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Flashcards in IFRS Deck (51):
2

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

The International Accounting Standards Board (IASB)

3

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

4

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

5

Which assumptions are followed within the IRFS framework?

Entity is a Going Concern

Entity uses the accrual basis of accounting.

6

What is the objective of the IFRS framework?

To provide users with information on international accounting.

7

What are the Enhancing Characteristics of IFRS?

Comparability - Allows users to compare different items among various periods

Verifiability - Different people would reach a similar conclusion on the information presented

Timeliness - Information is made available early enough to impact the decision making of users

Understandability - Information is easy to understand

8

What are the Qualitative Characteristics of accounting information within IFRS?

Relevance & Faithful Representation

Relevance - Makes a difference to the user
Includes:
Predictive Value - Future Trends
Confirming Value - Past Predictions

Faithful Representation
Includes:
Completeness - Nothing omitted that would impact the decision-making of a user
Neutrality - Information is presented is without bias
Free from Error - No material errors or omissions

9

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.

10

What is the Pervasive Constraint within IFRS?

Cost vs. Benefit

11

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.

12

Which items are considered reporting elements under IFRS?

Asset
Liability
Equity
Income
Expense

13

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

A full comparative statement using IFRS.

14

If IFRS was implemented in June 2012 for use in the December 31 2012 financial statements what is the Date of Transition?

January 1 2011 because a full year of comparative statements is required from the previous year

15

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

The Fair Value election

16

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

In the entity's retained earnings or equity

17

How is going concern different under IFRS than from GAAP?

Going Concern is an assumption under IFRS

18

How are extraordinary items treated under IFRS?

IFRS doesn't allow extraordinary items.

19

How is the completed contract method used under IFRS?

Completed contract method is not allowed under IFRS.

20

How is LIFO treated under IFRS?

IFRS does not allow LIFO.

21

Which financial statements are required under IFRS?

Statement of Comprehensive Income

Statement of Changes in Equity

22

How is the term income used in IFRS?

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

23

How is the term profit used in IFRS?

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

24

How does IFRS treat gains?

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

25

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* and ability to refinance; NOT actual execution.

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 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.

28

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

29

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.

30

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

31

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)

32

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

33

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

34

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

35

How is investment property reported under IFRS?

Initially recorded at cost

Revalued using either Fair Value model or Cost model

36

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

37

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

38

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

39

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)

40

How is internally generated goodwill reported under IFRS?

It is not recognized.

41

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.

42

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

43

How are defined benefit plans recorded under IFRS?

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

44

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

45

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.

46

For IFRS reporting purposes, how are currencies defined as?

For IFRS reporting purposes, currencies are defined as

1. Foreign
2. Functional
3. Presentation

47

What is the functional currency for IFRS reporting?

For IFRS reporting, the functional currency is the currency of the primary economic environment in which the company operates

48

With respect to foreign financial statements, what do you do if the Functional Currency DOES NOT = Presentation Currency?

(IFRS)

If the Functional Currency DOES NOT = Presentation Currency...

1. Translate all Assets & Liabilities using the current rate (AKA Spot rate at B/S date)

2. Translate Owner's Equity using the historical rate, EXCEPT for R/E, which is based on a calculation:

Beginning R/E (last year)
+ Profit or - Loss (weighted average)
= Subtotal
(historical rate)
= Ending R/E (calculation)

3. Translate Revenues, Expenses, Gain & Losses using historical rate, but you can also use the Wtd-Avg Rate

4. Foreign Currency Translation Gain/Loss will go to OCI

49

With respect to foreign financial statements, what do you do if the Functional Currency DOES NOT = Presentation Currency?

(IFRS)

If the Functional Currency DOES NOT = Presentation Currency...

1. Translate all Assets & Liabilities using the current rate (AKA Spot rate at B/S date)

2. Translate Owner's Equity using the historical rate, EXCEPT for R/E, which is based on a calculation:

Beginning R/E (last year)
+ NI or -NL (weighted average)
= Subtotal
(historical rate)
= Ending R/E (calculation)

3. Translate Revenues, Expenses, Gain & Losses using historical rate, but you can also use the Wtd-Avg Rate

4. Foreign Currency Translation Gain/Loss will go to OCI

50

With respect to foreign financial statements, what do you do if the Functional Currency = Presentation Currency?

(IFRS)

If the Functional Currency = Presentation Currency...

1. Translate monetary assets & liabilities using the current rate (AKA Sport Rate at B/S date)

2. Translate Non-monetary assets & liabilities at Historical Cost using the Historical Rate

3. Translate Non-monetary asset & liabilities at Fair Value using Rate when FV was determined

4. Translate Owner's Equity (all Non-monetary) using the historical rate, EXCEPT for R/E, which is based on a calculation:

Beginning R/E (last year)
+ Profit or - Loss (weighted average)
= Subtotal
(historical rate)
= Ending R/E (calculation)

5. Translate Revenues, Expenses, Gain & Losses (all Non-monetary) using historical rate, but you can also use the Wtd-Avg Rate

6. Foreign Currency Translation Gain/Loss goes to Profit or Loss, EXCEPT, for those FC TL G/L on Non-monetary items whose G/L goes to Other Comprehensive Income, then FC TL G/L goes to OCI also

51

What is the presentation currency for IFRS reporting?

For IFRS reporting, the presentation currency is the currency in which the F/S are presented

52

What does the term "Provision" mean under IFRS?

A provision is a liability that is uncertain in timing or amount

Provisions are made for taxes payable, compensated absences, bad debts, warranties and other estimated liabilities