Chapter 1

Question 1

what’s the role of the conceptual framework

Answer 1

ensure accounting standards are formulated in a consistent + logical way, plus ensure accounting issues can be effectively resolved through professional judgement by providing a basis to do so.

the conceptual framework provides guidelines for resolving accounting issues where accounting standards may not provide definitive or conclusive guidance

Question 2

what’s the characteristics for IFRS

Answer 2

fundamental (relevance, faithful representation which are the same as ASPE characteristics - understandability, relevance, reliability, comparability)

enhancing - comparability, verifiability, timeliness, understandability

Question 3

define verifiability and timeliness for IFRS

Answer 3

verifiability - information faithfully represents the economic phenomena it purports to represent - info that is disclosed should result in a consensus among various knowledgeable and independent observers

timeliness - requires having financial information available to decision-makers at tremendous speeds, more recent, up-to-the minute information is generally seen as more useful

Question 4

ASPE VS IFRS - balance sheet - statement of financial position

Answer 4

IFRS requires presentation in order of liquidity if it is deemed that such presentation provides info that is reliable + more relevant

with IFRS, assets + liabilities are not necessarily classified between current + non-current

IFRS requires a statement of financial position as at the beginning of the earlier comparative period in 2 specific circumstances

PP&E - revaluation; IFRS allows PP&E to be carried on the balance sheet using a cost model or a revaluation model. the revaluation model allows companies to carry their PP&E at a revalued amount less subsequent amortization + impairment (requires companies to revalue their PP&E frequently enough sot hat the fair value isn’t materially different than the carrying amount at the balance sheet date) if the asset is revalued the entire class of assets to which that asset belongs needs to be revalued as well.

PP&E - IFRS; depreciable amount is simply the asset cost - residual value but if the company chooses the revaluation model the depreciable amount will change every time the asset is revalued.

PP&E - IFRS; component separation & depreciation - requires the separation between an asset into different components

PP&E - IFRS; incidental revenue + expenses would be recognized as comprehensive income under IFRS while ASPE they’d be added to the asset’s cost. e.g. delays to starting construction

Question 5

aspe vs ifrs

Answer 5

ASPE = make accounting + financial reporting user-friendly + not resource-intensive,

IFRS = applicable to very broad, international, business community - require more disclosure

Question 6

ASPE vs IFRS - income statement - statement of profit or loss and other comprehensive income

Answer 6

other comprehensive income contain items that aren’t included as part of net income

difference in revenue recognition criteria- the general process in IFRS: engage in contract, performance obligations, revenue is recognized when the entity satisfies a performance obligation

Question 7

ASPE vs IFRS - statement of retained earnings

Answer 7

IFRS doesn’t require a separate statement of retained earning to be presented

IFRS requires a statement of changes in equity - IFRS needs a separate financial statement showing the changes in all equity component throughout the year

Question 8

define accumulated other comprehensive income (OCI)

Answer 8

running total of all the change sin OCI.

Question 9

ASPE vs IFRS cash flow statement - statement of cash flows

Answer 9

difference in classification of interest + dividends
- option 1: interest + dividends paid/received can be seen as an operating cash flow
- option 2: interest + dividend received can be classified as investing activities since they flow through the income statement but also represent a return on investment. interest + dividend paid can be classified as financing activities since they flow through the income statement but also represent a cost of obtaining financial resources
- once the company chooses an option they must continue to report this way in the future.

Question 10

other differences between ASPE + IFRS

Answer 10

ESG + sustainability reporting is significantly more prevalent in public vs private companies

IFRS has an exemption that allows entities not to have to restate prior periods on the basis of impracticality - if deemed impracticable to correct the error, the entity does not have to redo the prior period financial statements unlike in ASPE

accounting policy may only be changed under IFRS if they result in more relevant + reliable info while ASPE has no criteria to be met to change

IFRS doesn’t permit comparative info to be omitted. while in ASPE it permits if if the comparative info is deemed not meaningful.