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Flashcards in IFRS Deck (45):
2

Which organization's standards are the most authoritative in the hierarchy of international accounting?

The International Accounting Standards Board (IASB)

3

Where is the first place management should look for guidance on international recognition and accounting policies?

The International Financial Reporting Standards (IFRS) issued by the IASB

4

Which framework helps to develop standards for international accounting?

The IASB Framework

* The framework is NOT a standard itself
* The framework does not supersede any standard's authority

5

What is the objective of the IFRS framework?

To provide users with information on international accounting.

6

Which assumptions are followed within the IRFS framework?

The entity is a going concern (IFRS cannot be used if NOT a going concern)

Entity uses the ACCRUAL basis of accounting.

7

What are the qualitative characteristics of accounting information wtihin IFRS?

Understandability - Easy to use and understand

Relevance - helps user make decisions, predictive value, confirmatory role, materiality

Reliability - Faithful representation, substance over form, neutrality, prudence, completeness

Comparability - Comparative information from prior year is required

8

Which aspects of RELEVANCE in IFRS differ from GAAP?

Under IFRS, a confirmatory role is played by information (as opposed to feedback value in GAAP)

Materiality falls under relevance for IFRS, versus being iprimary constrainti in GAAP

9

How does RELIABILITY differ under IFRS from GAAP?

Both have neutrality and faithful representation or representational faithfulness.

GAAP also has verifiability;

as opposed to 'substance over form'

completeness

and prudence within IFRS.

Note: PRUDENCE or exercising caution replaces 'conservatism' in GAAP.

10

How does comparability differ under GAAP versus IFRS?

Comparative information from prior year is required under IFRS.

GAAP requires that if multiple years are presented, they are consistently prepared, however it doesn't require prior year comparative statements.

11

What are the constraints within IFRS?

Timeliness

Cost vs. Benefit

Fair Presentation of the company - IFRS can be overridden if it misrepresents the true financial condition of the company, but it must be disclosed.

12

Which items are considered reporting 'elements' under IFRS?

Asset
Liability
Equity
Income
Expense

13

What are the criteria for recognition on IFRS financial statements?

Probable future economic benefit

Can be measured reliably

If the value or outcome cannot be measured reliably, IFRS requires the use of the Cost Recovery Method.

14

When transitioning to IFRS, what type of financial statement must be produced for the first reporting period?

A full comparative statement using IFRS.

15

If IFRS was implemented in June 2010 for use in the December 31, 2010, financial statements, what is the Date of Transition?

January 1, 2009, because a full year of comparative statements is required fromt he previous year

16

For Property, Plant and Equipment, which election is the most efficient method for converting assets to IFRS?

The Fair Value election

17

Where on the financial statements are adjustments for adopting to IFRS made?

In the entity's retained earnings or equity

18

How is going concern different under IFRS than from GAAP?

Going concern is an ASSUMPTION under IFRS

19

How are extraordinary items treated under IFRS?

IFRS doesn't allow extraordinary items.

20

How is the completed contract method used under IFRS?

Completed contract method is not allowed under IFRS.

21

How is LIFO treated under IFRS?

IFRS does not allow LIFO.

22

Which financial statements are required under IFRS?

Statement of Comprehensive Income

Statement of Changes in Equity

23

How is the term 'income' used in IFRS?

'Income' is used instead of revenue and encompasses BOTH revenue and gains.

24

How is the term 'profit' used in IFRS?

In IFRS, the term 'profit' is used instead of Net Income.

25

How does IFRS treat gains?

They are treated the same as revenue and are not separated on the financial statements.

26

How does IFRS treat losses?

In IFRS, losses are treated the same as expenses, but they ARE separated on the financial statements.

27

How does refinancing of current liabilities to long-term liabilities under IFRS differ from GAAP?

Under IFRS, current liabilities can only be refinanced into a non-current liability if the refinance agreement is EXECUTED prior to the balance sheet date.

GAAP requires only intent to refinance- not actual execution.

28

How do contingent liabilities differ between GAAP and IFRS?

Under GAAP, there are three classifications of contingent liabilities -
Probable
Reasonably Possible
and Remote.

Under IFRS, contingencies are 'uncertain future events' and are classified as a provision if probable and measurable, even if uncertain in timing or amount.

29

How are bonds recorded under IFRS?

Bonds may be recorded on the Statement of Financial Position using one of two methods

Fair Value through profit or loss
*Liability revalued at the end of each period
*Gain or Loss recognized in period

Amortized Cost
*Using Effective Interest Method

30

How are deferred taxes treated under IFRS?

They use the 'liability method' - all deferred tax liabilities must be reported, but only 'probable' deferred tax assets can be reported.

They are non-current on the statement of financial position.

31

When can deferred tax assets and liabilities be netted under IFRS?

ONLY if they are related to the same country/taxing authority


For example, China Deferred Tax Assets can’t offset Japan Deferred Tax Liabilities

32

Which tax rates are used for calculating deferred tax assets/liabilities under IFRS?

The enacted rate or substantially enacted tax rate.

(GAAP is the enacted tax rate only)

33

Which items are recorded on the Income Statement in IFRS?

Income
Finance Costs
Tax Expense
Discontinued Ops
Profit/Loss
Non-controlling interest in Profit/Loss
Net profit/loss attributable from equity

34

How are property, plant and equipment (PP&E) recorded and valued under IFRS?

Recorded at cost

Valued using either:

Cost model - asset carried at cost less accumulated depreciation and impairment loss

Revaluation model - asset adjusted to fair value less accumulated depreciation

35

What are the requirements for using the revaluation model for PP&E under IFRS?

Asset must be able to be reliably measured

Must be applied to whole class of assets- not just one asset

No guidance on how often assets should be revalued under IFRS

36

How is investment property reported under IFRS?

Initially recorded at cost

Revalued using either Fair Value model or Cost model

37

How is profit or loss recorded in the current period for investment property under the Fair Value model of IFRS?

Recorded on the Income Statement

Investment P/L = IS

PP&E P/L = OCI

38

Under IFRS, how is investment property reported under the Cost Model?

Carried at Cost minus Accumulated Depreciation

Fair Value must still be disclosed in the notes to the financial statements

39

How are leases reported under IFRS?

Operating Leases can be recorded as Investment Property if measured at Fair Value

All other investment property must use Fair Value Model if one asset uses it

40

How are intangible assets valued under IFRS?

Using either the Cost Model (cost less Accumulated Depreciation and Impairment Loss)

or

the Revaluation Model (Fair Value less Accumulated Depreciation)

41

How is internally generated goodwill reported under IFRS?

It is not recognized.

42

How is amortization of intangibles handled under IFRS?

If asset has a finite life- it is amortized over useful life.

If asset has indefinite life, it is not amortized, but is tested for impairment at the reporting date.

43

When must a lease be recorded as a Finance Lease under IFRS?

If the substantial risks of ownership have passed to the Lessee, then the Lease must be accounted for as a Finance Lease

44

How are defined benefit plans recorded under IFRS?

Project-unit-credit method calculates the PV of the defined benefit obligation

45

How are interest expense and/or finance costs classified on an IFRS statement of cash flows?

They can be classified as either Operating or Financing

Once a classification is chosen, all future costs must be classified there

46

How are significant non-cash transactions recorded on an IFRS statement of cash flows?

They must be included in the notes to the financial statements.