FAR - Framework, Overview & Statements - Notes to Financial Statements - Notes to Financial Statements

Question 1

What disclosure is required by firms in hyperinflationary economies under IFRS?

Answer 1

Disclosure of the impact of inflation on the financial statements is required.

Question 2

Under IFRS what should the summary of Significant Accounting Policies include?

Answer 2

Judgments and key assumptions made in applying those policies; measurement bases used for recognition (e.g.: historical cost, fair value); information enabling an assessment of the estimation uncertainty that could result in a material adjustment to the balances of assets and liabilities, which are point estimates in many cases.

Question 3

Define “purchasing power loss”.

Answer 3

Losses that result from holding monetary assets during inflationary times or having monetary liabilities during deflationary times.

Question 4

Define “purchasing power gain”.

Answer 4

Gains that result from holding monetary assets during deflationary times or having monetary liabilities during inflationary times.

Question 5

Define “nonmonetary items”.

Answer 5

The specific price of nonmonetary items can change.

Question 6

Define “monetary items”.

Answer 6

The specific price of monetary items cannot change.

Question 7

Define “purchasing power”.

Answer 7

The purchasing power of an asset is the amount of goods and services that can be obtained by transferring the asset to another party.

Question 8

Define “specific price change”.

Answer 8

The change in the price of a specific good or service over a period of time.

Question 9

Define “constant dollars”.

Answer 9

Measurements in the general price level as of a specific date.

Question 10

Define “nominal dollars”.

Answer 10

Measurements in the price level in effect at a transaction date. These measurements are not adjusted for inflation.

Question 11

Define “general prices”.

Answer 11

The term general prices refers to a market basket of items that the typical consumer purchases.

Question 12

Define “inflation”.

Answer 12

It is the increase in general prices for a period of time; deflation is the decrease in general prices.

Question 13

What is the Management Discussion & Analysis (MD&A) section?

Answer 13

A narrative written by management that is an integral part of the disclosures of the financial statements.

Question 14

What is included in illegal acts for companies?

Answer 14

Illegal contributions and bribes.

Question 15

What is the difference between errors and irregularities?

Answer 15

Errors are unintentional, irregularities are intentional.

Question 16

What are the disclosure requirements for noncurrent liabilities?

Answer 16

Combined aggregate amount of maturities on borrowings 5+ years after balance sheet; sinking fund requirements; the aggregate amount of payments for unconditional obligations to purchase fixed or minimum amounts of goods or services; the fair value of each financial debt instrument in the FS or in the notes; the nature of the firm’s liabilities, interest rates and maturity dates, conversion options, assets pledged as collateral, and restrictions.

Question 17

What is a development stage enterprise?

Answer 17

An enterprise placing substantially all its efforts into the establishment of a new business.

Question 18

What is presented in the related party transaction disclosures?

Answer 18

Nature of relationship, description of all transactions for years presented, dollar amounts of transactions, and receivables to or from parties.

Question 19

What does the first footnote typically cover?

Answer 19

Summary of significant accounting principles.