Final answer:
The difference between U.S. GAAP and IFRS regarding a change in accounting entity centers on the retrospective adjustments and disclosure requirements. U.S. GAAP involves specific disclosures under ASC Topic 250, whereas IFRS under IAS 8 mandates retrospective application of new policies when practical.
Step-by-step explanation:
The difference between U.S. GAAP and IFRS in the way a change in accounting entity is accounted for lies in the retrospective adjustments. Both U.S. GAAP and IFRS require that when there's a change in the reporting entity, such as a merger or a change in the composition of the group of companies, financial statements must be retrospectively adjusted to appear as if the new reporting entity had existed in all periods presented. However, there are subtle differences in how these adjustments are made and in the disclosure requirements.
Under U.S. GAAP, ASC Topic 250 outlines the requirements for dealing with changes in accounting principle, changes in accounting estimate, and changes in the reporting entity. When there is a change in reporting entity, U.S. GAAP requires disclosure of the nature of the change and its effect on the financial statements.
In contrast, IFRS, as outlined in IAS 8, requires that when there is a change in accounting policies resulting from a change in the reporting entity, the entity must apply the new policies retrospectively unless it is impracticable to determine the period-specific effects or the cumulative effect of the change.