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GAAP vs. IFRS > GAAP vs. IFRS > Flashcards

GAAP vs. IFRS Flashcards

1
Q

How are Purchased Intangibles Assets recorded?

A

Recorded at cost under both US GAAP and IFRS

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2
Q

How are R&D costs accounted for?

A

Under US GAAP, expensed except for equipment or facilities that are acquired and have future alternative uses.
Under IFRS, research costs expensed and developement costs capitalized

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3
Q

How is revenue recognized from performance of services?

A

GAAP: In period services have been rendered and are able to be billed.
IFRS: Use percentage of completetion method

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4
Q

How are fixed assets computed under GAAP and IFRS?

A

GAAP: Cost less accumulated depreciation and impairment.
IFRS: Cost model or revaluation model
Revaluation = FV on revaluation date less subsequent accumulated depreciation and subsequent impairment

Revaluation gains go to OCI
Revaluation losses go to Income Statement

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5
Q

How is the discount rate determined for Pensions?

A

GAAP: Uses settlement rate.
IFRS: Uses the market yields at the end of the reporting period for high-quality corporate bonds having a simillar term or maturity

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6
Q

Can Pension Assets and Liabilities be netted?

A

GAAP: No.
IFRS: Only when there is a legally enforceable right to use the assets of one plan to settle the obligations of another plan

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7
Q

How are investments classified?

A

GAAP: 1. HTM 2. AFS 3. Trading
IFRS: 1. HTM - debt measured at amortized cost 2. FV through profit or loss (if purpose is to make a quick buck)

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8
Q

Can impairments of investments be reversed?

A

GAAP: No
IFRS: Yes

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9
Q

What is the requirement to classiy an instrument as HTM?

A

GAAP: Positive ability and intent to hold
IFRS: Business model test - holding the instrument is to collect cash flows

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10
Q

Treatment of Investment Transfers

A

GAAP: Permits transfers into or out of trading classification
IFRS: 1. Does NOT permit trasnfers into/out of trading 2. Only debt instruments are allowed to be transferred between categories

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11
Q

Can the Fair Value Option be used to measure invesments?

A

GAAP: Yes
IFRS: Yes, but only certain investors (venture capitalists, mutual funds) can use option

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12
Q

How is impairment loss measured?

A

GAAP: Carrying value less fair value
IFRS: Carrying value less recoverable amount. Recoverable amount is greater of: (FMV - cost to sell) OR Value in use

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13
Q

What Level is Goodwill tested at?

A

GAAP: Reporting level
IFRS: Cash generating level

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14
Q

Principles vs. Policies

A

GAAP: Accounting Principles
IFRS: Accounting Policies

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15
Q

Goodwill impairement testing

A

GAAP: Has a qualitative ‘prestep’ and then, if needed, a 2 step approach
IFRS: One-step approach

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16
Q

Control is defined as?

A

GAAP: > 50% ownership
IFRS: can be obtained with > 50% ownership in certain circumstances i.e., potential rights, right to appoint key personnel

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17
Q

Defines VIEs?

A

GAAP: Yes
IFRS: No, but has similar concept with Special Purpose Entities

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18
Q

Accounting policies have to align?

A

GAAP: No
IFRS: Yes

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19
Q

How is NCI assigned?

A

GAAP: NCI is assigned their percentage of GW from the acquisition premium
IFRS: Parent has choice at acquisition whether to assign to GW or NCI

20
Q

Does it define financial assets and liabilities separately?

A

GAAP: No
IFRS: Yes; financial liability may likely classify certain preferred sahres as liabilities not equity

21
Q

Is there a specific category for “loans and receivables?”

A

GAAP: No
IFRS: Yes

22
Q

Impairment testing is completed relative to what?

A

GAAP: Fair Value
IFRS: Recoverable amount = greater of (FMV - cost to sell) OR value in use

23
Q

Does the definition of derivative include a notional amount?

A

GAAP: Yes
IFRS: No

24
Q

Does it permit hedging a forecasted business combination that is subject to foreign exchange risk?

A

GAAP: No
IFRS: Yes

25
Q

Does it permit hedging part of the life of a hedged item?

A

GAAP: No
IFRS: Yes

26
Q

Can risk associated with business combination be hedged?

A

GAAP: No
IFRS: Foreign exchange risk can be hedged

27
Q

Are part term hedges permitted?

A

GAAP: No
IFRS: Yes

28
Q

Can non-derivative items be used as hedging instruments?

A

GAAP: Very limited
IFRS: Yes

29
Q

Is the short-cut method permitted?

A

GAAP: Yes
IFRS: No

30
Q

If a range of equal likely amounts is possible for a contingent loss provision, how is it recognized?

A

GAAP: Use the lowest amount in the range
IFRS: Use the midpoint of the range

31
Q

Must they show EPS for extraordinary items?

A

GAAP: Yes
IFRS: No EPS for extraordinary items because there are no extraordinary items

32
Q

Who uses LCM vs LCNRV?

A

GAAP: LCM
IFRS: LCNRV

33
Q

Can it use the completed contract method?

A

GAAP: Yes
IFRS: No

34
Q

How are Bond Issue Costs treated under US GAAP?

A

Under GAAP, bond issue costs are booked as an asset.

Dr. Cash
Dr. Bond Issue Costs
Dr. Discount on B/P
Cr. Bond Payable

35
Q

For financial statement presentation, is specific comparative information for prior period required?

A

GAAP: No
IFRS: Yes

36
Q

How are accounting changes accounted for under GAAP and IFRS? (i.e. accounting change in principle, estimates, errors)

A

Same under both methods.
Accounting principle: Retroactively
Accounting estimate: Prospectively
Errors: Restatments

37
Q

Does IFRS permit the netting of deferred taxes?

A

IFRS permits netting of deferred taxes if they relate to the same taxing authority

38
Q

Does IFRS permit deferred taxes to be classified as current and/or noncurrent?

A

IFRS permits deferred taxes to be classified as noncurrent

39
Q

Under IFRS, interest and dividends received may be reported on the statement of cash flows as

A

Operating and/or Investing Activities

40
Q

Under IFRS, interest and dividends paid may be reported in the statement of cash flows as

A

Operating and/or Financing Activities

41
Q

Does GAAP and IFRS mandate interim reporting?

A

GAAP does. However, IFRS does not mandate interim reporting.

42
Q

For IFRS reporting purposes, currencies are defined as

A

Foreign, functional, and presentation

43
Q

What Goodwill methods are used under US GAAP and IFRS?

A

GAAP uses full goodwill method. IFRS uses partial goodwill method.

44
Q

How does US GAAP and IFRS recognize NCI in a business acquisition?

A

GAAP uses the “purchase price” of the NCI. IFRS uses the FV of Net Assets & Liabilities of the NCI.

45
Q

How are Bond Issue Costs treated under IFRS?

A

Under IFRS, bond issue costs are deducted from the carrying value of the liability and included in the debit entry to bond discount upon issuance.

Dr. Cash
Dr. Discount on B/P (bond issue costs included in here)
Cr. Bonds Payable

GAAP vs. IFRS (1 decks)

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