IFRS Flashcards
Need for one set of international accounting standards
Multinational corporations
Mergers and acquisitions
Information technology - removing international barriers
Financial markets
Concern of making foreign companies follow SOX
Higher costs of SOX compliance are making the U.S securities markets less competitive
whether the benefits exceed the costs
Principles based
IFRS
rules based
GAAP
Do foreign companies need to reconclie their accounting with GAAP
No
Asset - IASB
A resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity
Liabilities - IASB
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
Equity - IASB
A residual interest in the assets of the entity after deducting all its liabilities
Income - IASB
Increases in economic benefits that result in increases in equity.
Includes revenues and gains
Expenses - IASB
Decreases in economic benefits that result in decreases in equity.
Losses that are not the result of ordinary activities
Title on IFRS balance sheet
Uses “statement of financial position” instead
Order on “statement of financial position”
Noncurrent assets
Current assets
Equity
Noncurrent liabilities
Current liabilities
Order of current assets - IFRS
reverse order of liquidity
ex. cash is last
Term for stock - IFRS
shares
Term for common stock - IFRS
share capital - ordinary
How often are financial statements prepared - IFRS?
annually
IFRS applies what kind of value
fair value
Transaction analysis is the________ under IFRS and GAAP
same
_______ is the basis for accounting systems worldwide
double-entry system
Trial balance is _________ as the text book
the same
Expanded accounting equation under IFRS
Assets = liabilities + share capital - dividends + revenues - expenses
General policy for using proper currency symbols both IFRS and GAAP
Currency signs are shown in trial balances and financial statements
Cash basis and IFRS
Cash basis is NOT in accordance with IFRS
Common assumption under IFRS and GAAP
periodicity assumption
GAAP revenue recogntion
100 rules
IFRS revenue recognition
one rule
Revenue Recognitoin GAAP and IFRS
General revenue recogntion principles are the same
GAAP revenue recognition defintion
realized, realizable and earned
IFRS revenue recogntion definition
Probability that the economic benefits associated with the transaction will flow to the company selling
Must be capable of being measured reliably
Revaluation of land and buidlings - IFRS
is permitted
Depreciation based on revaluation of assets
Allowed in IFRS
not permitted under GAAP
IFRS income
includes revenues and gains (outside normal course of business)
Closing process IFRS and GAAP
applicable to all companies
the same
Revenue Recognition Project
Will place more emphasis on when changes occur in assets and liabilities
Income statement IFRS and GAAP
Income statement is required under IFRS and GAAP
Inventory System under GAAP and IFRS
Companies can choose to use either a perpetual or a periodic system under either
Inventories under IFRS
Held-for-sale in the ordinary course of business, in the process of production for such sale, or in the form of materials or supplies to be consumed in the production process or in providing services
Classification of income statement under GAAP
Classified by function
ex. administration, distribution
Classification of income statement under IFRS
either nature or function
nature: salaries, depreciation expense, utilities expense
*if company does functional method, must disclose by nature in the notes to financial statements
Presentation of Income Statement: GAAP and IFRS
GAAP - either single step or multiple-step
IFRS - does not mention either
Revaluation adjustments - IFRS
Initial gains and losses resulting from revaluation are reported as adjustments to equity often as other comprehensive income
IFRS and equity
Because of revaluation, IFRS has more transactions that affect equity but not net income
IAS 1
“Presentation of Financial Statements”
Provides general guidelines for the reporting of income statement information
Comprehensive income under IFRS
includes unrealized gains and losses that are not included in the calculation of net income
Years of income statement
IFRS - 2 years
GAAP - 3 years
New approach of income statement
Better prepresent how businesses are run
Major differences of inventory reporting
IFRS prohibits use of LIFO cost
determines lower-of-cost-or-market inventory valuation differently
Who owns the goods - goods in transit or consigned goods- are what?
The same under IFRS and GAAP
Inventory valuation - IFRS
net realizable value = the best estimate of the net amounts that inventories are expected to realize
Write-downs IFRS and GAAP
can be reversed under IFRS
cannot be reversed under GAAP
Valuation of inventory - IFRS
Does not permit the option of valuing inventories at fari value
requries inventory to be written down, but cannot be wrriten up above its original cost
Specific Identification
Must be used under IFRS if the inventory items are not interchangeable
IFRS requires the following (ending inventory)
Ending inventory is wrriten down to net realizable value and may be written up in future periods to its net realizabl value but not above its original cost
