Flashcards in FAR IFRS Deck (58):
What is the IASB?
International Accounting Standards Board
How are Gains and Losses measured under Held For Sale?
* Measured in accordance with applicable standards
* Gains and Losses must be recognized
* Reported at the Lower of carrying value or FV less costs to sell
How are Extraordinary Items handled under IFRS?
Extraordinary are prohibited.
How are accounting changes handled under IFRS?
Accounting changes are made with a retrospective restatement, making a cumulative effect adjustment to Beginning Retained Earnings.
The entity must also present 3 Balance Sheets and 2 of each other statement
How does IFRS handle changes in Accounting Entity?
IFRS does not include the concept of a change in accounting Entity.
How does IFRS handle Error Correction?
When it is Impracticable to determine error, the entity is required to restate the information prospectively from the earliest date that is practicable.
What does IFRS consider as Comprehensive Income?
Revaluation Surpluses(Gains)recognized when intangible assets and fixed assets are revalued.
How is Comprehensive Income reported using IFRS?
Comprehensive Income is reported using the
1. Single-statement approach
*Presentation of comprehensive income in Changes to Owners Equity is Prohibited.
IFRS requirement for the Notes to the Financial Statements?
IFRS requires an explicit and unreserved statement of compliance with IFRS
What does IFRS require for the Summary of significant accounting policies to be?
IFRS requires the disclosure of judgements and estimates made in the process of applying accounting policies.
How does IFRS treat related party disclosures?
IFRS requires the disclosure of Key Management compensation arrangements
How does IFRS treat uncertainties?
IFRS requires the disclosure of assumptions made about the future and other major sources of estimation and uncertainty at the end of the reporting period that could result in a material adjustment to the carrying amount of assets and liabilities within the next Financial year.
How are interim financial reporting conducted according to IFRS?
Interim financial statement must be prepared using the same principles and practices used in preparation of the most recent annual financial statements.
Also Includes this year's condensed statements and the immediate preceeding financial years statement.
Interim financial statements use which tax rate under IFRS?
IFRS uses the the enacted or substantially enacted tax rate.
IFRS segment reporting disclosures includes?
1. Segment profit or Liability
2. Segment Liabilities
IFRS Revenue recognition is divided into which 4 categories?
1. Sale of goods
2. Rendering of services
3. Revenue from interest, royalties, and dividends
4. Construction Contracts
Common Revenue Recognition criteria include under IFRS?
1. Revenue and costs can be measured Reliably
2. Probable that the event will occur
3. Has additional revenue recognition criteria.
Intangible Assets unique qualities under IFRS
1. Research must be expensed.
2. Development costs may be capitalized.
3. Reported using the cost OR revaluation method.
How does IFRS handle Computer Software Development costs?
There is no separate guidance under IFRS
How does IFRS handle Impairment of Intangible
1 step method where the carrying value is compared to the asset's recoverable amount.
Recoverable amount is the greater of FV - cost to sell and assets value in use
Impairment loss is recognized when carrying value exceeds recoverable amount
Reversals are permitted
How is goodwill Impairment handled under IFRS?
IFRS uses the 1 step approach is when carrying value is compared to the recoverable amount
Recoverable amount is the greater of the FV - cost to sell and its value in use.
Impairment loss occurs when carrying amount exceeds recoverable amount.
First allocated to goodwill then on a pro-rata basis to other assets.
Which method of construction contracts is used under IFRS and how is it accomplished?
Percentage of completion method is used unless final outcome cannot be reliably estimated. then cost recovery method is used
Completed contracts method is NOT permitted
How is nonmonetary exchanges defined and used under IFRS
Nonmonetary exchanges are characterized as exchanges of similar assets and exchanges of dissimilar assets.
Exchanges of dissimilar assets generate revenue like GAAP.
Exchanges of similar assets do NOT generate revenue and no gains are recognized.
Losses are recognized in full in all transactions
How are foreign currency translations handled under IFRS?
Finanacial statements must 1st be restated for the effects of inflation and THEN must be converted from the foreign currency to the reporting currency using the current/year-end rate.
3 categories for marketable securities under IFRS
1. Financial assets at FV through profit or loss
2. Available for sale
Under IFRS how is Marketable securities available-for-sale exchanges Gains and losses handled ?
1. Regular Gains and losses are included in OCI
2. Unrealized Gains and Losses are reported in OCI
*EXCEPTION* Foreign exchanges gains and losses are directly reported on Income Statement*
How is the Equity Method applied under IFRS?
1. Prospective treatment is required
2. Retrospective treatment is not required.
How is the acquisition method-noncontrolling interest and goodwill?
Calculated using the Partial goodwill method or the Full goodwill method.
*Partial goodwill method is required, Full goodwill method may be conducted on a transaction by transaction basis*
How is inventory valuation conducted under IFRS?
1. Inventory is reported at the lower of cost or net realizable value.
2. Reversals of inventory write-downs is allowed for subsequent recoveries of inventory value.
Inventory cost flow assumption used under IFRS?
1. The method used to account for inventory should match the actual flow of goods.
2. LIFO is prohibited
Fixed assets valuations under IFRS has 2 methods. What are they? and how are they used?
1. Cost model:
CV=HC-ACU. Depr. - Impairment
2. Revaluation model:
CV= FV on revaluation date- subsequant ACU. Depr. - Subsequant Impairment
Revaluation Losses are reported on the I/S
Revaluation Gains are reported in OCI as revaluation surplus.
How is investment properties handled under IFRS?
1. Defined as land and/or buildings held to earn rental income or for capital appreciation.
Has 2 methods
1. Cost model
2. FV model
Does not depreciate, G/L are reported on I/S
What type of depreciation is used under IFRS
Component depreciation is used under IFRS
How is Fixed asset Impairments handled under IFRS?
IFRS uses a 1 step test when CV> the higher of:
1. FV-Cost to sell
2. Value in use
Reversals of Impairment losses is permitted
Types of leases under IFRS?
1. Operating Leases
2. Financing Leases
Both the lessee and lessor classify a lease as a finance lease if the lease transfers substantially all the risks and rewards of ownership to the lessee.
How are the initial direct costs of a lease handled under IFRS?
Initial direct costs paid by the lessee are added to the amount recognized as a finance lease asset.
How are bond issue costs handled under IFRS?
Bond issue costs are deducted from the carrying value of the liability and amortized using the effective interest method.
How is bond discount/premium amortization handled under IFRS?
The effective interest method is required and the straight line method is prohibited. Amortization is done over the expected life of the bond.
How are convertible bonds handled under IFRS?
A liability(Bond) and Equity component should be recognized when issued
Bond liability is recoded at FV
Actual Proceed Received- FV of the bond is recorded as a component of equity.
What is the defined benefit pension liability defined as under IFRS?
The defined benefit obligation is the defined benefit pension plan liability.
Includes service costs and net interest
Components are generally reported separately
Service costs increase the DBO and is reported as defined benefit service costs on the I/S NOT OCI
Gains and Losses are referred to as remeasurements and reported in OCI NOT the I/S
How are sick pay benefits handled under IFRS?
Entities are required to accrue sick pay benefits as services are rendered by employees.
How is the Accounting for Income taxes including valuations and deferred tax assets handled under IFRS?
Valuation allowances are not permitted
A deffered tax asset is recognized when it is probable that sufficient taxable profit will be available against which the temporary difference can be utilized.
Uncertain tax positions are not specifically addressed
Uses the Enacted or substantively enacted tax rates.
How are changes to the tax law handled under IFRS?
Changes are recognized on the I/S
exception when the deffered tax balance arises from a transaction or event that is recognized in OCI
How are deferred tax assets/liabilities reported on the Balance Sheet?
reported as non current on the BS and deferred tax assets and liabilities may be netted.
How is the accounting for stock issued to Employees handled under IFRS?
Employee stock purchase plans and stock options are generally considered to be compensatory.
Is the Statement of Changes in Shareholder's Equity a primary financial statement under IFRS?
How is diluted EPS handled under IFRS?
1. Contracts may be settled in cash or stock are always presumed to be settled in common shares.
2. Contingently issuable ordinary shares are included if satisfied.
How are Bank Overdrafts handled under IFRS in the Statement of Cash flows.
May be included if they are an integral part of an entities cash management.
Is cash flow per share allowed under IFRS?
IFRS prohibits cash flow per share
Under the Direct method of the Statement of Cash Flows which reconciliation is not required?
The reconciliation of net income to net cash flows from operating activities
How are interest, dividends and taxes handled under IFRS?
1. Interest/ Dividends Received= In Operating or Investment sections
2. Interest/Dividends paid= Operating or Financing
3. Taxes Paid= Operating, Investment and Financing
What are the rules for Asset Retirement obligations under IFRS?
1. asset retirement is called a decommissioning liability
2. Measured each period for changes in the amount or timing of cash flows and changes in the discount rate.
How are Contingencies handled under IFRS?
Probable= more likely than not to occur
Possible= may but probably will not occur
How are subsequent events handled under IFRS?
Recognized subsequent events are referred to as "Adjusting events after the reporting period"
Non-recognized subsequent events are referred to as " non-adjusting events after the reporting period"
Under this section of the FASB: An entity cannot prepare its financial statements on a going concern basis if management determines after year-end that it intends to liquidate the company or cease trading.
What requirement is their for financial assets to elect the FV option?
FV option can only be elected if doing so eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise from measuring measuring assets or liabilities or recognizing the gains and losses on them on different basis
FV option for fiancial liabilities can be used under IFRS when?
1. Doing so eliminates or significantly reduces a measurment or recognition inconsistency that would otherwise arise from measuring assets or liabilities or recognizing the gains and losses on them at different basis
2. Performance of financial instruments is measured on a FV basis
Required disclosures for risks under IFRS?
Entities are required to disclose the nature and extent of risks arising from financial instruments, including credit risk, liquidity risk, and market risk.