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accounting > IFRS - 2 > Flashcards

IFRS - 2 Flashcards

1
Q

IFRS and GAAP are very similar in _________________

A

accounting for cash

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2
Q

_________________ is the only standard that discusses issues specifically related to cash

A

IAS No. 1 (revised), “Presentation of Financial Statements,”

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3
Q

Fraud triangle internationally

A

Applicable to all international countries

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4
Q

Fraud worldwide

A

Nearly have of companies have been victims to fraud in the two-year period

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5
Q

FASB announced that it intends to _______________

A

introduce more principles-based standards

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6
Q

Definition for cash equivalents

A

is the same under IFRS

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7
Q

Internal control procedures related to cash_______

A

are the same under IFRS

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8
Q

Cash and Cash equivalents under IFRS

A

are listed together

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9
Q

Cash (IFRS)

A

Comprised of cash on hand and demand deposits

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10
Q

Cash equivalents

A

Short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value

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11
Q

Under proposed new standards for financial statements

A

Companies would not be allowed to combine cash equivalents with cash

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12
Q

IFRS: Restricted Cash

A

Restricted cash funds may be reported as a current or non-current asset depending on the circumstances.

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13
Q

Cash Equivalents under IFRS

A

May be required to be reported seperately from cash in the future

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14
Q

IFRS requires that loans and receivables be accounted for at________________

A

amortized cost, adjusted for allowances for doubtful accounts

adjusted for estimated loss provisions

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15
Q

Allowances sometimes known as _________ under IFRS

A

provisions

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16
Q

Entry to record Allowance under IFRS:

A

Bad Debt Expense XXX

                      Allowance for Doubtful Accounts XXXX
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17
Q

Picemeal approach to fair value

A
  1. disclosure of fair value information in the notes.
  2. the fair value option, which permits, but does not require, companies to record some types of financial instruments at fair values in the financial statements.
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18
Q

Factoring transaction: IFRS

A

Combination of focus on risks and rewards & loss of control

Permits partial derecognition

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19
Q

Factoring transaction: GAAP

A

Loss of control: primary criterion

does not permit partial derecognition

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20
Q

Estimated uncollectible accounts: IFRS

A

the entry to record estimated uncollected accounts is the same as GAAP.

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21
Q

Fair value option

A

The fair value option requires that all types of financial instruments be recorded at fair value.

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22
Q

Defintion for plant assets under both IFRS and GAAP

A

the same

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23
Q

Interest costs under IFRS and GAAP

A

interest costs during construction are capitalized

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24
Q

IFRS requires ___________

A

Component depreciation - specifies that any significant parts of a depreciable asset that have different estimated useful lives should be separately depreciated

*Allowed under GAAP but seldom used

25
Q

IFRS uses the term ______________, rather than salvage value, to refer to an owner’s estimate of an asset’s value at the end of its useful life for that owner

A

residual value

26
Q

Revaluation of plant assets - IFRS

A

allows companies to revalue plant assets to fair value at the reporting date

If used, must be applied to all assets in a class of assets

Assets experiecing rapid price changes must be revalued on an annual basis

27
Q

GAAP and IFRS - development expense and cost

A

development expense - costs in the research phase (both IFRS and GAAP)

development cost - cost in the development phase are capitalized as development cost once technolgical feasibility is achieved (IFRS ONLY)

28
Q

Who permits revaluation of property, plant, and equipment and intangible assets (except for goodwill)

A

IFRS

29
Q

When increasing a revaluation

A

credit revaluation surplus

30
Q

Research and development costs under GAAP

A

are expensed

31
Q

Under IFRS, value-in-use is defined as:

A

Future cash flows discounted to present value

32
Q

Although IFRS implies that receivables with different characteristics should be reported separately, _____________________________

A

there is no standard that mandates this segregation

33
Q

IFRS requires a _______________ to test whether the value of loans and receivables are impaired.

A

Two-tiered approach

First, a company should look at specific loans and receivables to determine whether they are impaired.

Then, the loans and receivables as a group should be evaluated for impairment. GAAP does not prescribe a similar two-tiered approach.

34
Q

Interest costs under IFRS and GAAP

A

are capitalized

35
Q

Component depreciation under GAAP

A

allowed but seldom used

36
Q

How is revaluation surplus listed?

A

as other comprehensive income

37
Q

Journal entry revaluing under IFRS

A

Accmulated depreciation 200,000

                               Plant assets 150,000

                        revaluation surplus 50,000
38
Q

R&D Journal Entry IFRS

A

Research expense XXX

Development expense XXX

Development cost XXX

                                           Cash XXX
39
Q

IFRS permits revaluation of ____________

A

intangible assets

(except for good will)

GAAP does not revalue intangible assets

40
Q

IFRS permits revaluation of _________________________

A

property, plant, and equipment and intangible assets (except for goodwill).

41
Q

International Company has land that cost $450,000 but now has a fair value of $600,000. International Company decides to use the revaluation method specified in IFRS to account for the land. Which of the following statements is correct?

A

International Company would credit Revaluation Surplus by $150,000.

42
Q

Liability definition: IFRS

A

present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits. Liabilities may be legally enforceable via a contract or law but need not be; that is, they can arise due to normal business practices or customs.

43
Q

Current liabilities are presented in _________________

A

order of liquidity

44
Q

Under IFRS, liabilities are classified as current if

A

they are expected to be paid within 12 months

45
Q

Under both GAAP and IFRS, preferred stock that is required to be redeemed at a specific point in time in the future must be reported as ______________________

A

debt, rather than being presented as either equity or in a “mezzanine” area between debt and equity.

46
Q

IFRS uses the term contingent liability

A

to refer only to possible obligations that are not recognized in the financial statements but may be disclosed if certain criteria are met

47
Q

IFRS - provisions

A

Provisions = liabilities of uncertain timing or amount

48
Q

Where is a contingent liability disclosed?

A

in the notes if criteria are met

49
Q

Under IFRS, if preference shares (preferred stock) have a requirement to be redeemed at a specific point in time in the future, they are treated:

A

as a liability

50
Q

The joint projects of the FASB and IASB could potentially:

A

change the definition of liabilities.
change the definition of equity.
change the definition of assets.
All of the above.

51
Q

Astoria Financial:

A

extended number of days before considering loans to be nonperforming

52
Q

Wells Fargo

A

Extended number of days before writing off loans as uncollectible

53
Q

BankAtlantic:

A

transferred loans to a subsidiary who doesn’t face the same capital requirements as the parent; less regulated

54
Q

Coniial BancGroup:

A

Switched from a national to a less rigoroulsy regulated state bank charter

55
Q

When a company establishes a “reserve” on its finacial statements against loans, do conumers still have an obligation to pay the loan off? Have the terms of agreement changed?

A

The consumers still have a legal obligation to pay the loan off

Nothing has changed regarding the terms of the agreement between the consumers and the bank

56
Q

How does decreasing amount of uncollectible receivables impact both the balance sheet and the income statement?

A

A decrease in uncollectible receivables will decrease the amount of allowance for doubtful accounts needed which will decrease bad debt expense.

Less expense results in a higher net income for the subsequent period => income statement

Lower allowance for doubtful accounts => balance sheet

57
Q

Management’s incentive to reduce number of loans as uncollectible?

A

Lesser write offs drives more desirable bottom lines

Management is often under pressure to hit earnings targets and executive compensation often is tied directly to earnings of financial peroformance goals

58
Q

Transparency - Current Event

A

Recording a transaction in a way that most clearly reports its underlying economics to financial statement users

Transparency does not hide or obscure any aspect of the underlying economic events it’s reporting

Wells fargo and Astoria were not promoting transparency because these changes decrease the allowance for doubtful accounts in financial times where they should be increasing with net receivables decreasing

*They are allowable under GAAP

accounting (31 decks)

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