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IFRS Flashcards

2
Q

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

A

The International Accounting Standards Board (IASB)

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3
Q

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

A

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

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4
Q

Which framework helps to develop standards for international accounting?

A

The IASB Framework

  • The framework is NOT a standard itself
  • The framework does not supersede any standard’s authority
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5
Q

What is the objective of the IFRS framework?

A

To provide users with information on international accounting.

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6
Q

Which assumptions are followed within the IRFS framework?

A

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

Entity uses the ACCRUAL basis of accounting.

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7
Q

What are the qualitative characteristics of accounting information wtihin IFRS?

A

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

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8
Q

Which aspects of RELEVANCE in IFRS differ from GAAP?

A

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

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9
Q

How does RELIABILITY differ under IFRS from GAAP?

A

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.

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10
Q

How does comparability differ under GAAP versus IFRS?

A

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.

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11
Q

What are the constraints within IFRS?

A

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.

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12
Q

Which items are considered reporting ‘elements’ under IFRS?

A 
Asset
Liability
Equity
Income
Expense
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13
Q

What are the criteria for recognition on IFRS financial statements?

A

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.

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14
Q

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

A

A full comparative statement using IFRS.

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15
Q

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

A

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

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16
Q

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

A

The Fair Value election

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17
Q

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

A

In the entity’s retained earnings or equity

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18
Q

How is going concern different under IFRS than from GAAP?

A

Going concern is an ASSUMPTION under IFRS

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19
Q

How are extraordinary items treated under IFRS?

A

IFRS doesn’t allow extraordinary items.

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20
Q

How is the completed contract method used under IFRS?

A

Completed contract method is not allowed under IFRS.

21
Q

How is LIFO treated under IFRS?

A

IFRS does not allow LIFO.

22
Q

Which financial statements are required under IFRS?

A

Statement of Comprehensive Income

Statement of Changes in Equity

23
Q

How is the term ‘income’ used in IFRS?

A

‘Income’ is used instead of revenue and encompasses BOTH revenue and gains.

24
Q

How is the term ‘profit’ used in IFRS?

A

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

25
Q

How does IFRS treat gains?

A

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

26
Q

How does IFRS treat losses?

A

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

27
Q

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

A

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
Q

How do contingent liabilities differ between GAAP and IFRS?

A

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
Q

How are bonds recorded under IFRS?

A

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
Q

How are deferred taxes treated under IFRS?

A

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
Q

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

A

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
Q

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

A

The enacted rate or substantially enacted tax rate.

GAAP is the enacted tax rate only

33
Q

Which items are recorded on the Income Statement in IFRS?

A 
Income
Finance Costs
Tax Expense
Discontinued Ops
Profit/Loss
Non-controlling interest in Profit/Loss
Net profit/loss attributable from equity
34
Q

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

A

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
Q

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

A

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
Q

How is investment property reported under IFRS?

A

Initially recorded at cost

Revalued using either Fair Value model or Cost model

37
Q

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

A

Recorded on the Income Statement

Investment P/L = IS

PP&E P/L = OCI

38
Q

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

A

Carried at Cost minus Accumulated Depreciation

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

39
Q

How are leases reported under IFRS?

A

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
Q

How are intangible assets valued under IFRS?

A

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

or

the Revaluation Model (Fair Value less Accumulated Depreciation)

41
Q

How is internally generated goodwill reported under IFRS?

A

It is not recognized.

42
Q

How is amortization of intangibles handled under IFRS?

A

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
Q

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

A

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

44
Q

How are defined benefit plans recorded under IFRS?

A

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

45
Q

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

A

They can be classified as either Operating or Financing

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

46
Q

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

A

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

FAR (18 decks)

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