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IFRS > IFRS VS GAAP > Flashcards

IFRS VS GAAP Flashcards

1
Q

Conceptual Framework

A

Entities are directed to refer to and consider the applicability of the concepts in the IASB Conceptual Framework when developing accounting policies in the absence of a standard or interpretation that specifically applies to an time.

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2
Q

Discontinued Operations

A

Before a competent can be classified as held for sale, the individual assets and liabilities of the component MUST BE MEASURED in accordance with applicable standards and any resulting gains and losses must be recognized.
After classification as held for sale, the competent is REPORTED AT LOWER OF CARRYING VALUE AND FAIR VALUE less costs to sell.

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3
Q

Extraordinary Items

A

The reporting of amounts as extraordinary is PROHIBITED.

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4
Q

Accounting Changes

A

At a minimum THREE BALANCE SHEETS and TWO of EACH OTHER FINANCIAL STATEMENT must be presented.

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5
Q

Change in Accounting Entity

A

IFRS does NOT INCLUDE the concept of a change in accounting entity.

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6
Q

Error Correction

A

WHEN IT IS IMPRACTICABLE to determine the cumulative effect of an error, the entity is required to RESTATE information prospectively from the EARLIEST date that is practicable.

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7
Q

Comprehensive Income

A

OCI includes revaluation surpluses (gains) recognized when intangible assets and fixed assets are revalued.

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8
Q

Notes to the Financial Statements

A

Requires EXPLICIT AND UNRESERVED STATEMENT OF COMPLIANCE WITH IFRS in the notes to the financial statements. An entity cannot describe F/S as complying unless they comply with all the requirements.

Disclosure of judgement and estimates made in the process of applying accounting policies.

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9
Q

Related party Disclosures

A

Disclosure of key management compensation arrangements is requried

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10
Q

Risks and Uncertaintes

A

Required disclosure of ASSUMPTIONS made about the future and other MAJOR SOURCES of ESTIMATION UNCERTAINTY at the end of the reporting period that could results in a material adjustment to the carrying amount of assets and liabilities within the next financial year.

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11
Q

Interim Financial Reporting

A

Must be prepared using the same principles and practices used in the preparation of the most recent annual financial statements

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12
Q

Interim Financial Statements are required to include at a minimum

A

Condensed balance sheets
Condensed statements of comprehensive income
Condensed statements of changes in equity
Condensed statements of cash flows
Required Disclosures

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13
Q

Interim financial reporting - tax rate

A

The effective tax rate may be calculated using enacted or substantially enacted changes in tax rates

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14
Q

Segment Reporting

A

Segment Disclosures include segment profit or loss, segment assets and segment liabilities (if a segment liability measure is regularly provided to the chief operating decision maker)

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15
Q

Revenue Recognition Criteria

A

Common revenue recognition criteria include:

  • Revenue and costs can be measured reliably
  • It is probably that the economic benefits from the transaction will flow to the entity
  • Each category has additional revenue recognition criteria
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16
Q

Intangible Assets

A
  • Research costs related to internally developed intangible assets must be expensed
  • Development costs may be capitalized if certain criteria are met
  • Intangible assets are reported using the cost model or the revaluation model
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17
Q

R&D Costs

A
  • Research costs must be expensed

- Development costs may be capitalized if certain criteria are met

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18
Q

Computer Software Development Costs

A
  • IFRS does not provide separate guidance
  • Software development costs are internally generated intangibles
  • Research Costs must be expensed, but development costs may be capitalized if certain criteria are met
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19
Q

Impairment of Intangible Assets other than Goodwill

A
  • Calculated using a ONE-STEP MODEL in which the CV of the intangible asset is compared to the asset’s recoverable amount
  • The recoverable amount is the greater of the asset’s FV less costs to sell and the asset’s value in use
  • Value in use = PV of future cash flows expected from its use
  • Impairment loss is the recognized to the extent that the carrying value exceeds the recoverable amount
  • REVERSAL of impairment losses is PERMITTED
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20
Q

Goodwill Impairment

A
  • Is calculated using the ONE STEP TEST at the cash generating unit level in which the CV is compared to the recoverable amount. The recoverable amount is the greater of the CGU’s FV less the costs to sell and its value in use
  • Impairment loss is recognized to the extent that the CV exceeds the recoverable amount
  • The loss is first alocated to GW and then on a pro-rata basis to the other assets
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21
Q

Construction Contracts

A
  • Percentage of completion method is REQUIRED unless the final outcome of the project cannot be reliably estimated, in which case the cost recovery method is required
  • The completed contract method is NOT PERMITTED
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22
Q

Non-monetary Exchanges

A
  • Nonmonetary exchanges are characterized as exchanges of SIMILAR ASSETS and exchanges of DISSIMILAR ASSETS
  • Exchanges of DISSIMILAR ASSETS are regarded as exchanges that generate revenue and are accounted for in the same manner as exchanges having commercial substance under GAAP
  • Exchanges of SIMILAR ASSETS are not regarded as exchanges that generate revenue and NO GAINS ARE RECOGNIZED
  • LOSSES ARE RECOGNIZED IN FULL in all nonmonetary transactions
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23
Q

Foreign Currency Translaton

A

Two primary factors that must be considered are:

  1. The currency that influences sales prices for goods and services, and
  2. The currency of the country whose competitive forces and regulations mainly determine the sales price of the goods and services
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24
Q

Foreign Currency Translation - Financial Statements

A

The F/S of a foreign subsidiary operation in a HIGHLY INFLATIONARY ECONOMY MUST FIRST BE RESTATED FOR THE EFFECTS OF INFLATION and then must be converted from the foreign currency using the current/year-end rate for all the F/S elements

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25
Q

Marketable Securities -Classification

A
  • IFRS has 3 classification categories ( think US GAAP categories)
  • Investments in equity instruments are generally measured at fair value through profit or loss.
  • Management can make an irrevocable ELECTION to present changes in FV in OCI, provided the instrument is not held for trading
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26
Q

Marketable securities-impairment

A
  • Impairment losses are recognized using an expected cred loss model. Losses are recorded in VALUATION ALLOWANCE
  • For financial assets measured at FAIR VALUE THROUGH PROFIT OR LOSS, NO IMPAIRMENT LOSSES ARE RECORDED
  • For financial assets measured at amortized costs, impairment losses are recorded in earnings
  • For financial assets measured at fair value through OCI, impairment losses are recorded in OCI
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27
Q

Equity Method - Step-by-Step Acquistion

A

IFRS generally requires entities to apply equity method PROSPECTIVELY from the time at which the investor obtains significant influence. Retroactive adjustment is not required.

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28
Q

Consolidation - parent and subsidiary with different year-ends

A
  • If the year ends differ by three months or less, the parent company can use the subs regular financial statements of a different period, giving recognition to material intervening events during the gap period to expedite the consolidation process
  • the subs F/S MUST BE ADJUSTED for significant transactions during the gap period
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29
Q

Acquisition method - noncontrolling interest and goodwill

A

Noncontrolling interest and GW are calculated using either the partial GW method or the full goodwill method. The partial GW method is the preferred method under IFRS, but entities can elect to used the full GW method on a transaction by transaction basis

30
Q

Inventory Valuation

A

Is reported at the lower cost or net realizable value. Reversal of inventory write-downs is allowed for subsequent recoveries of inventory value.

31
Q

Inventory Cost Flow Assumption

A
  • The method used to account for inventory should match the actual flow of goods
  • the use of LIFO is prohibited
32
Q

Fixed Asset Valuation

A
  • Reported using one of two models
    1. Cost Model: Carrying value = Historical Cost - Accumulated depreciation - Impairment
    2. Revaluation Model : Carrying Value = FV on revaluation date - subsequent accumulated depreciation - subsequent impairment
  • Revaluation losses are reported in income
  • Revaluation gains are reported in OCI as a revaluation surplus
33
Q

Investment Property

A
  • Land and/or buildings held to earn rental income or for capital appreciation
  • Reported using the Cost Model( have to disclose FV) or Fair Value Model(Can mark to market)
34
Q

Fixed Asset Depreciation

A
  • The depreciation method used should match the expected pattern of fixed asset consumption
  • Depreciation method, useful life, and salvage value MUST BE REVIEWED for appropriateness on each B/S date
  • Component depreciation is required
35
Q

Fixed Asset Impairement

A
  • Impairment is determined using a ONE-STEP TEST. Impairment exists if the CV of the fixed assets exceeds the higher of:
    1. FV less costs to sell
    2. Value in Use ( PV of the expected future cash flows from the fixed asset)
  • Reversal of impairment losses IS permitted
36
Q

Leases classification

A

Leases are classified as operating leases or finance leases. Both the lessor and lessee use these classifications.

37
Q

Capital(finance) lease criteria

A

Both the lessee and lessor classify a lease a finance lease if the lease transfers substantially all the risks and rewards of ownership to the lessee

38
Q

Initial direct costs of lease

A

Initial direct costs paid by the lessee are ADDED to the amount recognized as a finance lease asset

39
Q

Sale-leaseback transactions

A

Recognition of gains is dependent on the classification of the lease as an operating lease or a finance lease

40
Q

Bond issue costs

A

Deducted from the carrying value of the liability and amortized using the effective interest method

41
Q

Bond discount/premium amortization

A

The effective interest method is required and the straight line method is prohibited. Amortization is done over the EXPECTED LIEF OF THE BOND.

42
Q

Convertible bonds

A

A liability(bond) and equity component (conversion feature) should be recognized when convertible bonds are issued. The bond liability is recorded at FV, with the difference between the actual proceeds received and the FV of the bond recorded as a component of equity.

43
Q

Defined benefit pension plans definition

A

The defined benefit obligation (DBO) is the defined benefit pension plan liability

44
Q

Defined Benefit Cost

A

Includes service cost and net interest on the defined benefit liability (asset)

45
Q

Defined benefit pension plans cost reporting

A

The components of cost are generally reported separately on the income statement; there is no requirement that these amounts be aggregated and present as one amount

46
Q

Prior service cost

A

Is referred to as past service cost. When a plan is amended, past service cost increases the DBO and is reported as defined benefit service cost on the income statement. Under IFRS, past service cost is not booked to OCI.

47
Q

Pension gains and losses

A

Gains and losses are referred to as a REMEASUREMENTS of the net defined benefit liability (asset) and are reported in OCI. Remeasurements of the net defined benefit liability (asset) reported in OCI are not reclassified(amortized to the income statement in subsequent periods.

48
Q

Pension funded status

A

The fund status (DBO - fair value of plan assets) of the pension plan is reported on the B/S as the net defined benefit liability (asset). A liability is reported if the plan is underfunded (DBO > FV of plan assets) and an asset is reported if the plan is OVER-FUNDED (DBO

49
Q

Pension remeasurements

A

Re-measurements of the net defined benefit liability(asset) are included in OCI and NOT RECLASSIFIED (amortized) to the I/S in subsequent periods
However, an entity can transfer those amounts recognized in OCI within equity.

50
Q

Sick pay benefits

A

Entities are REQUIRED TO ACCRUE SICK PAY BENEFITS as services are rendered by employees

51
Q

Accounting for income taxes - Valuation Allowance

A

VALUATION ALLOWANCES ARE NOT PERMITTED. A deferred tax asset is recognized when IT IS PROBABLE that sufficient taxable profit will be available against which the temporary difference can be utilized

52
Q

Accounting for income taxes - Uncertain tax positions

A

Uncertain tax positions are not specifically addressed

The tax consequences of events should be accounted for in a manner consistent with expected resolution of the tax position with tax authorities as of the B/S date.

53
Q

Accounting for income taxes - Tax rates

A

Current and deferred taxes are calculated using ENACTED OR SUBSTANTIVELY ENACTED tax rates.

54
Q

Accounting for income taxes - Changes in tax law

A

Adjustments for changes in deferred tax balances due to changes in tax laws or rates are recognized on the I/S, EXCEPT WHEN THE DEFERRED TAX BALANCE ARISES FROM A TRANSACTION OR EVENT THAT IS RECOGNIZED IN OCI.
When a deferred tax balance arises from a transaction or event that is recognized in OCI, adjustments should also be recorded in OCI.

55
Q

Accounting for deferred tax assets and liabilities

A

DTA and DTL are REPORTED AS NON-CURRENT on the B/S. DTA and DTL MAY BE NETTED if the entity has a legally enforceable right to offset current tax assets against current tax liabilities and the DTA and DTL related to income taxes levied by the same tax authorities.

56
Q

Accounting for Stock Issued to Employees

A

Employee stock purchase plans and stock options are GENERALLY CONSIDERED TO BE COMPENSATORY

57
Q

Statement of Changes in Shareholders’ Equity

A

Is presented as a PRIMARY FINANCIAL STATEMENT

58
Q

Diluted EPS - Contracts

A

Contracts that may be settled in CASH OR STOCK ARE ALWAYS PRESUMED TO BE SETTLED IN COMMON SHARES AND INCLUDED IN DILUTED EARNINGS PER SHARE

59
Q

Diluted EPS- Contingently issuable ordinary shares

A

are treated as outstanding and included in the calculation of diluted EPS ONLY IF THE CONDITIONS ARE SATISFIED.

60
Q

Statement of Cash Flows - overdrafts

A

Cash may include bank overdrafts if they are an integral part of an entity’s cash management

61
Q

Statement of Cash Flows - methods

A

When the direct method is used entities are NOT REQUIRED to present a reconciliation of net income to net cash flows from operating activities

62
Q

Statement of Cash Flows - Presentation

A

Interest and dividends RECEIVED can be CFO or CFI
Interest and dividends PAID can be CFO or CFF
Taxes paid can be CFO,CFI, or CFF

63
Q

Statement of Cash Flows - cash flow per share

A

Presentation of cash flow per share is not prohibited

64
Q

Variable Interest Entities

A

A special purpose entity is a specific type of VIE created by a sponsoring company to hold assets or liabilities, often for structured financing purposes.
A sponsoring company controls and must consolidate a SPE when the company:
- Is benefited by the SPE’s activities
-Has decision making powers that allow it to benefit from the SPE
- Absorbs the risk and rewards of the SPE
- Has a residual interest in the SPE

65
Q

Asset Retirement Obligation

A

An asset retirement obligation is called a DECOMMISSIONING LIABILITY. A decommissioning liability is initially measured at the BEST ESTIMATE of the expenditure required to settle the obligation.
decommissioning obligations are REMEASURED EACH PERIOD for changes in the amount or timing of cash flows and changes in the discount rate.

66
Q

Contingencies - probably vs possible

A

PROBABLE is defined as MORE LIKELY THAN NOT to occur and POSSIBLE IS DEFINED as MAY but probably will not occur.

67
Q

Contingencies - defined

A

A POSSIBLE obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity.
A provision for a contingent liability should be recorded wit ha charge to income when the present obligation from a past event exists, the obligation is probably, and the amount can be reasonably estimated

68
Q

Subsequent events

A

Referred to as “events after the reporting period” and the subsequent event evaluation period extends from the reporting period through the date the F/S are authorized for issuance.

RECOGNIZED SUBSEQUENT EVENTS ARE REFERRED TO AS “ADJUSTING EVENTS AFTER THE REPORTING PERIOD” AND NON-RECOGNIZED SUBSEQUENT EVENTS ARE REFERRED TO AS “NON-ADJUSTING EVENTS A AFTER THE REPORTING PERIOD.”

Going concern issues are specifically addressed in the guidance on events after the reporting period, which state that an entity CANNOT prepare its F/S on a GOING CONCERN BASIS if management determines after year-end that it intends to liquidate the company or cease trading

69
Q

Financial Instruments

A

The fair value option can only be elected for FINANCIAL ASSETS IF DOING SO ELIMINATES OR SIGNIFICANTLY REDUCES A MEASUREMENT OR RECOGNITION INCONSISTENCY that would otherwise arise from measuring assets or liabilities or recognizing the gains and losses on them on different bases.

The FV OPTION CAN BE ELECTED FOR FINANCIAL LIABILITIES IF EITHER:

  1. Doing so eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise from measuring assets or liabilities or recognizing the gains and losses on them on different bases
  2. A group of liabilities or assets is managed and its performance is evaluated on a FV basis, in accordance with a documented risk management or investment strategy and information about the group is provided internally on that basis to the entity’s key management personnel
70
Q

Financial Instruments -disclosure

A

Are required to disclose the nature and extent of risks arising from financial instruments, including credit risk, liquidity risk and market risk

71
Q

Financial Instruments - initial and subsequent measurement

A

The IASB has issued a pronouncement (IFRS 9) that requires that all financial assets and financial liabilites be INITIALLY RECOGNIZED AT FAIR VALUE and then SUBSEQUENTLY MEASURED at either AMORTIZED COST or FAIR VALUE

IFRS (1 decks)

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