IFRS vs GAAP

Question 1

Discontinued Operations

Answer 1

IFRS- individual assets/liabilities remeasured with gains and losses recognized. Reported at lower of CV and FV less cost to sell

GAAP- Not required to be remeasured. Once held for sale there must be an impairment analysis

Question 2

Extraordinary Items

Answer 2

IFRS - Prohibited

GAAP-Allowed

Question 3

Accounting Changes

Answer 3

IFRS - Retrospective restatement. At a minimum present 3 balance sheets(end of current period, end of prior period,and beginning of prior period) and 2 of other statements.

GAAP- Comparative financials are not required. SEC does require comparative 2 balance sheets, 3 statement of income, owners equity and cash flow

Question 4

Change in accounting entity

Answer 4

IFRS- N/A

GAAP- Restated

Question 5

Error Correction

Answer 5

IFRS- Only required to restatement when its impractible to determine cumulative effect

GAAP- no impractibly exception. Always restate

Question 6

Comprehensive Income

Answer 6

IFRS- includes revaluation surplus of intangible and fixed assets

GAAP - No revaluation surplus

Question 7

Notes to financial statements

Answer 7

IFRS- Statement of compliance with IFRS. Must comply with ALL IFRS

GAAP- no such requirement

Question 8

Notes to financials

Answer 8

IFRS- Summary of significant accounting policies includes disclosure of estimates AND JUDGEMENTS

GAAP - No disclosure of judgements

Question 9

Related party disclosures

Answer 9

IFRS- Disclosure of key management compensation required

GAAP - No disclosure of key management compensation

Question 10

Risks and uncertainties

Answer 10

IFRS- Required disclosure of ASSUMPTIONS made about the future and other estimation uncertainty

GAAP - Required disclosure of

1) nature of operations
2) use of estimates
3) effect of change in accounting estimate
4) vulnerability to risk

Question 11

Interim financial reporting

Answer 11

IFRS- must use SAME principles used in annual

GAAP- certain principles may be modified

Question 12

Segment reporting

Answer 12

IFRS- segment profit or loss, segment assets AND LIABILITIES

GAAP- No liabilities reported

Question 13

Revenue Recognition

Answer 13

IFRS- 4 categories

1) sale of goods
2) rendering of services
3) revenue from interest, royalties, dividends
4) construction contracts

common revenue recognition criteria include

1) revenue and cost measured reliably
2) economic benefit will flow to entity

GAAP- Revenue recognized when realized or earned. 4 criteria must be met

1) evidence of contract
2) delivery occurred or services done
3) fixed price
4) collection assured

Question 14

Intangible Assets

Answer 14

IFRS- Research cost expensed
Development cost may be capitalized
Reported using cost OR revaluation model

GAAP - Research and development expensed
Cost model only
No revaluation

Question 15

Computer Software Development Cost

Answer 15

IFRS- no separate guidance

GAAP - Cost before tech feasibility are expensed
Cost after tech feasibility and before selling are capitalized

Question 16

Impairment of intangible assets other than GW

Answer 16

IFRS- 1 step model
1) CV compared to recoverable amount
*recoverable amount is the greater of FV less cost to sell and value in use (PV of future cash flows)
Reversal of impairment IS ALLOWED

GAAP- 2 step model

1) CV compared to sum of undiscounted cash flows
2) CV compared to FV

Indefinite life intangibles is done only using step 2

Question 17

Goodwill Impairment

Answer 17

IFRS- 1 step test at CGU
1) CV compared to recoverable amount
Impairment first allocated to GW then on a pro rata basis to the other assets of the CGU

GAAP - 2 step test

1) FV compared to CV
2) implied FV of GW to CV of GW

Question 18

Construction Contracts

Answer 18

IFRS- % of completion required unless final outcome cannot be estimated then use cost recovery method
Completed contract NOT permitted

GAAP- can use both % of completion and completed contract

Question 19

Choosing inventory cost flow assumption

Answer 19

IFRS- assumption has to match physical flow. Specific Idenfificaton used whenever possible. Same assumption must be used for all inventories having a similar nature an use

Question 20

How long is bond amortization done under IFRS

Answer 20

EXPECTED life of the bond….NOT contractual life

SL method not permitted

Question 21

When bonds issued inbetween interest dates how is total received calculated

Answer 21

Bond price + ACCRUED interest