Imported from arjundrath-star/klade-analyst (agent-template/skills/gaap-ifrs-bridge/SKILL.md). Install upstream with npx skills add arjundrath-star/klade-analyst --skill gaap-ifrs-bridge. Copyright stays with the author.

gaap-ifrs-bridge

Map the differences between US GAAP and IFRS for a specific company. Identify which accounting standards differ, quantify the dollar impact on key financials (revenue, EBITDA, net income, total assets, equity), and produce a bridge reconciliation. Critical for: cross-border M&A due diligence, international peer comparisons, and companies considering framework transition.

Trigger

• "GAAP vs IFRS for [company]"
• "GAAP to IFRS bridge"
• "IFRS conversion impact"
• "How would financials change under IFRS?"
• "Cross-border comparison adjustment"
• "Dual reporting reconciliation"
• "GAAP IFRS differences for [industry]"

Inputs

• Company: Ticker or name (required)
• Direction: GAAP→IFRS or IFRS→GAAP (default: GAAP→IFRS)
• Focus areas: Specific standards to analyze (optional, default: all material differences)
• Purpose: M&A due diligence, peer comparison, framework transition, academic (required)

Dependencies

• financial-data-api — data source stack
• sec-edgar-fetch — EDGAR XBRL for GAAP financials baseline

Step 0: EDGAR Pre-flight (MANDATORY)

python3 skills/sec-edgar-fetch/scripts/edgar_xbrl_extract.py TICKER --preset all

Extract complete GAAP financials as the starting point for IFRS bridge reconciliation.

Methodology

Step 1: Identify Material Differences

Assess each GAAP/IFRS difference for materiality to this specific company:

Step 2: Quantification by Difference

For each material difference, calculate the impact:

IFRS 16 Leases (usually largest impact):

GAAP: Operating leases → rent expense in SG&A
IFRS: All leases → ROU asset + lease liability on BS; D&A + interest on IS

Impact on IS:
- Remove: Operating lease expense (rent)
- Add: Depreciation of ROU asset
- Add: Interest on lease liability
- Net IS impact: Usually small (front-loaded interest vs straight-line rent)

Impact on BS:
- Add: ROU asset to non-current assets
- Add: Lease liability (current + non-current)
- Increase: Total assets and total liabilities

Impact on Metrics:
- EBITDA increases (rent removed, replaced by below-EBITDA items)
- Net Debt increases (lease liabilities added)
- Net Debt/EBITDA may increase or decrease depending on relative magnitudes

IAS 38 R&D Capitalization:

GAAP: All R&D expensed
IFRS: Research expensed; Development capitalized if 6 criteria met:
  1. Technical feasibility
  2. Intention to complete
  3. Ability to use/sell
  4. Probable future economic benefits
  5. Resources available
  6. Reliably measurable

Estimate: [X]% of R&D spend qualifies as development
Capitalize: $[X]M → adds to intangible assets
Remove from expense: $[X]M → increases operating income
Add amortization: $[X]M (over useful life) → reduces operating income
Net impact: Increase to NI of $[X]M (capitalize > amortize in growth phase)

LIFO to FIFO Conversion (if applicable):

LIFO Reserve from 10-K footnotes: $[X]M
FIFO Inventory = LIFO Inventory + LIFO Reserve
FIFO COGS = LIFO COGS − ∆LIFO Reserve
Tax impact: Additional tax on LIFO Reserve × tax rate
Net equity impact: LIFO Reserve × (1 − tax rate)

Step 3: Build the Bridge Reconciliation

Create a waterfall from GAAP → IFRS (or reverse):

GAAP Net Income                                    $X,XXX
  + Development cost capitalization (IAS 38)          +XXX
  − Amortization of capitalized development           (XX)
  + Operating lease reclassification (IFRS 16)        +XX
  − Lease interest expense (IFRS 16)                  (XX)
  − Lease depreciation (IFRS 16)                      (XX)
  + LIFO to FIFO adjustment                           +XX
  − Additional tax on LIFO conversion                 (XX)
  +/− Impairment timing differences                   (XX)
  +/− Contingency recognition differences             (XX)
  +/− Component depreciation differences              (XX)
IFRS Net Income                                    $X,XXX
Difference: $XXX (X.X% of GAAP NI)

Step 4: Impact on Key Metrics

Show how each metric changes under IFRS:

Step 5: Peer Comparison Adjustment

If comparing a GAAP company with IFRS peers (or vice versa), show adjusted multiples:

• Convert all to common framework before comparing
• Highlight which adjustments have the largest impact on relative valuation
• Note: "Adjusted EV/EBITDA for [Target] would be [X.Xx] under IFRS vs [X.Xx] under GAAP, changing its position from [premium/discount] to [premium/discount] vs peer median"

Output Format

🌐 GAAP ↔ IFRS Bridge — [Company] ([TICKER])
Direction: GAAP → IFRS | Period: FY[Y] | Source: SEC EDGAR XBRL [CIK]

━━━ MATERIAL DIFFERENCES IDENTIFIED ━━━
| # | Standard Area          | GAAP Treatment       | IFRS Treatment        | Material? | Est. Impact |
|---|----------------------|---------------------|----------------------|-----------|-------------|
| 1 | Leases (ASC 842/IFRS 16) | Operating + Finance | All on-balance-sheet | ✅ HIGH   | $[X]M BS    |
| 2 | R&D (ASC 730/IAS 38)     | Expense all         | Capitalize dev costs | ✅ HIGH   | $[X]M NI    |
| 3 | Inventory (LIFO)          | LIFO permitted      | FIFO/weighted avg    | ✅ HIGH   | $[X]M COGS  |
| 4 | Impairment                | 2-step              | 1-step recoverable   | ⚠️ Medium | $[X]M       |
| 5 | Contingencies             | Probable >75%       | Probable >50%        | ⚠️ Medium | $[X]M       |

━━━ BRIDGE RECONCILIATION ━━━
| Item                                    | Impact on NI ($M) | Impact on Assets ($M) | Impact on Equity ($M) |
|-----------------------------------------|-------------------|----------------------|----------------------|
| GAAP Reported                           | X,XXX             | XX,XXX               | X,XXX                |
| IFRS 16 lease capitalization            | +/-XX             | +X,XXX               | +/-XX                |
| IAS 38 development capitalization       | +XXX              | +XXX                 | +XXX                 |
| LIFO → FIFO conversion                  | +XX               | +XXX                 | +XXX                 |
| IAS 36 impairment differences           | +/-XX             | +/-XX                | +/-XX                |
| IAS 37 contingency recognition          | (XX)              | —                    | (XX)                 |
| Tax impact of adjustments               | (XX)              | +/-XX                | (XX)                 |
| **IFRS Adjusted**                       | **X,XXX**         | **XX,XXX**           | **X,XXX**            |
| **Net Difference**                      | **$XXX (X.X%)**   | **$X,XXX (X.X%)**   | **$XXX (X.X%)**      |

━━━ METRIC IMPACT ━━━
| Metric            | GAAP      | IFRS     | Change    | Direction |
|-------------------|-----------|----------|-----------|-----------|
| EBITDA ($M)       | X,XXX     | X,XXX    | +XXX      | ↑ Better  |
| Net Income ($M)   | X,XXX     | X,XXX    | +/-XX     | ↑/↓       |
| Total Assets ($M) | XX,XXX    | XX,XXX   | +X,XXX    | ↑ Larger  |
| Net Debt/EBITDA   | X.Xx      | X.Xx     | +/-X.Xx   | ↑/↓       |
| EV/EBITDA         | XX.Xx     | XX.Xx    | −X.Xx     | ↓ Cheaper |
| ROE               | XX.X%     | XX.X%    | +/-X.Xpp  | ↑/↓       |

━━━ TRIPLE-THREAT LENS ━━━
🏦 **Banker:** IFRS 16 adds $[X]M lease liabilities to the balance sheet, increasing total debt from $[X]M to $[X]M. However, EBITDA also rises by $[X]M (operating lease expense removed). Net effect on leverage: Net Debt/EBITDA moves from [X.Xx] to [X.Xx] — [tighter/looser] covenant headroom. For cross-border M&A, [Target]'s IFRS-adjusted EBITDA of $[X]M is the correct comparable figure against European peers.
📊 **Accountant:** Largest reconciling item is [IFRS 16/IAS 38/LIFO] at $[X]M impact. R&D capitalization under IAS 38 would add $[X]M to intangible assets — subject to annual impairment testing and amortization over [X] years. Key judgment: [X]% of R&D qualifying as "development" is [conservative/aggressive] based on [industry benchmark]. The LIFO reserve of $[X]M accumulated over [X] years represents $[X]M of embedded tax liability upon conversion.
💰 **Wealth Manager:** Under IFRS, [Company] trades at [X.Xx] EV/EBITDA vs [X.Xx] GAAP — [X]% [cheaper/more expensive] optically. For portfolio comparison with European peers (which report IFRS), use the IFRS-adjusted multiple. The headline difference is [EBITDA/NI/Assets] — which [does/doesn't] change the investment thesis. R&D capitalization would make reported earnings [X]% higher but doesn't change cash flows — earnings quality assessment should focus on GAAP (more conservative).

Quality Gates

• All material GAAP/IFRS differences identified for the specific company (not generic list)
• Each difference quantified with dollar impact on NI, assets, and equity
• Bridge reconciliation balances (GAAP + adjustments = IFRS)
• Lease impact calculated using disclosed operating lease commitments from 10-K
• R&D capitalization estimated with reasonable development-phase percentage
• LIFO reserve pulled from 10-K footnotes (exact figure, not estimated)
• Tax impact of each adjustment calculated
• Key metrics recalculated under both frameworks
• Source: EDGAR XBRL for GAAP baseline

Professional Standards

What separates A from B work:

• A-grade: Company-specific analysis using actual footnote disclosures (operating lease schedule, LIFO reserve, R&D spending breakdown). Each adjustment has a clear quantification methodology. Bridge fully reconciles. Metric impacts shown for valuation-relevant ratios. Cross-border peer comparison adjusted to common framework.
• B-grade: Generic list of GAAP vs IFRS differences without company-specific quantification. "Leases would be different" without calculating the actual ROU asset and liability. No bridge reconciliation. No metric impact analysis.

Common pitfalls:

• Overstating IFRS 16 impact by including short-term (<12 month) and low-value leases (exemptions exist)
• Assuming all R&D qualifies for IAS 38 capitalization (only development phase, and only if 6 criteria met)
• Forgetting the tax impact of GAAP→IFRS adjustments (deferred tax changes)
• Not adjusting for IFRS revaluation option (most companies elect cost model anyway)
• Treating ASC 606/IFRS 15 as identical (mostly converged, but differences exist in licensing, variable consideration constraint)
• Ignoring the P&L presentation differences (IFRS requires function or nature classification; GAAP typically uses function)

See Also

• transaction-classifier — initial classification under chosen framework
• three-statement-prep — produces the financial statements being bridged
• comps-builder — uses bridged metrics for cross-border peer comparison