IFRS

Question 1

What are the 4 components of the IASB monitoring board? (1 on top, 3 on bottom)

Answer 1

The IFRS foundation is on top, and below it is the IFRS advisory council, the IASB, and the IFRS interpretation committee.

Question 2

What does the IFRS foundation do and how long is their term?

Answer 2

They appoint members of the IASB, the IFRS Advisory Council, and the IFRS interpretations committee. The trustees serve 3 year terms

Question 3

What are the objectives of the IFRS foundation? (4)

Answer 3

To develop a single set of high quality, understandable, enforceable and globally accepted financial reporting standards. To promote us and rigorous application of IFRS. To consider the needs of a range of size and type of entities. To promote and facilitate adoption of IFRS through convergence.

Question 4

What does the IASB do?

Answer 4

They establish IFRS reporting standards, but they do NOT have enforcement power. Enforcement is the responsibility of the securities regulators in the national jurisdictions.

Question 5

What is the IFRS advisory council and who appoints them?

Answer 5

They advise the IASB on priorities and the views of interested organizations. Members are appointed by the IFRS foundation

Question 6

What does the IFRS interpretations committee do and who appoints the members?

Answer 6

They are similar to the FASB’s emerging issues task force: they identify issues in the context of IFRS, their interpretations are reviewed by the IASB. The members are appointed by the IFRS foundation.

Question 7

What is an SME?

Answer 7

Small and medium-sized entities. IFRS has one single standard for companies that are not publicly traded. Revisions to SME standards only happen once every 3 years.

Question 8

What are the 2 assumptions in the IASB framework?

Answer 8

That the accrual method is used, and that the entity is a going concern

Question 9

What statements are required for a first-time adopter of IFRS?

Answer 9

Upon adoption, the first set of statements must have 3 statements of financial position, 2 statements of comprehensive income, two separate income statements, two statements of cash flows, and two statements of changes in equity. Basically they need 3 balance sheets and 2 of everything else.

Question 10

What is the TRANSITION date of a company to IFRS?

Answer 10

The opening date of the balance sheet for the earliest comparative financial statements. If the first IFRS reporting date is as of Dec 31 Year 2, then the transition date will be Jan 1 year 1.

Question 11

Upon first time adoption of IFRS, an entity can elect to use fair value as deemed cost for:

Answer 11

Any individual item of property, plant, and equipment.

Question 12

What is the first reporting date when switching to IFRS?

Answer 12

The year end date for the period which IFRS is first applied.

Question 13

What are the major characteristics of IFRS for SMEs?

Answer 13

Disclosures are simplified. LIFO is prohibited. Goodwill and indefinite life intangible assets are amortized over a period NOT exceeding 10 years. Depreciation is based on a component approach. Simplified temporary difference approach to income tax accounting. Reversal of impairment charges is allowed in some circumstances. No disclosures for earnings per share and segment disclosures.

Question 14

Can revenue and AR from a sales commitment be recognized?

Answer 14

Yes. IFRS defines revenue from a balance sheet point of view and is based on the inflow of economic resources.

Question 15

What is the difference in transfer of receivables under GAAP and IFRS?

Answer 15

GAAP focuses on whether control has shifted from the transferor to the transferee. IFRS focuses on whether the transferor has transferred the rights to receive cash flows from the receivable and whether or not substantially all the risk and rewards of ownership were transferred.

Question 16

What is the general rule of IFRS when it comes to the value of assets?

Answer 16

That assets aren’t carried at more than their recoverable amount. If the asset’s carrying value is greater than the amount that could have been recovered through the asset’s use or by selling the asset, then it is impaired.

Question 17

What is the definition of RECOVERABLE AMOUNT under IFRS?

Answer 17

The higher of the fair value less cost to sell or the value in use. Fair value less cost to sell is the amount obtainable from the sale in an arms-length transaction. The value in use is the discounted present value of the future cash flows expected from the asset.

Question 18

What is a CGU under IFRS?

Answer 18

A cash generating unit is the smallest group of assets that can be identified that generates cash flows independently of the cash flows from other assets.

Question 19

Does IFRS permit recovery of an impairment loss?

Answer 19

Yes.

Question 20

Whats the difference in GAAP and IFRS of the reversal of an inventory write-down?

Answer 20

Under IFRS a reversal is allowed. Under GAAP it is NOT allowed.

Question 21

How often is useful life and depreciation method reviewed under IFRS?

Answer 21

Annually. Under GAAP it’s only when events or circumstances change.

Question 22

Component depreciation GAAP vs. IFRS

Answer 22

Under IFRS, when an item of PPE comprises of individual components for which different depreciation methods or rates are appropriate, each component is depreciated separately.

Question 23

PPE revaluation GAAP vs IFRS

Answer 23

PPE can be remeasured to fair value if fair value can be reliably measured.

Question 24

Where does an increase in PPE’s fair value ABOVE its original cost go under IFRS?

Answer 24

It goes into a revaluation surplus account which is in OCI. If a truck had gone down in value 10k then back up 15k in the next year, the first 10k would be in the profit and loss statements. The extra 5k would go into the revaluation surplus account in OCI.

Question 25

What investment classifications exist under IFRS?

Answer 25

Held to maturity which is debt measured at amortized cost, and Fair value, all equity is at fair value.

Question 26

Difference of HTM classification in GAAP vs IFRS:

Answer 26

Under GAAP the test is whether the firm has the positive ability and intent to hold to maturity. Under IFRS it’s the business model test, which evaluates if holding the debt for the cash flow is part of the business model.

Question 27

Transfer from HTM differences GAAP vs IFRS

Answer 27

In GAAP you transfer from HTM when you no longer have the positive ability and intent to hold to maturity. Under IFRS you transfer from HTM only when the business model objective changes

Question 28

OCI for investments differences in GAAP vs IFRS:

Answer 28

In GAAP gains/losses are recorded in OCI ONLY for AFS securities. In IFRS the entity may ELECT to records gains/losses to OCI at the initial measurement, but the election cannot be undone.

Question 29

IFRS investment property

Answer 29

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