IFRS - Chapters 5 & 23

Question 1

On the Balance Sheet, what are the three account classification characteristics?

Answer 1

1. Liquidity
2. Function
3. Amounts, nature, and timing

Question 2

In what order is the presentation of the Balance Sheet for GAAP?

Answer 2

1. Assets
2. Liabilities
3. Equity

Question 3

In what order is the presentation of the Balance Sheet for IFRS?

Answer 3

1. Assets
2. Equity
3. Liabilities

Question 4

Define non-current assets

Answer 4

assets not meeting the definition of current assets

Question 5

Define current assets

Answer 5

cash and other assets a company expects to convert to cash, sell, or consume either in one year or the operating cycle, whichever is longer

Question 6

What is a held-for-collection investment?

Answer 6

Debt securities that a company manages to collect contractual principal and interest payments

Question 7

What is a trading investment?

Answer 7

Debt and equity securities bought and held primarily for sale in the near term to generate income on short-term price changes

Question 8

What is a non-trading equity investment?

Answer 8

Certain equity securities held for purposes other than trading (e.g., to meet a legal or contractual requirement).

Question 9

What are the four types of long-term investments?

Answer 9

1. Securities (bonds, ordinary shares, or long-term notes).
2. Tangible assets not currently used in operations (land held for speculation).
3. Special funds (sinking fund, pension fund, or plant expansion fund.
4. Non-consolidated subsidiaries or associated companies.

Question 10

For a held-for-collection investment, state the type, valuation, and classification.

Answer 10

• Type
  
  • Debt
• Valuation
  
  • Amortized Cost
• Classification
  
  • Current or Noncurrent

Question 11

For a trading investment, state the type, valuation, and classification.

Answer 11

• Type
  
  • Debt or Equity
• Valuation
  
  • Fair Value
• Classification
  
  • Current

Question 12

For a non-trading equity investment, state the type, valuation, and classification.

Answer 12

• Type
  
  • Equity
• Valuation
  
  • Fair Value
• Classification
  
  • Current or Noncurrent

Question 13

Does IFRS have the available-for-sale and held-to-maturity classifications?

Answer 13

No

Question 14

What are property, plant, and equipment?

Answer 14

Tangible long-lived assets used in the regular operations of the business

Question 15

What are intangible assets?

Answer 15

assets which lack physical substance and are not financial instruments (i.e. patents, copyrights, franchises, goodwill, trademarks, etc.)

Question 16

What is included in “Other Assets”?

Answer 16

unusual items sufficiently different from assets included in specific categories

Question 17

How are the assets in GAAP presented?

Answer 17

In order of liquidity.

Question 18

What is the general order of presentation of current assets?

Answer 18

1. Inventories
2. Receivables
3. Prepaid expenses
4. Short-term investments
5. Cash and cash equivalents

Question 19

What is the basis of valuation for inventories?

Answer 19

Lower-of-cost-or-net realizable value

Question 20

What is the basis of valuation for prepaid expenses?

Answer 20

Cost

Question 21

What is the basis of valuation for receivables

Answer 21

Estimated amount collectible

Question 22

What is the basis of valuation for short-term investments?

Answer 22

Generally, fair value

Question 23

What is the basis of valuation for cash and cash equivalents?

Answer 23

Fair value

Question 24

What is discloses regarding inventories?

Answer 24

• Basis of valuation (i.e. lower-of-cost-or-net realizable value)
• Cost flow assumption used (i.e. FIFO or average cost)

Question 25

What is a **cash equivalent**?

Answer 25

short-term highly liquid investments that will mature within three months or less

Question 26

Why is there a *three moths or less* rule to be considered a *cash equivalent*?

Answer 26

Because of the market fluctuation of interest rates.

Question 27

True or False: A company must disclose any restrictions or commitments related to the availability of cash.

Answer 27

True

Question 28

Define **share capital**.

Answer 28

The par or stated value of shares issued. It includes ordinary shares and preference shares.

Question 29

What is another term for *ordinary shares*?

Answer 29

Common shares

Question 30

What is another term for *preference shares*?

Answer 30

Preferred shares

Question 31

Define **share premium**?

Answer 31

The excess of amounts paid-in over the par or stated value

Question 32

Define **retained earnings**.

Answer 32

The corporation’s undistributed earnings

Question 33

Define **accumulated other comprehensive income**.

Answer 33

The aggregate amount of the other comprehensive income items

Question 34

Define **treasury shares**.

Answer 34

Generally, the amount of ordinary shares repurchased

Question 35

Define **non-controlling interest (minority interest)**.

Answer 35

A portion of the equity of subsidiaries not owned by the reporting company

Question 36

How are **ordinary shares** and **preference shares** presented?

Answer 36

must disclose the par value and the authorized, issued, and outstanding amounts

Question 37

How is a **share premium** presented?

Answer 37

usually presents one amount for ordinary and preference shares

Question 38

How is **retained earnings** presented?

Answer 38

amount may be divided between the **unappropriated** and **restricted** amounts

Question 39

How are **treasury shares** presented?

Answer 39

shown as a reduction of equity

Question 40

What is an **unappropriated amount**?

Answer 40

the amount that is usually available for dividend distribution

Question 41

What is a **restricted amount**?

Answer 41

An amount restricted by bond indentures or other loan agreements

Question 42

What does the term **reserve** mean?

Answer 42

It is an **all-inclusive catch-all** for items such as retained earnings, share premium, and accumulated other comprehensive income

Question 43

True or False: The use of the term “reserve” is encouraged in U.S. GAAP.

Answer 43

False. The use of the term “reserve” is **discouraged in U.S. GAAP**, there is **no prohibition under IFRS**.

Question 44

Generally, what are the three types of **non-current liabilities**?

Answer 44

1. Obligations arising from specific **financing** situations. 2. Obligations arising from the ordinary **operations** of the company. 3. Obligations that depend on the occurrence or non-occurrence of one or more future events to confirm the amount payable, or the payee, or the date payable (**provisions**).

Question 45

What are the three types of **current liabilities**?

Answer 45

1. **Payables** resulting from the acquisition of goods and services: accounts payable, wages payable, and so on. 2. Collections received in advance for the delivery of goods or performance of services, such as **unearned** rent **revenue**. 3. **Other liabilities** whose liquidation will take place within the operating cycle or one year.

Question 46

Does IFRS specify the order or format in which a company presents items in the statement of financial position.

Answer 46

No

Question 47

Do GAAP and IFRS use the same format for the statement of cash flows?

Answer 47

Yes

Question 48

What are the sources of information for the statement of cash flows?

Answer 48

1. comparative statement of financial position 2. current income statement, and 3. selected transaction data

Question 49

The **operating** section of the statement of clash flows includes what content?

Answer 49

Cash inflows and outflows from operations.

Question 50

The **investing** section of the statement of cash flows includes what content?

Answer 50

Cash inflows and outflows from non-current assets.

Question 51

The **financing** section of the statement of cash flows includes what content?

Answer 51

Cash inflows and outflows from non-current liabilities and equity.