US GAAP reporting must be well documented, as both group auditors and the Slovak auditor will examine them. Unexplained differences can raise questions about the reliability of both sets of figures.

In Slovakia the tax base is derived from the result under Slovak rules, not US GAAP. Adjustments made only for group reporting therefore have no effect on income tax, but it is important not to confuse them with statutory accounting entries.