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IFRS Flashcards

1
Q

Explain the difference between GAAP & IFRS for application of the Conceptual Framework

A

“IFRS:

Entity should consider IASB Conceptual Framework for item with no standard

US GAAP:

Can’t apply to specific items”

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2
Q

Explain the difference between GAAP & IFRS for Discontinued Ops

A

“IFRS:

When Held for Sale, MUST measure assets and liabilities to FV with G/L recognized. Report at lower of CV or FV minus cost to sell.

US GAAP:

Remeasurement not required, but triggers impairment analysis.”

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3
Q

Explain the difference between GAAP & IFRS for Extraordinary Items

A

“IFRS:

Prohibited

US GAAP:

G/L If unusual and infrequent”

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4
Q

Explain the difference between GAAP & IFRS for Accounting Changes

A

“IFRS:

If retroactive change/retrospective restatement, need 3 B/S & 2 of each other F/S. Adjustment is to RE of beg. Prior period.

US GAAP:

Not required by GAAP, but SEC requires 2 B/S & 3 of each other.”

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5
Q

Explain the difference between GAAP & IFRS for Change in Accounting Entity

A

“IFRS:

Not a thing

US GAAP:

RESTATE all years shown”

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6
Q

Explain the difference between GAAP & IFRS for Error Correction

A

“IFRS:

Can restate at earliest date practicable if impracticable to determine cumulative of effect of error.

US GAAP:

No impracticality exemption”

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7
Q

Explain the difference between GAAP & IFRS for Comprehensive Income

A

“IFRS:

Revaluation surpluses for intangible assets and fixed assets

US GAAP:

No”

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8
Q

One of 2 differences in Notes to F/S

A

“IFRS:

Must include statement of IFRS Compliance

US GAAP:

No”

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9
Q

One of 2 differences in Notes to F/S

A

“IFRS:

Disclose judgments and estimates in accounting policy

US GAAP:

Estimates”

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10
Q

Explain the difference between GAAP & IFRS for Related Party Disclosures

A

“IFRS:

Disclose Key Management Compensation

US GAAP:

GAAP, no. SEC requires outside of F/S”

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11
Q

Explain the difference between GAAP & IFRS for Risk and Uncertainties

A

“IFRS:

Disclose assumptions and major sources of estimation uncertainty

US GAAP:

Must disclose:
1. Nature of Operations
2. Use estimates in F/S
3. Estimate of effect of accounting estimate change
4. Risk of near-term severe impact from a material concentration.
“

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12
Q

What principles may be used for interim reports?

A

“IFRS:

Use same principles as last annual F/S

US GAAP:

Certain principles/practices may be modified”

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13
Q

What reports are required for interim reporting?

A

“IFRS:

At a minimum:

  1. Condensed B/S for current period and end of LY
  2. Condensed Comprehensive Income for current period and YTD vs. LY
  3. Condensed Changes in Equity for YTD and LY YTD.
  4. Cash Flow for YTD and YTD LY
  5. Required Disclosures

US GAAP:

No minimum for GAAP. SEC has guidelines:
1. B/S for end of QTR and End of LY
2. I/S for QTR and YTD. May have rolling 12 months
3. Cash Flow for QTR and YTD. May have rolling 12 months
“

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14
Q

Explain the difference between GAAP & IFRS for Segment Reporting

A

“IFRS:

Report Segment Assets and Liabilities (if provided to chief operating decision maker)

US GAAP:

No requirement for liabilities”

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15
Q

Explain the difference between GAAP & IFRS for Revenue Recognition

A

“IFRS:

 Categories:
1. Sale of Goods
2. Rendering of Services
3. Interest, royalties and dividends
4. Construction contracts
Recognition Criteria:
• Revenue and Costs can measured reliably
• Probable economic benefits will flow to entity
• Each category has additional criteria

US GAAP:

Recognized when realized or realizable and earned, 4 criteria:
1. Persuasive evidence of an arrangement exists
2. Delivery occurred/services performed.
3. Price fixed and determinable
4. Collection reasonably assured
“

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16
Q

Explain the difference between GAAP & IFRS for Intangible Assets

A

“IFRS:

  • Development costs may be capitalized
  • Intangible assets reported using cost model or revaluation model

US GAAP:

• No
• Cost model only
“

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17
Q

Explain the difference between GAAP & IFRS for Computer Software development costs

A

“IFRS:

  • IFRS has no separate guidance
  • Are internal intangible

US GAAP:

• Different treatment of software to be sold and for internal use
• Cost be tech feasibility is expense
• After and up to sale point is Capitalized
“

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18
Q

Explain the difference between GAAP & IFRS for Intangible Impairment besides GW

A

“IFRS:

  • One-step: CV compared to recoverable amount
  • Recoverable amount= Greater of FV – Cost to Sell or Value in Used (PVFCF)
  • Reversal of Impairment loss permitted.

US GAAP:

• Two-Step for finite life; One Step for indefinite life
• Two-Step: 1. CV vs. Undiscounted FCF; 2. CV vs. FV
• Reversal not permitted unless held for disposal.
“

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19
Q

Explain the difference between GAAP & IFRS for Goodwill Impairment

A

“IFRS:

  • One Step at CGU Level
  • CV vs. Recoverable Amount
  • Loss first to GW then to other CGU assets pro-rata

US GAAP:

• Two-Step at Reporting Unit
• FV of Rpt. Unit vs. CV, then
• FV of GW vs. CV of GW
“

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20
Q

Explain the difference between GAAP & IFRS for Construction Contracts

A

“IFRS:

  • % Completion unless can’t estimate final outcome, then cost recovery method
  • Completed Contract NOT permitted

US GAAP:

% Complete or Completed Contract”

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21
Q

Explain the difference between GAAP & IFRS for Nonmonetary Exchange

A

“IFRS:

  • Similar & Dissimilar assets
  • Dissimilar same as having commercial substance
  • No Gains for Similar assets
  • Losses in Full for both

US GAAP:

• Having or Lacking Commercial Substance
• Having = FV with all gains recognized
• Lacking = Gains only with Boot received
• Losses in full for both
"
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22
Q

How is the Functional currency determined?

A

“IFRS:

Functional Currency Determination

  1. Currency influences sales prices
  2. Currency of Country who influences sale prices

US GAAP:

Functional Currency is that of entity’s primary economic environment.

Local currency is functional when stable
“

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23
Q

What happens when a foreign sub is in a highly inflationary economy?

A

“IFRS:

F/S of foreign sub in highly inflationary economy must be restated for inflation effects and converted to reporting currency using current rate

US GAAP:

Remeasurement method would be used”

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24
Q

Explain the classification differences between GAAP & IFRS for Marketable Securities

A

“IFRS:

3 Classifcations: Amortized Cost (HTM), FVPL (Trading), FVOCI (AFS)

Equity instruments generally measured at FVPL. Can make election to FVOCI if not Trading

US GAAP:

• Trading
• Available-For-Sale
• Held-to-maturity
“

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25
Q

Explain the difference between GAAP & IFRS for Marketable Securities Impairment

A

“IFRS:

  • Losses recorded in valuation allowance
  • If FVPL, NO impairment losses
  • If Amortized Cost, losses recorded in earnings
  • IF FVOCI, losses in OCI

US GAAP:

• Impairment losses recognized in earnings, basis reduced. Subsequent changes not recognized if HTM.
• IF AFS, subsequent increase is included in OCI, not I/S
“

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26
Q

Explain the difference between GAAP & IFRS for Equity Method – Step by step Acquisition

A

“IFRS:

Applied prospectively

US GAAP:

Retrospectively”

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27
Q

Explain the difference between GAAP & IFRS for Consolidation – Parent & sub different year-ends

A

“IFRS:

F/S adjusted for significant transactions during GAP Period

US GAAP:

Significant transactions require disclosure”

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28
Q

Explain the difference between GAAP & IFRS for Acquisition Method – NCI & GW

A

“IFRS:

Partial Goodwill or Full Goodwill method

US GAAP:

Full Goodwill Method”

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29
Q

Explain the difference between GAAP & IFRS for Inventory Valuation

A

“IFRS:

  • Lower of Cost or NRV (Ceiling)
  • Reversal of Write-downs allowed

US GAAP:

LCM (Floor/Ceiling)”

30
Q

Explain the difference between GAAP & IFRS for Inventory Cost Flow Assumptions

A

“IFRS:

No LIFO
Method should match actual flow of goods

US GAAP:

• Method should most clearly reflect periodic income
• Can use LIFO
“

31
Q

Explain the difference between GAAP & IFRS for Fixed Asset Valuation

A

“IFRS:

Cost Model: CV = Hist. Cost – AD – Impairment

Revaluation Model: CV = FV on Reval date – Subsequent AD – Subsequent Impairment

  1. Reval loss on I/S
  2. Reval Gain in OCI

US GAAP:

Cost Model only”

32
Q

Explain the difference between GAAP & IFRS for Investment Property

A

“IFRS:

  • Land and/or buildings to earn rental income or for capital appreciation
  • Reported at cost model with FV disclosed or..
  • At FV and not depreciated. G/L on I/S

US GAAP:

No”

33
Q

Explain the difference between GAAP & IFRS for Fixed Asset Depreciation

A

“IFRS:

  • Method should match expected pattern of FA consumption
  • Depr. Method, useful life, & SV must be reviewed each BS date
  • Component Depreciation required

US GAAP:

• Not required to match
• No review requirement
• Can use composite or component
“

34
Q

Explain the difference between GAAP & IFRS for Fixed Impairment

A

“IFRS:

One-step: CV vs greater of,,,
1. FV – Cost to Sell
2. Value in use (PVFCF)
Reversal of impairment loss permitted

US GAAP:

Two step:
Step 1: CV vs Undiscounted FCF

Step 2: CV vs. FV

Reversal only permitted if held for sale.
“

35
Q

Explain the difference between GAAP & IFRS for Lease Classification

A

“IFRS:

Operating or Finance Leases

US GAAP:

Operating or Capital”

36
Q

Explain the difference between GAAP & IFRS for Capital (Finance) Lease criteria

A

“IFRS:

If lease transfers substantially all the risks and rewards

US GAAP:

Lessee classifies as cap lease if OWNS:

Lessor classifies as sales-type lease if: OWNS & LUC

37
Q

Explain the difference between GAAP & IFRS for Initial Direct Costs of Lease

A

“IFRS:

Paid by lessee added to lease asset

US GAAP:

Expensed”

38
Q

Explain the difference between GAAP & IFRS for Sale-leaseback

A

“IFRS:

Gain recognition dependent of lease classification

US GAAP:

Recognition dependent on rights retained by seller-lessee”

39
Q

Explain the difference between GAAP & IFRS for Bond Issue Costs

A

“IFRS:

Deducted from CV
Amortized effective interest method

US GAAP:

An asset, amortized SL”

40
Q

Explain the difference between GAAP & IFRS for Bond discount/premium amortization

A

“IFRS:

Effective interest method only over expected life of bond

US GAAP:

Effective interest method only (SL if not really different). Amortization over contractual life of bond”

41
Q

Explain the difference between GAAP & IFRS for Convertible Bonds

A

“IFRS:

Bond liability and equity component (conversion feature) recognized. Bond liability recorded at FV.

US GAAP:

No separate recognition”

42
Q

What are the names benefit obligations?

A

“IFRS:

Defined Benefit Obligation (DBO)

US GAAP:

Project Benefit Obligation (PBO)”

43
Q

What are the components of benefit costs?

A

“IFRS:

Defined benefit cost includes service cost and net interest on defined benefit liability (asset)

US GAAP:

Components of cost are SIRAGE: Service Cost, Interest Cost, Return on Plan Assets (actual), Amortization of PSC, G/L loss amortization, Existing net obligation/asset amortization”

44
Q

How are the obligation amounts reported?

A

“IFRS:

Components reported separately on IS.

US GAAP:

Presented as one amount”

45
Q

How is prior service cost treated?

A

“IFRS:

Past Service Cost is not booked to OCI. On I/S

US GAAP:

Goes to OCI and is amortized to pension expense over plan participant’s remaining years of service.”

46
Q

How are gains and losses on the benefit liability (asset) treated?

A

“IFRS:

Gains and Losses are remeasuements of the defined benefit liability (asset) and are reported in OCI. Are not amortized to I/S

US GAAP:

Two choices:
1. Recognized on I/S
2. Book to OCI and amortize to pension expense using corridor approach
“

47
Q

How is the net benefit liability (asset) classified on BS?

A

“IFRS:

If Plan is overfunded, asset cannot exceed PV of future economic benefits available to entity in form of cash refund or reductions in future contribution. IFRS doesn’t specify whether the defined benefit liability (asset) is current or noncurrent

US GAAP:

Overfunded plan is reported in full as a noncurrent asset. Underfunded is reported in full as current liability, noncurrent liability, or both.”

48
Q

What goes in and out of OCI related to pensions?

A

“IFRS:

Remeasurement of the DBO are in OCI and not reclassified. Can transfer within equity.

US GAAP:

Unrecognized PSC and pension G/L are in AOCI.”

49
Q

Explain the difference between GAAP & IFRS for Sick Pay Benefits

A

“IFRS:

Must Accrue Sick Pay

US GAAP:

Not required to accrue nonvesting accumulating rights to sick pay. Only when 4 criteria met.”

50
Q

Explain how DTA are recognized and valued.

A

“IFRS:

No Valuation Allowance. Deferred tax asset recognized when probable that there will be enough taxable profit to offset

US GAAP:

Valuation allowance recognized when more likely than not that part or all of DTA will not be recognized.”

51
Q

Explain the difference between GAAP & IFRS for uncertain tax positions

A

“IFRS:

Uncertain tax positions not specifically addressed.

US GAAP:

Recognized in two-step process:
1. Recognition of tax benefit
2. Measurement of tax benefit
“

52
Q

Which tax rates are used for current and deferred taxes?

A

“IFRS:

Current and deferred taxes calculated using enacted or substantially enacted rates

US GAAP:

Enacted rates only”

53
Q

Where are adjustments to deferred tax balances recognized?

A

“IFRS:

Adjustments to Deferred tax balances occur on I/S, unless original transaction occurred in OCI.

US GAAP:

Recognized on I/S”

54
Q

How are DTA & DTL classified on BS?

A

“IFRS:

DTA & DTL are Noncurrent on BS. Both can be netted.

US GAAP:

Depends on related asset. If no related asset, use when it reverses. Netted by current or noncurrent.”

55
Q

Explain the difference between GAAP & IFRS for Accounting for Stock Issued to Employees

A

“IFRS:

ESPP & Stock Options are Compensatory

US GAAP:

Non-compensatory if certain requirements met”

56
Q

Explain the difference between GAAP & IFRS for Statement of Changes in Shareholders’ Equity

A

“IFRS:

Presented as a primary F/S

US GAAP:

May be Primary or in the notes”

57
Q

How are contracts that can be settled in cash or common stock affect Diluted EPS?

A

“IFRS:

Contracts that can be settled in cash or stock are presumed to be settled in common share and included in diluted EPS

US GAAP:

Not included if circumstances indicate will be paid in cash”

58
Q

How are contingently issuable ordinary shares handled for Diluted EPS?

A

“IFRS:

Contingently issuable ordinary shares are treated as outstanding and in Diluted EPS only if the conditions are satisfied. (All or nothing)

US GAAP:

If not met, the number of contingently issuable shares in diluted EPS is based on the number of shares that would be issuable if the reporting period were the end of the contingency period.”

59
Q

This difference relates to what can be included in cash in CF.

A

“IFRS:

Cash may include bank overdrafts

US GAAP:

Overdrafts are excluded”

60
Q

What happens must be done if the Direct Method is used in the Statement of Cash Flows

A

“IFRS:

If Direct Method used, not required to present reconciliation for cash flow from operating activities

US GAAP:

Reconciliation required if Direct method used.”

61
Q

What are the differences between CFO, CFI, & CFF?

A

“IFRS:

  • Interest/Dividends Received: CFO or CFI
  • Interest/Dividends Paid: CFO or CFF
  • Taxes Paid: CFO, CFI, CFF

US GAAP:

Interest and dividends received, interest paid and taxes paid: CFO

Dividends Paid: CFF
“

62
Q

How is cash flow per share handled?

A

“IFRS:

Cash Flow per share not prohibited

US GAAP:

Cash Flow per share prohibited”

63
Q

Explain the difference between GAAP & IFRS for VIE’s

A

“IFRS:

Special Purpose Entity (SPE). Sponsoring Company hold, must consolidate when:
• Is benefited by SPE’s activities
• Has decision making powers that allow it to benefit
• Absorbs risks and rewards
• Has a residual interest SPE

US GAAP:

VIE does not have equity investors with voting rights or lacks sufficient financial resources to support itself. The primary beneficiary of the VIE must consolidate. The primary beneficiary has power to direct the activities of the VIE that most significantly impact the entity’s performance and :
• Absorbs the expected VIE losses, or
• Receives the expected VIE residual returns
“

64
Q

Explain the difference between GAAP & IFRS for Asset Retirement Obligations

A

“IFRS:

Asset retirement obligation is called a decommissioning liability. Is remeasured each period.

US GAAP:

ARO is initially measured at FV and adjusted only for changes in amount and timing of cash flows.”

65
Q

What are the terms related to contingencies?

A

“IFRS:

Probable = More likely than not.
Possible = May, but probably won’t occur

US GAAP:

Probable = Likely to occur
Reasonably Possible = more than remote, but less than likely
“

66
Q

When is a contingent liability recorded?

A

“IFRS:

Contingent liability only recorded when present obligation from a past event exists, the obligation is probable, and the amount can be reasonably estimated.

US GAAP:

Contingent liability only recorded when it is probable that an asset has been impaired or liability incurred and amount of loss can be reasonably estimated.”

67
Q

Explain the difference between GAAP & IFRS for Subsequent Events

A

“IFRS:

Recognized subsequent events are “adjusting events after the reporting period”. Non-recognized subsequent event are “non-adjusting events after the reporting period”. Going concern: an entity cannot prepare its F/S on a going concern basis if going to liquidate.

US GAAP:

Subsequent event period extends through the date F/S are issued or available to be issued. Are recognized or non-recognized,”

68
Q

When can the Fair Value Option be elected for valuing financial assets and liabilities?

A

“IFRS:

Fair Value Option can only be elected for financial assets if to reduce inconsistencies. For financial liabilities, only if (1) to reduce inconsistencies or (2) a group of assets or liabilities are managed and evaluated on a fair value basis, in accordance with strategies by key management.

US GAAP:

Entities may elect the fair value option from financial assets and liabilities, with unrealized G/L going to I/S.”

69
Q

What risk’s must be disclosed in relation to Financial Instruments?

A

“IFRS:

Entities required to disclose risks arising from financial instruments, including credit risk, liquidity risk, and mark risk.

US GAAP:

Credit risk required. Market risk optional”

70
Q

How Financial Assets and Liabilities initially valued?

A

“IFRS:

IFRS 9: All financial assets and liabilities should be initially recognized at fair value and then subsequently measured at either amortized cost or fair value

US GAAP:

FASB doesn’t have anything yet.”

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