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Flashcards in IFRS - 2 Deck (58):
1

IFRS and GAAP are very similar in _________________

accounting for cash

2

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

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

3

Fraud triangle internationally

Applicable to all international countries

4

Fraud worldwide

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

5

FASB announced that it intends to _______________

introduce more principles-based standards

6

Definition for cash equivalents

is the same under IFRS

7

Internal control procedures related to cash_______

are the same under IFRS

8

Cash and Cash equivalents under IFRS

are listed together

9

Cash (IFRS)

Comprised of cash on hand and demand deposits

10

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

11

Under proposed new standards for financial statements

Companies would not be allowed to combine cash equivalents with cash

12

IFRS: Restricted Cash

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

13

Cash Equivalents under IFRS

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

14

IFRS requires that loans and receivables be accounted for at________________

amortized cost, adjusted for allowances for doubtful accounts

adjusted for estimated loss provisions

15

Allowances sometimes known as _________ under IFRS

provisions

16

Entry to record Allowance under IFRS:

Bad Debt Expense    XXX

                          Allowance for Doubtful Accounts XXXX

17

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.

18

Factoring transaction: IFRS

Combination of focus on risks and rewards & loss of control

Permits partial derecognition

 

19

Factoring transaction: GAAP

Loss of control: primary criterion

does not permit partial derecognition

20

Estimated uncollectible accounts: IFRS

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

21

Fair value option

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

22

Defintion for plant assets under both IFRS and GAAP

the same

23

Interest costs under IFRS and GAAP

interest costs during construction are capitalized

24

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

25

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

26

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

27

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)

28

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

IFRS

29

When increasing a revaluation

credit revaluation surplus

30

Research and development costs under GAAP

are expensed

31

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

Future cash flows discounted to present value

32

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

there is no standard that mandates this segregation

33

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.

34

Interest costs under IFRS and GAAP

are capitalized

35

Component depreciation under GAAP

allowed but seldom used

36

How is revaluation surplus listed?

as other comprehensive income

37

Journal entry revaluing under IFRS

Accmulated depreciation 200,000

                                   Plant assets 150,000

                            revaluation surplus 50,000

38

R&D Journal Entry IFRS

Research expense XXX

Development expense XXX

Development cost XXX

                                               Cash XXX 

39

IFRS permits revaluation of ____________

intangible assets

(except for good will)

GAAP does not revalue intangible assets

40

IFRS permits revaluation of _________________________

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

41

 
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.

42

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.

43

Current liabilities are presented in _________________

order of liquidity

44

Under IFRS, liabilities are classified as current if 

they are expected to be paid within 12 months

45

 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.

46

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

47

IFRS - provisions

Provisions = liabilities of uncertain timing or amount

48

Where is a contingent liability disclosed?

in the notes if criteria are met

49

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

50

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.

51

Astoria Financial: 

extended number of days before considering loans to be nonperforming

52

Wells Fargo

Extended number of days before writing off loans as uncollectible

53

BankAtlantic:

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

54

Coniial BancGroup:

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

55

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

56

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

57

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

58

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