IFRS VS GAAP

Question 1

Discontinued Operations: Held for Sale

Answer 1

IFRS:
Before a component can be classified as held for sale = must be measured in accordance with applicable standards and any resulting g/l must be recognized
~After calssification: Component reported at lower CV and FV less cost to sell

GAAP:
Assets and liabilities are not required to be remeasured
~HFS - does trigger impairment analysis

Question 2

Extraordinary Items

Answer 2

IFRS: Prohibited

GAAP: Material and unusual and infrequent

Question 3

Accounting Changes : Required Comparative FS

Answer 3

IFRS:
Any retrospective restatement requires 3 BS and 2 of everything else

GAAP:
Comparative FS = Not Required

Question 4

Change in Accounting Entity

Answer 4

IFRS:
No such concept

GAAP:
Restated to reflect new entity

Question 5

Error Correction: Impracticable to determine cum effect of error

Answer 5

IFRS:
If impracticable → Restate info prospectively from earliest date that it is practicable

GAAP:
No impracticability exemption

Question 6

OCI: Revaluation Surplus

Answer 6

IFRS:
Recognize when intangible assets and FA revalued

GAAP
Revaluation not permitted

Question 7

Notes to FS: Explicit & Unreserved Statement of Compliance

Answer 7

IFRS:
Requires it

GAAP
No requirement

Question 8

Notes to FS: Summary of Significant Accounting Policies

Answer 8

IFRS:
Judgments and Estimations required

GAAP:
Just estimations required - no judgments

Question 9

Related Party Disclosures: Key Management Compensation:

Answer 9

IFRS:
Required to disclose

GAAP:
No requirement

Question 10

Risk & Uncertainties: Disclosures

Answer 10

IFRS:
Required disclosure of assumptions about future and other major sources of estimation uncertainty at end of reporting period

GAAP:
Required Disclosures:
~Nature of operations
~Use of est
~Est of the effect of change in acct est (if material)
~Vulnerability to the risk - from material concentration

Question 11

Goodwill Impairment Calculation

Answer 11

IFRS: 1 step @ cash generating unit level

GAAP: 2 Step @ reporting unit level

Question 12

Construction Contracts:

Answer 12

IFRS: Completed constract method is not permitted

Question 13

Nonmonetary Exchanges

Answer 13

IFRS: Similar & Dissimilar Exchanges (Similar –> Not regarded as exchanges –> no gain recogn)

GAAP: Has & Lacks commercial substance

Question 14

Marketable Sec – Classification

Answer 14

IFRS: Trading sec called Financial Assets at FV through Profit & Loss

Question 15

Marketable Sec – AFS

Answer 15

IFRS: Unrealized G/L are recorded in OCI except foreign exchange g/l = directly to IS

GAAP: All unrealized g/l are reported in OCI

Question 16

Marketable Sec – Impairment

Answer 16

IFRS: Previously recognized impairment loss on HTM & AFS must be reversed with amt of reversal recogn on IS

GAAP: Subsequent increase in FV is included in OCI

Question 17

Equity method – Step by Step Acquisition

Answer 17

IFRS: Prospectively

GAAP : Retrospectively

Question 18

Acquisition Method – NCI & Goodwill

Answer 18

IFRS: Calculation using either partial or full goodwill method

GAAP: Full Goodwill method only

Question 19

Inventory Valuation

Answer 19

IFRS: Lower of cost or NRV (Reversal is permitted)

GAAP: Lower of cost or market

Question 20

Inventory Cost Flow Assumptions – LIFO

Answer 20

IFRS: Prohibited

GAAP: Permitted

Question 21

FA Impairment

Answer 21

IFRS: Cost or Revaluation Model Can be used
Revaluation Model Carrying Value = FV on revaluation date - subsequent accum dep - sub impairment

Losses = IS (FV < CV before revaluation)
Gains = OCI = (FV > CV before revaluation)

Question 22

Investment Property

Answer 22

IFRS: Land and/or building held to earn rental income or capital appreciation
~FV Model=Investment Property reported at FV
~If cost model is used = FV must be disclosed

GAAP: No “investment” property classification

Question 23

FA DEP:

Answer 23

IFRS: Dep method used should match the expected pattern of FA consumption
~Must be reviewed on each BS date for appropriate
~Component dep is required

GAAP:
~Not required to match
~No requirement for review
~Composite or component dep

Question 24

FA Impairment:

Answer 24

IFRS: 1 step test & reversal permitted

GAAP: 2 Step (1) Test for recoverability (2) Calc impairment

Question 25

Lease Classification

Answer 25

IFRS: Operating or Finance GAAP: Operating or Capital Lease

Question 26

Capital (Finance) Lease Criteria:

Answer 26

IFRS: Substantially all risk and rewards are transferred GAAP: Lessee = OWNS and Lessor = LUC

Question 27

Initial Direct Cost of Lease:

Answer 27

IFRS: Add to the amt recogn as a finance lease (asset) GAAP: Expensed

Question 28

Sale-Leaseback Transactions: Recognition of Gains

Answer 28

IFRS: Dependent on the classification of operating or fin lease GAAP: Dependent on the rights to the leased property retained by the seller-lessee

Question 29

Bond Issue Cost:

Answer 29

IFRS: Deducted from CV of the liability and amort using effective interest rate GAAP: Recorded as an asset & amort using SL

Question 30

Bond Disc/Prem Amortization

Answer 30

IFRS: Effective Interest Method (No SL) --> Amort over expected life GAAP: Effective interest or SL --> Amort over contractual life

Question 31

Convertible Bonds

Answer 31

IFRS: A liability (bond) & equity component (conversion feature) should be recogn when convertible bonds are issued ~Record at FV GAAP: No separate recogn when issed ~Record the same as non-convertible

Question 32

Defined Benefit Pension Plans

Answer 32

IFRS: Called Defined Benefit Obligation (DBO) GAAP: Called Projected Benefit Obligation (PBO)

Question 33

Defined Benefit Pension Plan: Calculation

Answer 33

IFRS: Include service cost and net interest ``` GAAP: Components are SIRAGE S- Service Cost I - Interest Cost R- A- Amort of Prior Service Cost G - or Loss E - Amort of existing net obligation ```

Question 34

Defined Pension Plan: Reporting

Answer 34

IFRS: Separately on IS GAAP: One Amt on the IS

Question 35

Defined Pension Plans: Prior Service Cost

Answer 35

IFRS: Called Past Service Cost (is not booked to OCI) GAAP: Increases PBO and OCI & Amort

Question 36

Defined Pension Plan (Gains/Losses)

Answer 36

IFRS: Are referred to as re-measurement of the net defined benefit liability (asset) and are reported in OCI GAAP: Two Choices (1) IS -- In period incurred (2) OCI -- In period incurred & then amort using the corridor approach

Question 37

Defined Benefit Pension Plans: Funded Status

Answer 37

IFRS: ~Underfunded = Liability ~Overfunded = Asset (amt cannon exceed the PV of future economic benefit available to the entity in the form of cash refunds or reduction in future contribution ~Liability as current or noncurrent GAAP: ~Overfunded = Full as a noncurrent asset ~Underfunded = Current Liab, noncurrent liab or both

Question 38

Defined Benefit PP

Answer 38

IFRS: Remeasurements of the net defined benefit liability (assets) are included in OCI and are not reclassified (amort) to the IS in subsequent periods GAAP: Unrecogn prior service cost & unrecogn pension g/l are reported in OCI

Question 39

Sick Pay Benefits

Answer 39

IFRS: Required to accrue sick pay benefits as services are rendered by employees GAAP: Not required to accrue nonvesting accum rights to receive sick pay benefits

Question 40

Accounting for Income Taxes: Valuation Allowances

Answer 40

IFRS: Not permitted (val acct) def tax asset is recogn when it is probable that sufficient taxable profit will be available GAAP: Valuation allowance is recogn when it is more likely than not that part or all of def tax asset will not be realized

Question 41

Accounting for Income Taxes: Uncertain tax positions

Answer 41

IFRS: Not specifically addressed GAAP: 2 Step Process: (1) recognition of the tax benefit (2) Measurement of tax benefit

Question 42

Accounting for Income Taxes: Adjustment for changes in the def tax balances due to changes in tax laws or rates

Answer 42

IFRS: Recogn on the IS, except when the def tax balance arises from a transaction or event that is recogn in OCI GAAP: Recogn on IS

Question 43

Accounting for Income Taxes: Tax Rates

Answer 43

IFRS: Enacted or substantially enacted tax rates GAAP: Enacted tax rate only

Question 44

Accounting for Income taxes: Def tax assets & liabilities

Answer 44

IFRS: Reported as non current GAAP: Reported as current or noncurrent (currents netted/noncurr netted)

Question 45

Acct for Stock Issued to Employees

Answer 45

IFRS: Generally considered to be compensatory GAAP: Can be non compensatory -- if they meet specific requirements

Question 46

Statement of changes in SE

Answer 46

IFRS: Primary FS GAAP: Can be presented as primary FS or in the notes to the FS

Question 47

Diluted EPS: Contracts that may be settled in cash or stock

Answer 47

IFRS: always presumed to be settled in CS and included in diluted EPS GAAP: Not included in diluted EPS if circumstances indicate that the contract will be paid in cash

Question 48

Diluted EPS: Contingently Issuable Ordinary Shares

Answer 48

IFRS: Are treated as outstanding & included in the calculation of diluted EPS only if the conditions are satisfied (all or nothing) GAAP: Dependable on the # of shares that would be issuable

Question 49

Statement of Cash Flows: Bank Overdrafts

Answer 49

IFRS: Cash can include bank overdrafts GAAP: Bank overdrafts are excluded

Question 50

Statement of Cash Flows: When direct method is used

Answer 50

IFRS: Entities are not required to present a reconciliation of NI to Net cash flows from operating rev GAAP: Entities are required to present a reconciliation of NI to Net cash flows from operating activities