10-10-16 IFRS Flashcards
The IFRS Foundation serves as the administrative umbrella for a group of bodies. Which of the following bodies are NOT included under the IFRS Foundation umbrella?
A. International Federation of Accountants (IFAC).
B. International Accounting Standards Board.
C. IFRS Interpretations Committee.
D. IFRS Advisory Council.
A. International Federation of Accountants (IFAC).
The International Federation of Accountants (IFAC) is a global organization for the accounting profession. Its members are accounting and auditing organizations throughout the world. It is an independent organization not under the IFRS Foundation umbrella, but it does support the activities of the IFRS Foundation by encouraging high-quality practices by the world’s accountants and auditors.
Which of the following is an objective of the IFRS Foundation?
A. To enforce the use and rigorous application of those standards.
B. To take account of, as appropriate, the needs of a range of sizes and types of entities in diverse economic settings.
C. To develop, in the public interest, a single set of high-quality, understandable, enforceable, and globally accepted financial-reporting standards (IFRSs) through its member associations.
D. To require adoption of international financial reporting standards (IFRSs) globally.
B. To take account of, as appropriate, the needs of a range of sizes and types of entities in diverse economic settings.
The objective of the IFRS Foundation is to take account of, as appropriate, the needs of a range of sizes and types of entities in diverse economic settings.
Which of the following is not a role of the trustees of the IFRS Foundation?
A. Appoint the members of the IASB and establish their contracts of service and performance criteria.
B. Appoint the members of the IFRS Interpretations Committee and the IFRS Advisory Council.
C. Approve the annual budget of the IFRS Foundation and determine the basis for funding.
D. Annually review the strategy of the IFRS Foundation and the IASB and its effectiveness, including the determination of the IASB’s agenda.
The Trustees do NOT determine the agenda of the IASB. Rather, the Trustees annually review the strategy of the IFRS Foundation and the IASB and its effectiveness, including the consideration, but not the determination, of the IASB’s agenda.
IASB’s due process procedures includes the following steps.
I. Analyze comments to the Exposure Draft;
II. Issue the Exposure Draft;
III. Prepare the Discussion Paper;
IV. Add the item to the Working Agenda;
V. Discuss the issue;
VI. Issue the IFRS;
and VII. Publish the Discussion Paper.
What is the correct ordering of the steps?
A. IV, II, III, V, VII, I, VI
B. IV, V, II, III, VII, I, VI.
C. IV, III, VII, V, II, I, VI.
D. IV, V, III, VII, II, I, VI.
D. IV, V, III, VII, II, I, VI.
The correct ordering is: 1) Add the item to the Working Agenda (IV), 2) Discuss the issue (V), 3) Prepare the Discussion Paper (III), 4) Publish the discussion paper (VII) 5) Issue the Exposure Draft (II) 6) Analyze comments to the Exposure Draft and (I) 7) Issue the IFRS (VI) Per the IASB Due Process Handbook
According to the IFRS for Small and Medium-sized Entities (IFRS for SMEs), the intended user is an SME. Which of the following, if any, is (are) included in the definition of that user?
YES-An entity that does not have public accountability.
YES-An entity that publishes general purpose financial statements for external users.
The IASB uses a broad definition of an SME. Rather than restrict it by revenue or number of employees, as other organizations, such as the World Bank and U.S. government, have done; the Board simply states that the entity does not have public accountability and that the entity publishes general purpose financial statements for external users, such as owners who are not involved in managing the business, existing and potential creditors, and credit rating agencies. IFRS for SME, para. 1.2.
IAS 8, Accounting Policies, Changes in Accounting Estimates, and Errors includes the IFRS hierarchy. What is the second-level, or the level after the initial level, addressing the requirements and guidance in IFRS?
A. The definitions, recognition criteria, and measurement concepts for assets, liabilities, comprehensive income, revenue, expenses, and gains and losses in the Framework.
B. The definitions, recognition criteria, and measurement concepts for assets, liabilities, revenue, and expenses in the Framework.
C. Pronouncements of other standard-setting bodies, other accounting literature, and accepted industry practices.
D. Pronouncements of other standard setting bodies using a similar conceptual framework, other accounting literature, and accepted industry practices.
B. The definitions, recognition criteria, and measurement concepts for assets, liabilities, revenue, and expenses in the Framework
The IFRS hierarchy, as presented in IAS 8, includes first, the requirements in IFRS dealings with similar or related issues; second, the definitions, recognition criteria, and measurement concepts for assets, liabilities, income, and expenses in the Framework; and lastly, the most recent pronouncements of other standard-setting bodies that use a similar conceptual framework to develop accounting standards, other accounting literature, and accepted industry practices, to the extent that these do not conflict with IFRS or the Framework. IAS 8, para. 12.
The purpose of IASB’s Framework for the preparation and presentation of financial statements includes all of the following except:
A. Assist users of financial statements in interpreting the information contained in financial statements that are prepared in conformity with IFRSs.
B. Assist national standard-setting bodies in developing national standards.
C. Assist the IASB in the development of future IFRSs and in its review of existing IFRSs.
D. Assist the IASB in enforcing regulations, accounting standards and procedures relating to the presentation of financial statements by providing a basis for reducing the number of alternative treatments permitted by IFRSs.
IASB has NO enforcement authority. The enforcement is carried out by regulators, such as the SEC in the U.S., Central Banks, and governmental authorities.
The purpose of the IASB’s Framework is not to assist in enforcing regulations, accounting standards, and procedures but, rather, to assist in promoting the harmonization of regulations, accounting standards, and procedures relating to the presentation of financial statements by providing a basis for reducing the number of alternative treatments permitted by IFRSs. IASB Framework, para. 1.
Does the IASB have enforcement authority?
Yes/ No
NO
Remember that the IASB has no enforcement authority. The enforcement is carried out by regulators, such as the SEC in the U.S., Central Banks, and governmental authorities. .
Which of the following is a fundamental (primary) qualitative characteristic of useful financial information included in IASB’s Framework?
A. Comparability.
B. Timeliness.
C. Relevance.
D. Understandability.
C. Relevance
Relevance and faithful representation are the two fundamental qualitative characteristics of financial information (IASB Framework 5-18).
Comparability,
Verifiability,
Understandability,
Timeliness, are the enhancing qualitative
True /False
Disclosure in the financial statements & Presentation are addressed in individual IFRSs, not in the IASB’s Framework.
True
Which one of the following is a characteristic of accounting under IFRS for SMEs?
A. Interest incurred during construction must be capitalized.
B. Earnings per share must be provided in the financial statements.
C. Goodwill must be amortized.
D. The LIFO cost flow assumption can be used in valuing inventories.
C. Goodwill must be amortized.
Under IFRS for SMEs, goodwill is assumed to have a limited life and is amortized over that life, or a period not to exceed 10 years if the life cannot be reasonably estimated.
Under U.S. GAAP, goodwill is assumed to have an UNLIMITED life and is not amortized.
Which ones are NOT permissible in IFRS but allowed in GAAP -maybe more than 1 choice
A. Interest incurred during construction must be capitalized.
B. Earnings per share must be provided in the financial statements.
C. Goodwill must be amortized.
D. The LIFO cost flow assumption can be used in valuing inventories.
A, B, & D
A-Under IFRS for SMEs, interest during construction is not capitalized, but rather is expenses. Under U.S. GAAP, interest during construction is capitalized as part of the cost of the constructed item.
B-Under IFRS for SMEs, earnings per share (EPS) does NOT have to be provided. Under U.S. GAAP, earnings per share must be provided on the income statement.
LIFO cost flow assumption MAY NOT be used under IFRS for SMEs. However, either the FIFO or the weighted average cost assumptions of inventory flow can be used. Under U.S. GAAP, either the FIFO, LIFO, or the weighted average cost assumption of inventory flow may be used.
Under IFRS for SMEs, which of the following, if any, must be disclosed in financial statements?
Earnings per Share (EPS) Information by Segment
Yes Yes
Yes No
No Yes
No No
Earnings per Share (EPS) Information by Segment
No No
KEY WORD IS FOR “SME”
Under IFRS for SMEs, neither earnings per share (EPS), nor information by segment is required in financial statements. Since financial statements prepared under IFRS for SMEs are those of entities not traded on exchanges or otherwise required to file with regulatory agencies, earnings per share and segment reporting are not considered important information for users. These are two of the simplifications in IFRS for SMEs that make the standards less burdensome than either U.S. GAAP or full IFRS.
Under IFRS for SMEs, which of the following methods, if any, can be used by an investor to account for an investment in another entity (an associate) over which the investor has significant influence?
Cost Method Equity Method
Yes Yes
Yes No
No Yes
No No
Cost Method Equity Method
Yes Yes
Under IFRS for SMEs, either the cost method or equity method may be used by an investor to account for an investment in another entity (called an “associate” in IFRS for SMEs) over which the investor has significant influence. Under U.S. GAAP, only the equity method may be used.
Which of the following statements, if any, concerning IFRS for SMEs is/are correct?
I. IFRS for SMEs is based on accrual basis accounting.
II. Generally, IFRS for SMEs may be used as an alternative to using OCBOA.
A. I only.
B. II only.
C. Both I and II.
D. Neither I nor II.
C. Both I and II.
Both statements are correct. IFRS for SMEs is based on accrual basis accounting (Statement I) and, generally, IFRS for SMEs may be used as an alternative to using OCBOA (Statement II).
