International Financial Reporting Standards (IFRS)

Question 1

When do you recognize an element in the International Accounting Standards Board (IASB) framework?

Answer 1

When it is probable that there is a future economic benefit and the item has a cost or value that can be measured with reliability.

Question 2

What are some omitted topics for small and medium-sized entities (SMEs) in IFRS?

Answer 2

• Earnings per share
• Interim financial reporting
• Segment reporting

Question 3

List the steps of developing International Accounting Standards.

Answer 3

• Add the item to the agenda.
• Discuss the issue.
• Publish a discussion paper if the topic is difficult.
• Prepare and vote on the exposure draft.
• Issue the exposure draft.
• Analyze comments on the exposure draft.
• Debate the issue at hand.

Question 4

Identify the types of entities that are not eligible to use IFRS for SMEs.

Answer 4

1. Entities that are required to file financial statements with a regulatory body (e.g., SEC) for the purpose of issuing securities in a public market; or
2. Entities that hold assets in a fiduciary capacity for a broad group of outsiders (e.g., banks, insurance companies, pension funds, etc.).

Question 5

What did the SEC eliminate for foreign companies listed in the United States?

Answer 5

A reconciliation of earnings and equity to U.S. GAAP (Form 20-F) in their financial statements.

Question 6

Under IFRS, if no standards exist on an accounting issue, what should companies use?

Answer 6

The definitions, recognition criteria, and measurement concepts for assets, liabilities, income, and expenses in the Framework.

Question 7

What are the five elements in the IASB framework?

Answer 7

1. Assets
2. Liabilities
3. Equity
4. Income
5. Expenses

Question 8

When can revisions happen for small and medium-sized entities (SMEs) in IFRS?

Answer 8

Revisions for SMEs standards happen every three years at most.

Question 9

What is the highest level of international GAAP?

Answer 9

The International Financial Reporting Standards

Question 10

Do IFRS allow revaluation of plant assets and intangibles to fair value as a other comprehensive income item?

Answer 10

Yes, the standards allow this.

Question 11

Do IFRS have a required minimum list of items to be reported on the income statement?

Answer 11

Yes, the standards have a minimum list of items.

Question 12

What is meant by a “reliable measurement”?

Answer 12

It is a measurement in which a reasonable estimate is made.

Question 13

TRUE or FALSE: Income may be realized or unrealized.

Answer 13

True.

Question 14

What elements are considered income under the FASB framework?

Answer 14

“Revenue” and “gains” as separate elements.

Question 15

How are expenses classified under IFRS?

Answer 15

They are classified by business function or nature of the expense.

Question 16

Is a separate statement of other comprehensive income one of the formats permitted under IFRS?

Answer 16

Yes, this is one of the formats permitted under IFRS.

Question 17

TRUE or FALSE: The IASB framework should apply only to public companies, not private corporations.

Answer 17

False. The IASB framework should apply to both public and private companies.

Question 18

What are the various types of GAAP which may be used by a U.S. entity?

Answer 18

Depending on the entity, the following types of GAAP may be used:

1. U.S. GAAP;
2. U.S. Other Comprehensive Basis of Accounting (OCBOA);
3. International Financial Reporting Standards (IFRS);
4. IFRS for Small and Medium-sized Entities (SMEs).

Question 19

What is simplified for small and medium-sized entities (SMEs) in IFRS?

Answer 19

• Topics that are irrelevant are eliminated.
• Recognition and measurement aspects are simplified.
• Disclosures reduced to 10% of those in regular IFRS.

Question 20

Are IFRS more rules based or principles based?

Answer 20

Principle based.

Question 21

What are the underlying assumptions of the IASB framework?

Answer 21

• The financial statements are prepared on the accrual basis.
• The entity is a going concern.

Question 22

Does the IASB framework include losses for the term “expense”?

Answer 22

Yes, it includes such losses.

Question 23

What two formats are accepted under IFRS for income statement presentation?

Answer 23

1. Single-step statements

2. Multiple-step income statements

Question 24

What comprises income under the IASB framework?

Answer 24

It includes both revenues and gains.

Question 25

What are some of the purposes of the IASB framework?

Answer 25

• Assist the board to develop new International Accounting Standards (IASs).
• Promote harmonization of standards.
• Assist and provide information to interested parties.

Question 26

What will be the underlying conceptual support for future principles-based accounting standards?

Answer 26

Developing a common framework

Question 27

What elements of the FASB framework are not included in the IASB framework?

Answer 27

• Investments by owners
• Distributions to owners
• Comprehensive income
• Gains
• Losses

Question 28

What should financial statements do according to IFRS?

Answer 28

Fairly present the underlying financial position and financial performance of the entity by faithfully representing the underlying economic reality the firm faced during the period.

Question 29

Identify some of the possible advantages of using IFRS for SMEs, instead of U.S. GAAP, by eligible entities.

Answer 29

• More relevant standards
• Less complicated and voluminous standards
• Less costly standards to implement
• Less frequent changes in standards

Question 30

What is the overall objective of financial statements under IFRS?

Answer 30

To provide information about the financial position, financial performance, and cash flows of an entity that is useful to a wide range of users in making economic decisions.

Question 31

List some examples of simplified recognition and measurement for small and medium-sized entities (SMEs) in IFRS.

Answer 31

• Goodwill is amortized
• All research and development is expensed
• Categories of investments are reduced
• Less prior-year data is required for first-time adoption

Question 32

What type of balance sheet is required under IFRS?

Answer 32

Statement of financial position items must be classified as current and noncurrent.

Question 33

Do IFRS allow the term “reserve” on the balance sheet?

Answer 33

Yes, the term “reserve” is allowed.