IFRS Flashcards
How does IFRS record foreign currency transactions?
It is recorded on the initial date.
For each subsequent balance sheet date, settlement occurs, and the transaction is adjusted for the current amount.
The difference in the current rate from the prior date is reported in profit or loss in the period incurred.
What does US GAAP use the IFRS does not?
Undiscounted cash flows
How does IFRS perform impairment tests?
How is it performed?
Net realizable value
- It is tested when there is reason to suspect loss in value
- The test is to determine if the carrying value is recoverable
- Recoverable amount is greater of value in use (PV of discounted future cash flows) or net realizable value (sales proceeds less cost to sell)
What is the recognition exemption for low value/immaterial assets when leasing?
Difference from GAAP?
For assets that are below $5,000 and of low value or immaterial, these assets do not have to be capitalized.
They are instead expensed.
GAAP does not have a dollar threshold, just permits immaterial assets to be expensed.
How is the cash flow statement prepared under IFRS? Is it the same as GAAP?
Yes, both GAAP and IFRS allows for the direct method and indirect method to be used.
How is a business combination accounted for under IFRS?
IFRS - does not require goodwill to be recognized but allows it as an option
ref-2394.01
What does IFRS allow an exception of “impracticality” for?
For changes in accounting principles and correction of errors.
Meaning - a change in accounting principle or correction of accounting error is applied retrospectively, except to the extent that it is impracticable to determine the effects of the change. It would then be applied to the earliest date practicable.
How does IFRS recognize research and development projects?
Project can be capitalized once the development project reaches the stage of a working model or prototype, found to be technologically feasible, and financially affordable to complete.
The asset can be either for sale or internal use, but must be valuable for that purpose.
With IFRS, how is the cost of settling a lawsuit reported?
The must best estimated number must be use to accrue as the settlement and it must always be discounted to present value
How is the revaluation model used for a class of assets applying IFRS?
When the carrying value materially differs from the fair value, a revaluation must occur.
Any increase in value is included in asset valuation surplus (an equity account like oci)
Any decrease is accounted for as an other lose included in income from operations
With respect to the categories of assets, liabilities, and stockholders’ equity presented on the balance sheet (statement of financial position) for US GAAP and IFRS differences?
IFRS statements may PP&E first in the balance sheet
How would a company using IFRS record an inventory that in Year 1 reduced its inventory from $100 to its NRV of $80 but had in Year 2 had a NRV of $150?
IFRS has inventory only carried at lower of cost or NRV.
Year 2 = Cost-$100, NRV-$150 Cost is lower in Year 2 so the new cost is $100 Db Inventory-$20 Cr Expense-$20
