IFRS vs GAAP

Question 1

Convertible bonds

Answer 1

IFRS - Issuance is recorded as a liability. Anything extra is recorded as equity

GAAP - entire amount is a liability until the bond is converted.

Question 2

Cost to successfully Defend a patent

Answer 2

IFRS - Expensed unless cost increases future benefits.

GAAP - Added to cost and Capitalize

Question 3

Capital lease

Answer 3

IFRS - Major portion of expected life (Over 50%)

GAAP - Title Transfer
Bargain Purchase
> 75% of the asset’s life
> 90% of the PV of future cash flows

Question 4

Interest Revenue and Dividend Revenue on Statement of Cash Flows

Answer 4

GAAP - Operating Activities

IFRS - Either Operating or Investing

Question 5

Interest Expense and Dividends Paid on Statement of Cash Flows

Answer 5

GAAP - Interest Expense = Operating
Dividends Paid = Financing

IFRS - Either Operating or Financing

Question 6

Probable Contingent Loss Recognition within a range

Answer 6

GAAP - Lowest number

IFRS - Middle Number

Question 7

Research and Development Costs

Answer 7

GAAP - Expense All

IFRS - Only Research is Expensed.
Development is Capitalized (Future economic Benefit)

Question 8

How are Positive and Negative Cash Balances shown on Balance Sheet

Answer 8

GAAP - Positive is an Asset. negative is a liability

IFRS - Amounts are netted and shown as assets

Question 9

When is an asset Impaired

Answer 9

GAAP - Future cash flows must not exceed book value

IFRS - Book value exceeds the higher of

a) Present value of future cash flows OR
b) Fair Value less necessary costs to sell

Question 10

To Determine actual recognition of impairment loss

Answer 10

GAAP - Book Value minus Fair Value

IFRS - Book Value minus higher of

a) Present value of future cash flows OR
b) Fair Value less necessary costs to sell

Question 11

Contingent loss rules

Answer 11

GAAP - Must be Probable

IFRS - “Likely” = 51% or higher

Question 12

Prior Service Costs (a change in the projected benefit obligation created by an amendment in a contractual provision)

Answer 12

GAAP - Recorded in Accumulated OCI and then amortized

IFRS - Expensed immediately

Question 13

Revaluation of Fixed Assets rules under IFRS

Answer 13

Revaluation loss = Reduces Net Income

Revaluation gain = Increases OCI

MUST be done for an entire asset class

Question 14

Recovery of Previously recognized impairment losses

Answer 14

GAAP - Not allowed

IFRS - Recognized if circumstances are resolved

Question 15

Cost Flow Assumtions

Answer 15

GAAP - FIFO, LIFO, Averaging

IFRS - FIFO, Averaging
LIFO NOT allowed - not realistic & several weaknesses

Question 16

Refinancing of Current Debt to Long Term classification on Balance Sheet

Answer 16

GAAP - Refinancing done prior to Issuance of F/S

IFRS - Refinancing done prior to Balance Sheet Date

Question 17

Lower of cost or market

Answer 17

GAAP - Usually replacement costs unless it is above ceiling (NRV) or below floor (NRV - normal profit margin)

IFRS - Always NRV

Question 18

How are Biological Assets recorded

Answer 18

GAAP - Historical Cost minus Accumulated Depreciation

IFRS - Fair Value minus selling costs

Question 19

If Percentage of completion is deemed to be unreasonable how will profits be determined?

Answer 19

GAAP - Completed Contract

IFRS - Cost Recovery Method

Question 20

Capital Lease Interest Rates used by Lessor and Lessee

Answer 20

IFRS - Same Rates - Implicit Rate

GAAP - Different Rates