IFRS

Question 1

One single standard for companies that are not publicly traded

Answer 1

Eliminates topics not relevant to SME;
Simplifies recognition and measurement;
Disclosures are reduced;
Revisions to SME standards only once every 3 years

Question 2

IFRS are more principles-Based:

Answer 2

Less detailed than US GAAP;
Fewer rules;
Requires more professional judgment;
Less Literature to address exceptions

Question 3

IASB’s due process procedures includes:

Answer 3

Add the item to the Working Agenda;
Discuss the issue;
Prepare the discussion Paper;
Publish the discussion paper;
Issue the Exposure Draft;
Analyze comments to the Exposure Draft, and
Issue the IFRS

Question 4

International GAAP Hierarchy

Answer 4

Level 1
IFRSs and implementation guidance dealing with specific issue or similar situations
Level 2
Definitions, recognition criteria and measurement concepts for A, L, income and expenses in the Framework
Level 3
Pronouncements from other standard setting bodies using a similar Framework

Question 5

What is SMEs

Answer 5

Small and Medium-sized Entities

Question 6

Purposes of the IASB Framework

Answer 6

To assist the Board in developing new IASs and reviewing existing IASs;
To Assist the Board in promoting harmonization of standards by providing a basis for reducing the number of alternative accounting treatments permitted by IASs
To assist national standard-setting bodies in developing standards;
To assist preparers in applying IASs and dealing with topics not yet covered by IASs;
To assist auditors in forming an opinion as to whether financial statements conform with IASs;
To assist users in interpreting financial statements prepared in conformity with IASs;
To provide information for parties interested in the work of the IASC (now IASB)

Question 7

IASB 2 Assumptions:

Answer 7

1. The accrual method is used

2. The entity is a going concern

Question 8

What is the fundamental (primary) qualitative characteristic of useful financial information included in IASB’S Framework?

Answer 8

• Relevance
Predictive Value; Confirmatory Value
• faithful representation
Completeness; Neutrality; Free from Material Error

Question 9

IASB Framework definition for Assets, Liabilities, Equity

Answer 9

Assets: An asset is a resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity.

Liabilities: A liability is a 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 future benefits.

Equity: Equity is the residual interest in the asset after subtracting liabilities. Several sub-categories of equity are mentioned including funds contributed by shareholders, retained earnings, and reserves representing appropriations or capital maintenance adjustments.

Question 10

What type of balance sheet is required under International Financial Reporting Standards (IFRS)?

Answer 10

Statement of Financial Position items must be classified as current and non-current.

Question 11

What does a chart of accounts do?

Answer 11

Assigns account numbers to accounts for use in computerized information systems.

Question 12

What is the overall objective of financial statements under International Financial Reporting Standards (IFRS)?

Answer 12

To provide information about the financial position, financial performance and cash flows of an entity that is useful to a wide range of users in making economic decisions.

Question 13

What should financial statements do according to International Financial Reporting Standards (IFRS)?

Answer 13

Fairly present the underlying financial position and financial performance of the entity by faithfully representing the underlying economic reality the firm faced during the period.

Question 14

What kinds of transactions are recorded in special journals?

Answer 14

High volume similar transactions are recorded in special journals.

Question 15

What are the steps of the accounting cycle?

Answer 15

(1) Analyze source documents, (2) Post to ledger, (3) Make adjusting entries, (4) Prepare trial balance, (5) Prepare income statement, balance sheet, and cash flow statements, (6) Close temporary accounts.

Question 16

Do International Financial Reporting Standards (IFRS) allow the term “reserve” on the balance sheet?

Answer 16

Yes, the term reserve is allowed.

Question 17

Is a separate statement of other comprehensive income one of the formats permitted under International Financial Reporting Standards (IFRS)?

Answer 17

Yes, this is one of the formats permitted under IFRS.

Question 18

What two formats are accepted under International Financial Reporting Standards (IFRS) for Income Statement presentation?

Answer 18

Single-step and multiple-step income statements.

Question 19

What does the multiple-step income statement present?

Answer 19

Includes multiple subtotals of revenues, expenses, gains, and losses. (Sales - Cost of Goods Sold = Gross profit; Gross profit - operating expenses = income from operations; Income from operations + or − other income / expenses= Income B/F Taxes; IBT − taxes = Net Income.)

Question 20

What does the single-step income statement present?

Answer 20

Total revenues and gains less total expenses and losses.

Question 21

What are the forms of the statement of comprehensive income?

Answer 21

Single statement and two statements.

Question 22

What is operating margin?

Answer 22

The excess of operating revenues over operating expenses.

Question 23

Are extraordinary items allowed in International Financial Reporting Standards (IFRS)?

Answer 23

No, extraordinary items are not allowed.

Question 24

How are expenses classified under International Financial Reporting Standards (IFRS)?

Answer 24

They are classified by business function or nature of the expense.

Question 25

Does International Financial Reporting Standards (IFRS) have a required minimum list of items to be reported on the income statement?

Answer 25

Yes, it has a minimum list of items.

Question 26

What is comprehensive income?

Answer 26

Net income + other comprehensive income items.

Question 27

Major differences between US GAAP and IFRS GAAP in income statement?

Answer 27

US
Reporting special items prescribed;
Dividends per share not required
Extraordinary allowed

IFRS
No requirement on reporting special items
Dividends per share required disclosure
Extraordinary not allowed

Question 28

What are the various types of generally accepted accounting principles which may be used by a U.S. entity?

Answer 28

Depending on the entity, the following types of generally accepted accounting principles may be used:

1. U.S. Generally Accepted Accounting Principles (GAAP);
2. U.S. Other Comprehensive Basis of Accounting (OCBOA);
3. International Financial Reporting Standards (IFRS);
4. IFRS for Small and Medium-sized Entities (SMEs).

Question 29

Identify some of the possible advantages of using IFRS for SMEs, instead of U.S. GAAP, by eligible entities.

Answer 29

1. More relevant standards;
2. Less complicated and voluminous standards;
3. Less costly standards to implement;
4. Less frequent changes in standards.

Question 30

Identify the types of entities that are not eligible to use IFRS for SMEs.

Answer 30

1. Entities that are required to file financial statements with a regulatory body (e.g., SEC) for the purpose of issuing securities in a public market; or
2. Entities that hold assets in a fiduciary capacity for a broad group of outsiders (e.g., banks, insurance companies, pension funds, etc.).