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Flashcards in IFRS - 2 Deck (58):

IFRS and GAAP are very similar in _________________

accounting for cash


_________________ is the only standard that discusses issues specifically related to cash

IAS No. 1 (revised), “Presentation of Financial Statements,”


Fraud triangle internationally

Applicable to all international countries


Fraud worldwide

Nearly have of companies have been victims to fraud in the two-year period


FASB announced that it intends to _______________

introduce more principles-based standards


Definition for cash equivalents

is the same under IFRS


Internal control procedures related to cash_______

are the same under IFRS


Cash and Cash equivalents under IFRS

are listed together


Cash (IFRS)

Comprised of cash on hand and demand deposits


Cash equivalents

Short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value


Under proposed new standards for financial statements

Companies would not be allowed to combine cash equivalents with cash


IFRS: Restricted Cash

Restricted cash funds may be reported as a current or non-current asset depending on the circumstances.


Cash Equivalents under IFRS

May be required to be reported seperately from cash in the future


IFRS requires that loans and receivables be accounted for at________________

amortized cost, adjusted for allowances for doubtful accounts

adjusted for estimated loss provisions


Allowances sometimes known as _________ under IFRS



Entry to record Allowance under IFRS:

Bad Debt Expense    XXX

                          Allowance for Doubtful Accounts XXXX


Picemeal approach to fair value

1.disclosure of fair value information in the notes.

2.the fair value option, which permits, but does not require, companies to record some types of financial instruments at fair values in the financial statements.


Factoring transaction: IFRS

Combination of focus on risks and rewards & loss of control

Permits partial derecognition



Factoring transaction: GAAP

Loss of control: primary criterion

does not permit partial derecognition


Estimated uncollectible accounts: IFRS

the entry to record estimated uncollected accounts is the same as GAAP.


Fair value option

The fair value option requires that all types of financial instruments be recorded at fair value.


Defintion for plant assets under both IFRS and GAAP

the same


Interest costs under IFRS and GAAP

interest costs during construction are capitalized


IFRS requires ___________

Component depreciation - specifies that any significant parts of a depreciable asset that have different estimated useful lives should be separately depreciated

*Allowed under GAAP but seldom used


IFRS uses the term ______________, rather than salvage value, to refer to an owner's estimate of an asset's value at the end of its useful life for that owner

residual value


Revaluation of plant assets - IFRS

allows companies to revalue plant assets to fair value at the reporting date

If used, must be applied to all assets in a class of assets

Assets experiecing rapid price changes must be revalued on an annual basis


GAAP and IFRS - development expense and cost

development expense - costs in the research phase (both IFRS and GAAP)

development cost - cost in the development phase are capitalized as development cost once technolgical feasibility is achieved (IFRS ONLY)


Who permits revaluation of property, plant, and equipment and intangible assets (except for goodwill)



When increasing a revaluation

credit revaluation surplus


Research and development costs under GAAP

are expensed


Under IFRS, value-in-use is defined as:

Future cash flows discounted to present value


 Although IFRS implies that receivables with different characteristics should be reported separately, _____________________________

there is no standard that mandates this segregation


IFRS requires a _______________ to test whether the value of loans and receivables are impaired.

Two-tiered approach

First, a company should look at specific loans and receivables to determine whether they are impaired.

Then, the loans and receivables as a group should be evaluated for impairment. GAAP does not prescribe a similar two-tiered approach.


Interest costs under IFRS and GAAP

are capitalized


Component depreciation under GAAP

allowed but seldom used


How is revaluation surplus listed?

as other comprehensive income


Journal entry revaluing under IFRS

Accmulated depreciation 200,000

                                   Plant assets 150,000

                            revaluation surplus 50,000


R&D Journal Entry IFRS

Research expense XXX

Development expense XXX

Development cost XXX

                                               Cash XXX 


IFRS permits revaluation of ____________

intangible assets

(except for good will)

GAAP does not revalue intangible assets


IFRS permits revaluation of _________________________

property, plant, and equipment and intangible assets (except for goodwill).


International Company has land that cost $450,000 but now has a fair value of $600,000. International Company decides to use the revaluation method specified in IFRS to account for the land. Which of the following statements is correct?

International Company would credit Revaluation Surplus by $150,000.


Liability definition: IFRS

present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits. Liabilities may be legally enforceable via a contract or law but need not be; that is, they can arise due to normal business practices or customs.


Current liabilities are presented in _________________

order of liquidity


Under IFRS, liabilities are classified as current if 

they are expected to be paid within 12 months


 Under both GAAP and IFRS, preferred stock that is required to be redeemed at a specific point in time in the future must be reported as ______________________

debt, rather than being presented as either equity or in a “mezzanine” area between debt and equity.


IFRS uses the term contingent liability

to refer only to possible obligations that are not recognized in the financial statements but may be disclosed if certain criteria are met


IFRS - provisions

Provisions = liabilities of uncertain timing or amount


Where is a contingent liability disclosed?

in the notes if criteria are met


Under IFRS, if preference shares (preferred stock) have a requirement to be redeemed at a specific point in time in the future, they are treated:

as a liability


The joint projects of the FASB and IASB could potentially:

change the definition of liabilities.
change the definition of equity.
change the definition of assets.
All of the above.


Astoria Financial: 

extended number of days before considering loans to be nonperforming


Wells Fargo

Extended number of days before writing off loans as uncollectible



transferred loans to a subsidiary who doesn't face the same capital requirements as the parent; less regulated


Coniial BancGroup:

Switched from a national to a less rigoroulsy regulated state bank charter


When a company establishes a "reserve" on its finacial statements against loans, do conumers still have an obligation to pay the loan off? Have the terms of agreement changed?

The consumers still have a legal obligation to pay the loan off

Nothing has changed regarding the terms of the agreement between the consumers and the bank


How does decreasing amount of uncollectible receivables impact both the balance sheet and the income statement?

A decrease in uncollectible receivables will decrease the amount of allowance for doubtful accounts needed which will decrease bad debt expense.

Less expense results in a higher net income for the subsequent period => income statement

Lower allowance for doubtful accounts => balance sheet


Management's incentive to reduce number of loans as uncollectible?

Lesser write offs drives more desirable bottom lines

Management is often under pressure to hit earnings targets and executive compensation often is tied directly to earnings of financial peroformance goals


Transparency - Current Event

Recording a transaction in a way that most clearly reports its underlying economics to financial statement users

Transparency does not hide or obscure any aspect of the underlying economic events it's reporting

Wells fargo and Astoria were not promoting transparency because these changes decrease the allowance for doubtful accounts in financial times where they should be increasing with net receivables decreasing

*They are allowable under GAAP