IFRS Flashcards
How does IFRS view Interim Financial Reporting?
IFRS does NOT mandate Interim Reporting. GAAP does.
IFRS views each interim periods as a discrete reporting period.
GAAP views Interim Periods as an Integral part of an Annual period
IFRS definition of Value in Use
The present value of the asset’s expected Cash Flows.
The recoverable amount of an asset is the gerater of it
Fair Value MINUS Cost to Sell
or
Value In Use
How does IFRS report the stmt of Comprehensive Income?
- Revenue
- Finance Costs
- Share of Profits and Losses of Equity Method
- Tax Expense
- After Tax Profit Loss on Disc. Ops.
and After Tax Gain on disposal
- Profit or Loss (Not Net Income)
- Each Component of OCI classified by nature
- Share of the other OCI equity method
- Total Comprehensive Income
How does IFRS calculate the amount of provision for a Liability?
An entity is subject to warranty claims. A reliable estimate is that between $1 million and $3 million will probably be paid out. No estimate of loss within this range is more likely than any other.
IFRS takes the mid point, of $2million between 1 and 3 Mill….whereas GAAP takes the low point of $ 1 million or most likely estimate.
Under IFRS, the impracticability exception applies to which of the following?
Retrospective Application of a New Accounting Policy
Retro. App. of a Prior Period Error
Retrospective application of a new accounting policy is not done if it is impracticable to determine period-specific effects or the cumulative effect. Impracticable means that the entity cannot apply a requirement after making every reasonable effort
When an Investor is presumed to have a Significant Influence, how must the Interest be accounted for under IFRS?
Under IFRS, when an entity is presumed to have signficant influence over its investee it must account for its investement under only the EQUITY METHOD
GAAP may use Fair or Equity Method when it has significant influence
Under IFRS which policies may an entity apply to measure INVESTMENT PROPERTY?
Cost Model or Fair Model.
Cost Model= Cost - Accum Depr. - Impairments
Fair Model- Remeasured at Far Value
G/Ls are recognized immediately in Profit or Loss
How does IFRS determine the cost of Inventory?
Lower of Cost or Net Realizeable Value
NRV Under IFRS:
the estimated selling price in the ordinary course of business minus the estimated costs of completion and sale.
Which methods does IFRS use to evaluate Plant Property and Equipment (PPE)?
Cost or Revaluation Model
Cost= Cost - Accum Depr. - Impairment Losses
Revaluation Model
Increases in Value - OCI
Decreases in Value - Expense
Must be applied to whole class, no guidance to how often it must be revalued
When are loss contingency provisions required for IFRS?
recognition of provisions is required when (1) the entity has a legal or constructive present obligation resulting from a past event (called an obligating event), (2) it is probable that an outflow of economic benefits will be necessary to settle the obligation, and (3) its amount can be reliably estimated. Thus, no obligation described meets the recognition criteria for a provision. Hence, each is a contingent liability and requires disclosure unless the possibility of the outflow of resources is remote. Thus, items I and II but not III are disclosed.
What is the difference between IFRS guidance for Business Combos and GAAP?
IFRS requires a subsidiary’s stmts used in preparation must be adjusted to reflect uniform acct. policies with the parent
GAAP does not require the Parent to adjust the subsidiary’s accounting policies to make them uniform with theirs
How dsoes IFRS treat interest income on plan assets for the period?
IFRS, interest income on plan assets for the period is recognized in profit or loss.
It equals the fair value of the plan assets at the beginning of the year (adjusted for contributions and benefit payments during the year) times the same discount rate used to discount the defined benefit obligation.
What is the difference between GAAP and IFRS carrying amounts of PPE?
GAAP cannot carry an item of PPE at an amount above its historical cost.
IFRS can carry an item at its revalued amount, which can be greater than its historical cost
Under IFRS an asset is impaired when its carrying amount exceeds its recoverable amt.
The recoverable amt under IFRS is:
The greater of its
fair value minus cost to sell
or value in use***.
The present value of the asset’s expected cash flows
What is the difference between GAAP and IFRS valuation of Non Controlling Interests?
According to IFRS, at the acquisition date the acquirer may measure NCIs at
(1) fair value or
(2) their proportionate share of the fair value of the acquiree’s identifiable assets and liabilities.
GAAP can only use Fair Value
What is the difference between GAAP and IFRS regarding Impairment of Long Lived Assets
IFRS allows impairment reversals in subsequent period on Long Lived Assets if a change in the estimates to measure the recoverable amount changes.
Under GAAP the reversal of Impairment Losses is PROHIBITED.
How does IFRS measure and report Intangible Assets?
Cost or Revaluation Model.
Revaluation model may be chosen only if the intangible asset has an active market
What is the difference between IFRS and GAAP adjustments of Inventory.
IFRS permits the reversals of adjustments in a subsequent period, allowing Inventory to be written up to the extent of the previous write down.
GAAP does not allow the reversal of a previous write- down on inventory.
Cash paid for For Interest or Dividends under IFRS may be in what category?
Operating or Financing
Cash received for Interest or Dividends may be reported in what category?
Operating or Investing
Which items do NOT qualify to be Depreciated under IFRS?
Investment Property accounted for under the Fair Value Method
Non Current Asset held for Sale
What is the Residual Allocation Method?
Proceeds of bonds issued with detachable share purchase warrants must be assigned based on the residual allocation method.
The Liability Account is measured at Fair Value
and the residual proceeds is assigned to the equity component.
Impairment Method for IFRS?
Carrying Amount
MINUS
the greater of
FV MINUS Cost of Disposal
or Value in Use
=Impairment Loss
What is the difference between IFRS and GAAP in regards Going Concern?
Under IFRS, auditors assume the entity is a going concern.
Under GAAP the auditor makes that determination, if it is indeed a going concern
What are the 5 elements under IFRS?
Asset
Liability
Equity
Income (NOT REVENUE) (contains gains)
Expense (contains losses)
How does IFRS recognize Revenue?
Probably Future Economic benefit and can be measured reliably.
Cost Recovery method if the value or outcome cannot be measured reliably. NO COMPLETED CONTRACT
GAAP uses completed contract method.
Which statements are required under IFRS and not under GAAP?
Comparative Financials required under IFRS
Statement of Comprehensive Income Required
Statement of Changes in Equity Required
These are not required under GAAP
What is the IFRS date of transition?
If IFRS is implemented in June 2010 for use in 2010 financials,
the date of transition is actually January 1, 2009 because a full year of comparative stmts are required from the previous year
How are bonds reported under IFRS?
Fair Value through profit or loss
or
Amortized Cost
How are Deferred Taxes reported under IFRS?
Use the Liability Method
All Deferred Tax Liabilities must be reported
Only Probably Deferred Tax Assets can be reported
Deferred Tax Assets and Liabilities are NON CURRENT
Deferred Tax Assets and LIabilities can be netted only if they are related to the same taxing authority
What does Tax Rates are used under IFRS?
The Enacted Tax Rate
or Substantially Enacted Tax Rate
GAAP only uses the Enacted Tax Rate only
How are Operating Leases treated under IFRS?
Can be recorded as Investment Property if measured at Fair Value
Where are significant non-cash transactions recorded under IFRS?
Must be included in the Notes to Financial Stmts
If an IFRS company decides to revalue its equipment each year, what effect would a drop of $2000 in value above regular depreciation be?
It would be a 2000 expense for that year, recognized in income. BUT…. an increase in the value would go under other comprehensive income.
Losses> Income Stmt
Gains> OCI
Under IFRS, a contingent loss must be recognized if it is…
More likely than not. Even just 51% vs 49% meets this criteria
GAAP vs IFRS research and development costs?
Under GAAP all research and development costs are expensed as incurred. Under IFRS, research costs are expensed, but development costs are capitalized if the company believes that future economic benefits are probable and that the product being developed is commercially and technically feasible.
How are bilogical assets valued under IFRS?
Fair Value Less Costs To Sell
Under IFRS, how should a company report their investments in bonds when it is a part of their business model to hold such investments solely to receive the cash and interest from principal repayment?
at amortized cost
