IFRS

Question 1

How does the IFRS structure differ from GAAP?

Answer 1

Principal/Judgment based vs Rules Based

Question 2

Which organization’s standards are the most authoritative in the hierarchy of international accounting?

Answer 2

The International Accounting Standards Board (IASB)

Question 3

Where is the first place management should look for guidance on international recognition and accounting policies? The

Answer 3

The International Financial Reporting Standards (IFRS) issued by the IASB

Question 4

Which assumptions are followed within the IRFS framework?

Answer 4

Entity is a Going Concern and uses the accrual basis of accounting.

Question 5

How is going concern different under IFRS than from GAAP?

Answer 5

Going Concern is an assumption under IFRS

Question 6

What are the Qualitative Characteristics of accounting information within IFRS?

Answer 6

Relevance & Faithful Representation

Same as GAAP

Question 7

What are the Enhancing Characteristics of IFRS?

Answer 7

CUT-V

Same as GAAP

Question 8

How does comparability differ under GAAP versus IFRS?

Answer 8

Comparative information from prior year is required under IFRS.

GAAP requires that if multiple years are presented they are consistently prepared however it doesn’t require prior year comparative statements.

Question 9

How is the term income used in IFRS?

Answer 9

Income - used instead of revenue and encompasses BOTH revenue and gains.

(Not an element under GAAP; used to describe calculation e.g. Net Income)

Question 10

How is the term profit used in IFRS?

Answer 10

Profit is used instead of Net Income.

Question 11

How does IFRS treat gains?

Answer 11

They are treated the same as revenue and are not separated on the financial statements.

Question 12

How does IFRS treat losses?

Answer 12

In IFRS losses are treated the same as expenses but they ARE separated on the financial statements.

Question 13

What is the Pervasive Constraint within IFRS?

Answer 13

Cost vs. Benefit

Question 14

What are the elements of financial position under IFRS?

Answer 14

Asset-RESOURCE controlled by entity as a result of past events and from which future economic benefits are expected to flow from entity.

Liability-present OBLIGATION entity arising from past events, settlement of which is expected to result in outflow from entity of resources embodying economic benefits

Equity-RESIDUAL INTEREST in the assets of entity after deducting all its liabilities

Question 16

What are the criteria for recognition on IFRS financial statements?

Answer 16

Probability of occurrence

Reliable Measurement

If the value or outcome cannot be measured reliably IFRS requires the use of the Cost Recovery Method.

Question 17

When transitioning to IFRS what type of financial statement must be produced for the first reporting period?

Answer 17

A full comparative statement using IFRS.

Question 18

If IFRS was implemented in June 2012 for use in the December 31 2012 financial statements what is the Date of Transition?

Answer 18

January 1 2011 because a full year of comparative statements is required from the previous year

Question 18

For Property Plant and Equipment which election is the most efficient method for converting assets to IFRS?

Answer 18

The Fair Value election

Question 19

Where on the financial statements are adjustments for adopting to IFRS made?

Answer 19

In the entity’s retained earnings or equity

Question 20

How does refinancing of current liabilities to long-term liabilities under IFRS differ from GAAP?

Answer 20

Under IFRS current liabilities can only be refinanced into a non-current liability if the refinance agreement is EXECUTED prior to the balance sheet date.

GAAP requires only intent to refinance not actual execution.

Question 21

How do contingent liabilities differ between GAAP and IFRS?

Answer 21

Under GAAP there are three classifications of contingent liabilities - Probable Reasonably Possible and Remote.

Under IFRS contingencies are uncertain future events and are classified as a provision if probable and measurable even if uncertain in timing or amount.

Question 22

How are bonds recorded under IFRS?

Answer 22

Bonds may be recorded on the Statement of Financial Position using one of two methods

Fair Value through profit or loss

• Liability revalued at the end of each period
• Gain or Loss recognized in period

Amortized Cost
*Using Effective Interest Method

Question 23

How are deferred taxes treated under IFRS?

Answer 23

They use the liability method - all deferred tax liabilities must be reported but only probable deferred tax assets can be reported.

They are non-current on the statement of financial position.

Question 24

When can deferred tax assets and liabilities be netted under IFRS?

Answer 24

ONLY if they are related to the same country/taxing authority

For example China Deferred Tax Assets can’t offset Japan Deferred Tax Liabilities

Question 25

Which tax rates are used for calculating deferred tax assets/liabilities under IFRS?

Answer 25

The enacted rate or substantially enacted tax rate. | GAAP is the enacted tax rate only

Question 26

Which items are recorded on the Income Statement in IFRS?

Answer 26

``` Income Finance Costs Tax Expense Discontinued Ops Profit/Loss Non-controlling interest in Profit/Loss Net profit/loss attributable from equity ```

Question 27

How are property plant and equipment (PP&E) recorded and valued under IFRS?

Answer 27

Recorded at cost Valued using either: Cost model - asset carried at cost less accumulated depreciation and impairment loss Revaluation model - asset adjusted to fair value less accumulated depreciation

Question 28

What are the requirements for using the revaluation model for PP&E under IFRS?

Answer 28

Asset must be able to be reliably measured Must be applied to whole class of assets not just one asset No guidance on how often assets should be revalued under IFRS

Question 29

How is investment property reported under IFRS?

Answer 29

Initially recorded at cost Revalued using either Fair Value model or Cost model

Question 30

How is profit or loss recorded in the current period for investment property under the Fair Value model of IFRS?

Answer 30

Recorded on the Income Statement Investment P/L : IS PP&E P/L : OCI

Question 31

Under IFRS how is investment property reported under the Cost Model?

Answer 31

Carried at Cost minus Accumulated Depreciation Fair Value must still be disclosed in the notes to the financial statements

Question 32

How are leases reported under IFRS?

Answer 32

Operating Leases can be recorded as Investment Property if measured at Fair Value All other investment property must use Fair Value Model if one asset uses it

Question 33

How are intangible assets valued under IFRS?

Answer 33

Using either the Cost Model (cost less Accumulated Depreciation and Impairment Loss) or the Revaluation Model (Fair Value less Accumulated Depreciation)

Question 34

How is internally generated goodwill reported under IFRS?

Answer 34

It is not recognized.

Question 35

How is amortization of intangibles handled under IFRS?

Answer 35

If asset has a finite life it is amortized over useful life. If asset has indefinite life it is not amortized but is tested for impairment at the reporting date.

Question 36

When must a lease be recorded as a Finance Lease under IFRS?

Answer 36

If the substantial risks of ownership have passed to the Lessee then the Lease must be accounted for as a Finance Lease

Question 37

How are defined benefit plans recorded under IFRS?

Answer 37

Project-unit-credit method calculates the PV of the defined benefit obligation

Question 38

How are interest expense and/or finance costs classified on an IFRS statement of cash flows?

Answer 38

They can be classified as either Operating or Financing Once a classification is chosen all future costs must be classified there

Question 39

How are significant non-cash transactions recorded on an IFRS statement of cash flows?

Answer 39

They must be included in the notes to the financial statements.

Question 40

How is the completed contract method used under IFRS?

Answer 40

Completed contract method is not allowed under IFRS.

Question 41

How is LIFO treated under IFRS?

Answer 41

IFRS does not allow LIFO.

Question 41

Which financial statements are required under IFRS?

Answer 41

Statement of Comprehensive Income Statement of Changes in Equity

Question 41

How is the term Expense used under IFRS?

Answer 41

Encompasses losses as well