Conceptual Framework (Part II)

Question 1

Under IFRS, revenue is recognized when what five criteria are met?

Answer 1

1. Risks and rewards are transferred to buyer.
2. Selling entity doesn’t retain managerial involvement
3. The amount can be reliably measured
4. Economic benefits are likely to flow to the entity
5. Costs incurred can be reliably measured.

Question 2

What two methods of revenue recognition apply to service based contracts?

Answer 2

Percentage of completion and cost recovery.

Question 3

What disclosures are necessary pertaining to revenue recognition?

Answer 3

1. The amount of revenue in each significant category and the amount of revenue from exchange of goods and services.

Question 4

What are the primary IFRS/GAAP differences?

Answer 4

1. IFRS requires comparative financial statements.
2. IFRS requires separate statement of changes in equity.
3. IFRS does not allow extraordinary items
4. IFRS reports inventory at lower of cost or NRV
5. IFRS does not allow LIFO
6. IFRS impairment losses can be reversed.
7. IFRS doesn’t allow the completed contract method.
8. IFRS measures taxes at future enacted tax rate.
9. IFRS requires component depreciation (separate)