Module II· Trading ComparablesAdvanced

Question

How do you adjust comps between IFRS and US GAAP reporters?

Answer

Main differences that move multiples:

Goodwill: IFRS = impairment test, US GAAP = similar but with different mechanics; usually neutralized in EBITDA anyway.
R&D: IFRS allows capitalization (capitalized R&D), US GAAP almost always expenses it. − IFRS reporters have higher EBITDA but higher capex.
Operating leases: IFRS 16 (capitalized since 2019), US GAAP ASC 842 (similar since 2019, but different P&L geography).
Pension: service-cost treatment differs slightly.
Stock options: valuation methodology varies. In practice: for cross-region comps (a European target with US comps), attempt IFRS adjustments, otherwise add a caveat in the pitch.

Deep diveShow more details

Pitch tip

For a large-cap target with S&P 500 comps, footnote: 'GAAP differences may impact comparability — primary adjustments: capitalized R&D normalized, lease treatment harmonized.'

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