IFRS

Question 1

How does IFRS view Interim Financial Reporting?

Answer 1

IFRS does NOT mandate Interim Reporting. GAAP does.

IFRS views each interim periods as a discrete reporting period.

GAAP views Interim Periods as an Integral part of an Annual period

Question 2

IFRS definition of Value in Use

Answer 2

The present value of the asset’s expected Cash Flows.

The recoverable amount of an asset is the gerater of it

Fair Value MINUS Cost to Sell

or

Value In Use

Question 3

How does IFRS report the stmt of Comprehensive Income?

Answer 3

1. Revenue
2. Finance Costs
3. Share of Profits and Losses of Equity Method
4. Tax Expense
5. After Tax Profit Loss on Disc. Ops.

and After Tax Gain on disposal

6. Profit or Loss (Not Net Income)
7. Each Component of OCI classified by nature
8. Share of the other OCI equity method
9. Total Comprehensive Income

Question 4

How does IFRS calculate the amount of provision for a Liability?

Answer 4

An entity is subject to warranty claims. A reliable estimate is that between $1 million and $3 million will probably be paid out. No estimate of loss within this range is more likely than any other.

IFRS takes the mid point, of $2million between 1 and 3 Mill….whereas GAAP takes the low point of $ 1 million or most likely estimate.

Question 5

Under IFRS, the impracticability exception applies to which of the following?

Answer 5

Retrospective Application of a New Accounting Policy

Retro. App. of a Prior Period Error

Retrospective application of a new accounting policy is not done if it is impracticable to determine period-specific effects or the cumulative effect. Impracticable means that the entity cannot apply a requirement after making every reasonable effort

Question 6

When an Investor is presumed to have a Significant Influence, how must the Interest be accounted for under IFRS?

Answer 6

Under IFRS, when an entity is presumed to have signficant influence over its investee it must account for its investement under only the EQUITY METHOD

GAAP may use Fair or Equity Method when it has significant influence

Question 7

Under IFRS which policies may an entity apply to measure INVESTMENT PROPERTY?

Answer 7

Cost Model or Fair Model.

Cost Model= Cost - Accum Depr. - Impairments

Fair Model- Remeasured at Far Value

G/Ls are recognized immediately in Profit or Loss

Question 8

How does IFRS determine the cost of Inventory?

Answer 8

Lower of Cost or Net Realizeable Value

NRV Under IFRS:

the estimated selling price in the ordinary course of business minus the estimated costs of completion and sale.

Question 9

Which methods does IFRS use to evaluate Plant Property and Equipment (PPE)?

Answer 9

Cost or Revaluation Model

Cost= Cost - Accum Depr. - Impairment Losses

Revaluation Model

Increases in Value - OCI

Decreases in Value - Expense

Must be applied to whole class, no guidance to how often it must be revalued

Question 10

When are loss contingency provisions required for IFRS?

Answer 10

recognition of provisions is required when (1) the entity has a legal or constructive present obligation resulting from a past event (called an obligating event), (2) it is probable that an outflow of economic benefits will be necessary to settle the obligation, and (3) its amount can be reliably estimated. Thus, no obligation described meets the recognition criteria for a provision. Hence, each is a contingent liability and requires disclosure unless the possibility of the outflow of resources is remote. Thus, items I and II but not III are disclosed.

Question 11

What is the difference between IFRS guidance for Business Combos and GAAP?

Answer 11

IFRS requires a subsidiary’s stmts used in preparation must be adjusted to reflect uniform acct. policies with the parent

GAAP does not require the Parent to adjust the subsidiary’s accounting policies to make them uniform with theirs

Question 12

How dsoes IFRS treat interest income on plan assets for the period?

Answer 12

IFRS, interest income on plan assets for the period is recognized in profit or loss.

It equals the fair value of the plan assets at the beginning of the year (adjusted for contributions and benefit payments during the year) times the same discount rate used to discount the defined benefit obligation.

Question 13

What is the difference between GAAP and IFRS carrying amounts of PPE?

Answer 13

GAAP cannot carry an item of PPE at an amount above its historical cost.

IFRS can carry an item at its revalued amount, which can be greater than its historical cost

Question 14

Under IFRS an asset is impaired when its carrying amount exceeds its recoverable amt.

The recoverable amt under IFRS is:

Answer 14

The greater of its

fair value minus cost to sell

or value in use***.

The present value of the asset’s expected cash flows

Question 15

What is the difference between GAAP and IFRS valuation of Non Controlling Interests?

Answer 15

According to IFRS, at the acquisition date the acquirer may measure NCIs at

(1) fair value or
(2) their proportionate share of the fair value of the acquiree’s identifiable assets and liabilities.

GAAP can only use Fair Value

Question 16

What is the difference between GAAP and IFRS regarding Impairment of Long Lived Assets

Answer 16

IFRS allows impairment reversals in subsequent period on Long Lived Assets if a change in the estimates to measure the recoverable amount changes.

Under GAAP the reversal of Impairment Losses is PROHIBITED.

Question 17

How does IFRS measure and report Intangible Assets?

Answer 17

Cost or Revaluation Model.

Revaluation model may be chosen only if the intangible asset has an active market

Question 18

What is the difference between IFRS and GAAP adjustments of Inventory.

Answer 18

IFRS permits the reversals of adjustments in a subsequent period, allowing Inventory to be written up to the extent of the previous write down.

GAAP does not allow the reversal of a previous write- down on inventory.

Question 19

Cash paid for For Interest or Dividends under IFRS may be in what category?

Answer 19

Operating or Financing

Question 20

Cash received for Interest or Dividends may be reported in what category?

Answer 20

Operating or Investing

Question 21

Which items do NOT qualify to be Depreciated under IFRS?

Answer 21

Investment Property accounted for under the Fair Value Method

Non Current Asset held for Sale

Question 22

What is the Residual Allocation Method?

Answer 22

Proceeds of bonds issued with detachable share purchase warrants must be assigned based on the residual allocation method.

The Liability Account is measured at Fair Value

and the residual proceeds is assigned to the equity component.

Question 23

Impairment Method for IFRS?

Answer 23

Carrying Amount

MINUS

the greater of

FV MINUS Cost of Disposal

or Value in Use

=Impairment Loss

Question 24

What is the difference between IFRS and GAAP in regards Going Concern?

Answer 24

Under IFRS, auditors assume the entity is a going concern.

Under GAAP the auditor makes that determination, if it is indeed a going concern

Question 25

What are the 5 elements under IFRS?

Answer 25

Asset Liability Equity Income (NOT REVENUE) (contains gains) Expense (contains losses)

Question 26

How does IFRS recognize Revenue?

Answer 26

Probably Future Economic benefit and can be measured reliably. Cost Recovery method if the value or outcome cannot be measured reliably. NO COMPLETED CONTRACT GAAP uses completed contract method.

Question 27

Which statements are required under IFRS and not under GAAP?

Answer 27

Comparative Financials required under IFRS Statement of Comprehensive Income Required Statement of Changes in Equity Required These are not required under GAAP

Question 28

What is the IFRS date of transition?

Answer 28

If IFRS is implemented in June 2010 for use in 2010 financials, the date of transition is actually January 1, 2009 because a full year of comparative stmts are required from the previous year

Question 29

How are bonds reported under IFRS?

Answer 29

Fair Value through profit or loss or Amortized Cost

Question 30

How are Deferred Taxes reported under IFRS?

Answer 30

Use the Liability Method All Deferred Tax Liabilities must be reported Only Probably Deferred Tax Assets can be reported Deferred Tax Assets and Liabilities are **NON CURRENT** Deferred Tax Assets and LIabilities can be netted only if they are related to the same taxing authority

Question 31

What does Tax Rates are used under IFRS?

Answer 31

The Enacted Tax Rate or Substantially Enacted Tax Rate GAAP only uses the Enacted Tax Rate only

Question 32

How are Operating Leases treated under IFRS?

Answer 32

Can be recorded as Investment Property if measured at Fair Value

Question 33

Where are significant non-cash transactions recorded under IFRS?

Answer 33

Must be included in the Notes to Financial Stmts

Question 34

If an IFRS company decides to revalue its equipment each year, what effect would a drop of $2000 in value above regular depreciation be?

Answer 34

It would be a 2000 expense for that year, recognized in income. BUT.... an increase in the value would go under other comprehensive income. Losses\> Income Stmt Gains\> OCI

Question 35

Under IFRS, a contingent loss must be recognized if it is...

Answer 35

More likely than not. Even just 51% vs 49% meets this criteria

Question 36

GAAP vs IFRS research and development costs?

Answer 36

Under GAAP all research and development costs are expensed as incurred. Under IFRS, research costs are expensed, but development costs are capitalized if the company believes that future economic benefits are probable and that the product being developed is commercially and technically feasible.

Question 37

How are bilogical assets valued under IFRS?

Answer 37

Fair Value Less Costs To Sell

Question 38

Under IFRS, how should a company report their investments in bonds when it is a part of their business model to hold such investments solely to receive the cash and interest from principal repayment?

Answer 38

at amortized cost

Question 39

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

Answer 39

They appoint members of the IASB, THe IFRS Advisory Council and the IFRS Interpretations Committe. The trustees serve 3 year terms

Question 40

What are the objects of the IFRS foundation?

Answer 40

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 41

What does the IASB do?

Answer 41

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

Question 42

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

Answer 42

They are similiar 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 43

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

Answer 43

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 44

IFRS and Borrowing Costs

Answer 44

Must be capitalized if meeting certain criteria If not meeting criteria... Must be expensed Borrowing costs must be capitalized if they are related to the acquisition of a qualifying asset Finance Costs (interest expense must be disclosed

Question 45

IFRS Acceptable Methods of Accounting for T-Stock

Answer 45

1. Par Value 2. Cost Method 4. Constructive Retirement Method

Question 46

How is compensation expense calculated for Stock Options?

Answer 46

Options are measured at the Fair Value at the GRANT DATE, allocated over service period

Question 47

How is ending ARO balance calculated?

Answer 47

BEGINING ARO + DISCOUNTED CASH FLOW ESTIMATES OF CURRENT ASSETS PURCHASED - PAYMENTS + ACCRETION EXPENSE =ENDING BALANCE ARO

Question 48

Under GASB Concepts Stmts, what is an essential characteristic of a liability?

Answer 48

A liability is a present obligation to sacrifice resources.

Question 49

Under GASB what defines a Deferred Outflow of Resources?

Answer 49

A liability that involves a consumption of net position by the government.

Question 50

Stock Dividends vs Stock Splits

Answer 50

Stock splits decline the par value of the stock in proportion to the stock split NO EFFECT ON A=L+SE Stock dividends do NOT change par value.

Question 51

How is Net Patient Service Revenue calculated?

Answer 51

Net Patient Service Revenue Gross Patient Service Revenue 860 Bad Debts Expense 10 Contractual Adjustments 100 Allowance for discounts for hospital employees 35 860 - 100 -35 = 725 Bad Debts is an operating expense, not a contra to gross patient service revenue.

Question 52

How is Royalty expense calculated?

Answer 52

10% of **_Net_** Sales Returns Estimated to be 1% Gross Sales 600,000 Royalty Income= 600 \* .99% = 594,000 594,000 \* .10% = 59,400

Question 53

How are costs to develop software for internal use treated after the app development stage?

Answer 53

Amortized over the economic life o the product

Question 54

What are the four conditions necessary for accrual of employees compensation for future absences according to FASB?

Answer 54

1. rights to compensation vest or accumulate, 2. payment of compensation is probable, 3. amount of payment can be reasonably estimated, and 4. the compensation is attributable to employees' services already rendered.

Question 55

What is the primary measurement focus of the Govt?

Answer 55

The governmental fund reporting focuses primarily on the sources, uses, and balances of financial resources.” The financial statements for governmental funds use the current financial resources measurement focus Flows and balances of financial resources

Question 56

if a government facility uses cash basis for the budget....

Answer 56

it can use it for the actual. GASB 2400.103 requires modified accrual basis, so the government facility needs to include a separate schedule or notes to the required supplementary information that reconcile the budget amounts with the GAAP amounts (modified accrual basis).

Question 57

How are losses related to to Discontinued Operation treated?

Answer 57

In a period in which a component of an entity either has been disposed of or is classified as held for sale, the income statement of a business entity or statement of activities of a not-for-profit entity (NFP) for current and prior periods shall report the results of operations of the component, including any gain or loss recognized in accordance with paragraphs 360-10-35-40 and 360-10-40-5, in discontinued operations. The results of operations of a component classified as held for sale shall be reported in discontinued operations in the period(s) in which they occur. The results of discontinued operations, less applicable income taxes (benefit), shall be reported as a separate component of income

Question 58

Under a pledge, an account receivable is used as collateral for a loan...who retains control of the Receivables?

Answer 58

The company that pledged the receivables

Question 59

What are the characteristcs of a Govt organization\>

Answer 59

Status as bodies corporate and politic Power to enact and enforce a tax levy

Question 60

Promised contributions to be collected in a future year...

Answer 60

Should be classified as temporarily restricted assets

Question 61

Prospective fiancial statements include which disclosures?

Answer 61

Both summary of signficant accounting policies and summary of signficant assumptions

Question 62

Purpose of the notes to the Financial Statements?

Answer 62

Provide Disclosures required GAAP

Question 63

When a Subsidiary's Functional Currency is its Local currency? Is it translated or remeasured?

Answer 63

**_Translated at the Current Rate_** If the Sub's functional currency was its reporting currency, it would be remeasured. Non Monetary....Historical Rates Monetary....Current Rates

Question 64

Impaired long-lived assets to be disposed of by sale that are subject to FASB ASC 360-10-35 are measured at:

Answer 64

Lower of: Fair Value LESS Costs to Sell or Carrying Amount

Question 65

Bale CO. incurred 100,000 of acqusition costs related to the purchase of the net assets of Dixon Co.: The 100,000 Acquisitions Costs should be:

Answer 65

Acquisition of Net assets are Expensed as incurred in the current period The costs to acquire stock or bonds must be included in the cost of the stock or bonds

Question 66

How are transfers from the General Fund recorded?

Answer 66

Other Financing Uses NOT expenditures

Question 67

What are the following functional expense categories for a non governmental not for profity entity?

Answer 67

Program services Management and General Fundraising

Question 68

Are inter governmental revenues included in the General Fund?

Answer 68

YES Governments usually prepare their budgets showing estimated revenues and estimated expenditures or appropriations on a basis consistent with financial reporting. This budget includes revenues, increases in the general fund resources not matched by decreases in another fund resources, and also expected interfund transfers. Interfund transfers are recognized in the records as “other financing sources” and result from a movement of resources from one fund to another. Property taxes, licenses and permits, and intergovernmental revenues will all be represented in the budget as “estimated revenues.” The expected transfers in will be represented by “estimated other financing sources” in the budget.

Question 69

A. A. Corporation has a loading dock that is situated next to a local highway. Recently, a new major highway was completed nearby, which bypasses the loading dock, and has thus made the installation of questionable future value to the corporation. The carrying amount of the loading dock is $400,000. The undiscounted present value of the future cash flows related to the loading dock is $410,000. The discounted present value of the future cash flows related to the loading dock is $380,000. The loading dock could be sold for $401,000 right now, less a broker's commission of $6,000. If A. A. Corporation applies IFRS, does it need to recognize an impairment loss?

Answer 69

“No, since the undiscounted cash flows are larger than the carrying value,” is wrong, but would be the rule under U.S. GAAP today, IFRS does not use undiscounted future cash flows. The answer choice, “No, because the dock can be sold for its carrying value,” is wrong because IFRS uses net realizable value, not gross sale proceeds, for impairment tests. An asset is tested under IFRS for impairment, when there is reason to suspect loss in value. The test is to determine if the carrying value is recoverable. The recoverable amount is the greater of value in use (present value of discounted future cash flows) or net realizable value (sales proceeds less cost to sell). Here, that is $401,000 less the broker commission of $6,000, or $395,000. Since this is greater than the value in use ($380,000), the recoverable amount is $395,000, which is $5,000 below the carrying value, and thus A. A. recognizes an impairment loss of $5,000.

Question 70

In preparing combined financial statements for a governmental entity, interfund receivables and payables should be:

Answer 70

Reported as amounts due to and from other funds NOT eliminated does not affect the fund balance or net position of either fund involved. Not reported as other financing sources or uses in the Govt fund stmts

Question 71

Entities under common management of a parent should disclose...

Answer 71

Should disclose the fact that they are under common management and a consolidated part of the Parent Entity, regardless if transactions took place.

Question 72

What constitutes Internal Service Funds?

Answer 72

They are Enterprise Funds used to account for activities in which one department in a governmental unit provides services exclusively to other departments within the governmental unit, generally on a cost reimbursement basis.

Question 73

Unrealized gains on investments which are permanently restricted as to use by donors are reported by a private, non profit hospital on the.....

Answer 73

Investment Returns RESTRICTED by donors are reported on the Statement of Changes in Net Assets Investment Returns NOT restricted by donors are reported on the Statement of Operations.

Question 74

If a state or local government files for bankruptcy under Chapter 9 of the US bankruptcy Code, accounts payable should be:

Answer 74

Remeasured based on the Plan of Adjustment

Question 76

Which is NOT a similiarity between interim reporting for US GAAP and IFRS?

Answer 76

For interim reporting GAAP allows an inventory loss from a market decline to be deferred even if the market decline is expected to reverse by years end. IFRS uses lower of cost or NRV even if a market decline is expected to reverse by year end

Question 77

Similarities between US GAAP and IFRS Interim Reporting

Answer 77

A. Revenue from long-term construction contracts should be recognized as earned during an interim period on the same basis as followed for the full year. B.Material seasonal fluctuations may not be smoothed in interim information. C.Ordinarily, the results for an interim period should be based on the same accounting principles the entity uses in preparing annual statements. D.Interim partial liquidation of a LIFO layer need not be reported if it is expected to be recovered by year end.

Question 78

IFRS should adjust the statements for the following scenarios that happen before Issuance Jan 1 thru February 28th\*\*\* Issuuance of Stmts

Answer 78

Stock Splits Write off of a receivable for a debtor that claimed bankruptcy in January and was know to be deterioarting Settlement of extended litigation in excess of a previous liability HOWEVER a business combo that happens in January is applied to the next year, not the previous

Question 79

What is required for Acct Policies for IFRS?

Answer 79

Uniform accounting policies are required for like transactions and events in similar circumstances

Question 80

Under IFRS when does an entity derocognize a Financial Asset when transferring the rights to the cash flows of the Investment?

Answer 80

If the entity does not retain or does transfer substantially all risks and rewards of ownership and does not retain control.

Question 81

Under IFRS, a chgange from FIFO to Weright Average Inventory Cost Formula when costs are falling has what effect?

Answer 81

Maximizes profits. In a period of falling costs, FIFO results in higher cogs tahn the weight average method

Question 82

How does IFRS measure Investment Property?\>

Answer 82

Fair Value or Cost Model FV MODEL- all Gains and losses are recognized immediately in profit or loss Intangibles, PPE, Inventory: Cost or Revaluation GAINS to OCI, LOSSES to expense

Question 83

IFRS Value in Use

Answer 83

The presented value of the future cash flows expected to be derived from an asset

Question 84

GAAP vs IFRS Impairment Loss Reversals

Answer 84

Under IFRS an impairment loss on an asset may be reversed in subsequent periods if a change in the estimates used to measure the recoverable amount has occured. GAAP prohibits the reversal of impairtment losses

Question 85

UNder IFrs, an entity may use the revaluation model for subsequent measurement of an INTANGIBLE ASSET only if:

Answer 85

An active market exists for the intangible asset

Question 86

Impairment Test for a CGU with Good Will under IFRS?

Answer 86

The carrying amount of a CGU exceeds its recoverable amount. NO differnt than any other impairment

Question 87

Under IFRS, which of the following statements is true regarding remeasurements of plan assets by an entity that sponsors a defined benefit pension plan?

Answer 87

They must be recognized in OCI and must not be reclassified to profit or loss in subsequent periods.

Question 88

Interest rates to discount pensions under IFRS vs GAAP

Answer 88

Under U.S. GAAP, different interest rates ordinarily are used to calculate interest cost and the expected return on plan assets. Under IFRS, the same rate is used to discount the defined benefit obligation (interest cost) and to calculate interest income on plan assets

Question 89

Interest income on plan assets for IFRS...

Answer 89

Recognized immeditaely in profit or loss

Question 91

Under IFrs Certain Bank Overdrafts may be conisdered Cash and Cash Quivalents if:

Answer 91

1. rapayable ond emand 2. part of an entitys cash management

Question 93

What is the difference between IFRS and GAAP treatment of Bond Issue Costs?

Answer 93

GAAP puts them in a deferred charge asset account and amortizes them IFRS nets them and they reduce a premium or add to a discount.