IFRS vs US GAAP (Revenue recog, intangible assets, research/dev costs, computer software costs, impairment, construction, nonmonetary exhange, foreign curerency translation, Flashcards Preview

FAR CPA Review - (Becker, Roger, Wiley CPA Excel, NINJA) > IFRS vs US GAAP (Revenue recog, intangible assets, research/dev costs, computer software costs, impairment, construction, nonmonetary exhange, foreign curerency translation, > Flashcards

Flashcards in IFRS vs US GAAP (Revenue recog, intangible assets, research/dev costs, computer software costs, impairment, construction, nonmonetary exhange, foreign curerency translation, Deck (21):
1

(Revenue recognition) - IFRS

Under IFRS, revenue transactions are divided into 4 categories:

1. sale of ____
2. Rending of ___
3. REvenue from ___, ___, and dividends
4. ____ contracts

(Revenue recognition) - IFRS

Under IFRS, revenue transactions are divided into 4 categories:

1. Sale of GOODS
2. Rending of SERVICES
3. Revenue from INTEREST, ROYALTIES, and dividends
4. CONSTRUCTION contracts

2

(Revenue recognition) - IFRS

Under IFRS, common revenue recognition include what 3 things?

IFRS:

include

1) Measure reliabliy on revenues and costs
2) It's probable that economic benefits on transaction goes to the entity (seller-company)
3) Each category has aditional revenue recognition

3

Revenu recognition - US GAAP

Revenue is recongized when it is ___ or ___ and earned.

Revenue is recongized when it is REALIZED or REALIZABLE and EARNED.

4

Revenu recognition - US GAAP

What 4 criteria need to meet for each contract element before recognize revenue?

(1) Persuasive evidence (strong evidence) that a contact / arrangement on transation exists.

(2) Delivery has occured -or- serves actually did rendered (Finished delivery -or- finished doing the service)

(3) Price is fixed and determinable

(4) Collection is reasonable assured.
(Other words, we are assured that we can collect the cash payment for goods delivered or services rendered at later date after sell goods or sell serviced)

5

Intangible assets - IFRS

Research costs to internally developd intangible assets must be _____.

Development costs may be ___if certain criteria are met.

Intangible assets are reported using the ___ model or the the ___ model.

Intangible assets - IFRS

Research costs to internally developd intangible assets must be EXPENSED.

Development costs may be CAPITALIZED if certain criteria are met.

Intangible assets are reported using the COST model or the REVALUATION model.

6

Intangible asets - US GAAP

Research and Development costs related to internally developed (developed inside the company) intangible assets (developed inside the company) must be ____.

Intangible asets are reported using the ___ method only.

Revalulation is ____.

Intangible asets - US GAAP

Research and Development costs related to internally developed intangible assets must be EXPENSED.

Intangible asets are reported using the COST method only.

Revalulation (model) is PROHIBITED.

7

Research and development costs - IFRS

Research costs must be ____.
Development costs may be ____ if meet certain criteria.

Research and development costs - IFRS

Research costs must be EXPENSED.
Development costs may be CAPITLIZED if meet certain criteria.

8

Research and development costs - GAAP

Reasearch costs and development costs must be ____ .

Research and development costs - GAAP

Reasearch costs and development costs must be EXPENSED.

9

Comuter Software Development costs - IFRS

IFRS does ___ provide separate guidance regarding computer software develompent costs.

Computer software development costs are ____ generated intangibles. Other words, these costs are developed ____ the company.

Research costs must be ____, but development costs may be _____ if met certain criteria.

Comuter Software Development costs - IFRS

IFRS does NOT provide separate guidance regarding computer software develompent costs.

Computer software development costs are INTENALL generated intangibles. Other words, these costs are developed INSIDE the company.

Research costs must be EXPENSED, but development costs may be CAPITALIZED if met certain criteria.

10

Impairment Intangible Assets (not including goodwill) - IFRS

An impairment loss is calculated using a ___-step model in which the carying value of the intangible asset is compared to the asset's recoverable amount.

The recoverable mount is the ____ of assets' fair value less ___ to sell and the asset's value in use (or PV of future ___ flows)

Recognized impairment loss when the cary value is above/exceeds the _____ amount.

Reversal of impairment losses is ____ .

Impairment Intangible Assets (not including goodwill) - IFRS

An impairment loss is calculated using a ONE-step model in which the carying value of the intangible asset is compared to the asset's recoverable amount.

The recoverable mount is the GREATER of assets' fair value less COSTS to sell and the asset's value in use (or PV of future CASH flows)

Recognized impairment loss when the cary value is above/exceeds the RECOERABLE amount.

Reversal of impairment losses is PERMITTED.

11

Impairment Intangible Assets (not including goodwill) - US GAAP

For FINITE intangible assets, an impairment loss is calculated using a __-step model in which:

(1) The asset's ____ amount is compared to sum of ____ cash flows expected from the asset (other words ____ amount minus ____ cash flows),


and then

(2) If ____ amount ___ the sum of undiscounted cash flows, an impairment loss is EQUAL to difference between asset's ____ amount and ___ value of asset is recorded. Other words, ___ value minus _____ amount = impairment loss.

For INFINITE life intangible assets, an impairment loss is calculated using a ___-step model in which the ___ amount of asset is compared to the ___ value of asset. Other words ____ amount minus ____ value = impairment loss.

Reversal of impoarment losses is ___ permitted unles the intangible asset is held for diposal (going to be sold)

Impairment Intangible Assets (not including goodwill) - US GAAP

For FINITE intangible assets, an impairment loss is calculated using a TWO-step model in which:

(1) The asset's CARRYING amount is compared to sum of UNDISCOUNTED cash flows expected from the asset, (other words CARRYING amount minus UNDISCOUNTED cash flows),

and then

(2) If CARRYING amount is GREATER the sum of undiscounted cash flows, an impairment loss is EQUAL to difference between asset's CARRYING amount and FAIR value of asset is recorded. Other words, FAIR value minus CARRYING value = impairment loss.

For INFINITE life intangible assets, an impairment loss is calculated using a ONE-step model in which the CARRYING amount of asset is compared to the FAIR value of asset. Other words, CARRYING amount minus FAIR value = impairment loss.

Reversal of impairment losses is NOT permitted unless the intangible asset is held for disposal (going to be sold)

12

Goodwill Impairment - IFRS

Goodwill impairment is calculated using a ___-step test at the ___ ____ unit (CGU) level in which the carrying value of the CGU is compared to CGU's recoverable amount.

The recoverable amount is the greater of the CGU's ___ value less ___ to sell and its value in use (PV of ___flows)

Recognized Impairment loss when carry value is ___ than recoverable amount.

The impairment loss is first allocated to the ____ and then allocated on a __ rata basis o the other ___ of the CGU.

Goodwill Impairment - IFRS

Goodwill impairment is calculated using a ONE-step test at the CASH GENERATING unit (CGU) level in which the carrying value of the CGU is comprised of CGU's recoverable amount.

The recoverable amount is the greater of the CGU's FAIR value less COSTS to sell and its value in use (PV of CASH flows)

Recognized Impairment loss when carry value is GREATER than recoverable amount.

The impairment loss is first allocated to the GOODWILL and then allocated on a PRO rata basis ot the other ASSETS of the CGU.

13

Goodwill impairment - US GAAP

Goodwill is calculated using a __-step method at the ___ ___ level (RUL) in which:

(1) ____ value of the reporting unit (assets minus liabilities or net assets or stockholders equity) is compared to its ___ value, including ____ will

and then

(2) If ___ value of reporting unit is ___ than its ___ amount, an impairment loss is calculated by comparing the ____ fair value of the reporting unit's goodwill to the ___ value of the goodwill.

___ Goodwill is calculated basically Reporting unit's ___ value minus its ____ value.

Goodwill impairment - US GAAP

Goodwill is calculated using a TWO-step method at the REPORTING UNIT level (RUL) in which:

(1) FAIR value of the reporting unit (assets minus liabilities or net assets or stockholders equity) is compared to its CARRY value, including goodwill (allocated to assets and liabilities)

and then

(2) If FAIR value of reporting unit is LESS than its CARRYING amount (Carry value), an impairment loss is calculated by comparing the IMPLIED fair value of the reporting unit's goodwill to the CARRY value of the goodwill.

IMPLIED Goodwill is calculated basically Reporting unit's FAIR value minus its CARRY value.

FYI - Example:
Company's reporting unit book value is = 3450
Company's reporting unit fair value is = 3310
Company's reporting unit's good will book value = 225
Implied fair value is = 3310 - 3450 = 140

Then Implied fair value minus carry value of goodwill
140 - 225 = 85 impairment loss.

14

Construction contracts - IFRS

% of completion method is ___ unless the final outcome of the project cannot be reliability estimated, in which case the ___ ____ method is required.

The ___ contract method is not allowed.

Construction contracts - IFRS

% of completion method is REQUIRED unless the final outcome of the project cannot be reliability estimated, in which case the COST RECOVERY method is required.

The COMPLETED contract method is not allowed.

15

Construction contracts - US GAAP

The __ of completion and ___ contract method are permitted (allowed to be used)

Construction contracts - US GAAP

The % of completion and COMPLETED contract method are permitted (allowed to be used).

16

Nonmonetary exchanges - IFRS

Non-monetary exchanges are characterized as exchanges of ____ and ____ assets.

Exchanges of ____ assets regarded as exchanges that generate revenue and are accounted for in the __ way as exchanges having ____ substance in US GAAP.

Exchanges of similar assets are ___ regarded as exchanges that generates revenue and no gains are recognized.

Losses are recognized in ___ (report the ___ $$ amount) in all nonmonetary transactions.

Nonmonetary exchanges - IFRS

Non-monetary exchanges are characterized as exchanges of DISSIMILAR and SIMILAR assets.

Exchanges of DISSIMILAR assets regarded as exchanges that generate revenue and are accounted for in the SAME way as exchanges having COMMERCIAL substance in US GAAP.

Exchanges of similar assets are NOT regarded as exchanges that generates revenue and no gains are recognized.

Losses are recognized in FULL (report the ENTIRE $$ amount) in all nonmonetary transactions.

FYI - Notes:

Exchanges of DISSIMILAR assets regarded as exchanges that generate revenue and are accounted for in the SAME way as exchanges having COMMERCIAL substance in US GAAP.

Journal entries
Dr. New asset (old asset Fair value given up + cash paid out)
Dr. Cash received
Dr. Accum. depr. - old asset
Dr. Loss (if any)
Cr. Old asset (at cost, i.e. purchase cost or historic cost)
Cr. Cash paid out
Cr. Gain (if any)

17

Non-monetary exchanges - US GAAP

Non-monetary exchanges are characterized as exchanges having ___ substance and exchanges ____ ____ substance.

Exchanges that have commercial substance are accounted for at ___ value with all ___ recognized

In exchanges that lack commercial substance, gains are only recognized when ___ is received. Also if ___ received / old asset's Fair is __ %, then recognized the entire gain.

Losses are recognized in ___ in all non-monetary exchanges.

Non-monetary exchanges - US GAAP

Non-monetary exchanges are characterized as exchanges having COMMERCIAL substance and exchanges LACKING COMMERCIAL substance.

Exchanges that have commercial substance are accounted for at FAIR value with all GAIN recognized

FYI - note (for above, hence these journal entries):
------------------------------------
Dr. New asset (old asset Fair value given up + cash paid out)
Dr. Cash received
Dr. Accum. depr. - old asset
Dr. Loss (if any)
Cr. Old asset (at cost, i.e. purchase cost or historic cost)
Cr. Cash paid out
Cr. Gain (if any)

In exchanges that lack commercial substance, gains are only recognized when BOOT is received. Also if BOOT (cash) received / old asset's Fair is 25%, then recognized the entire gain.

Losses are recognized in FULL in all non-monetary exchanges.

18

Foreign currency translation - IFRS:

Several factors must be considered in determining the entity's ____ currency. Two primary factors that must be considered are:

(1) The currency that influences ___ price for ___ and ___, and

(2) The __ of country whose ___ forces and government ___mainly determines the sales price of its goods and services.

Foreign currency translation - IFRS:

Several factors must be considered in determining the entity's FUNCTIONAL currency. Two primary factors that must be considered are:

(1) The currency that influences SALES price for GOODS and SERVICES, and

(2) The CURRENCY of country whose COMPETITIVE forces and government REGULATIONS mainly determines the sales price of its goods and services.

19

Foreign currency translation - US GAAP

The functional currency is the currency's of the entity's ___ economic environment.

The local currency is the functional currency when the foreign operations are relatively ___-contained and ___ within the country, the day-to-day operations do not depend on the parent's ___ currency and the local economy is not highly _____.

Foreign currency translation - US GAAP

The functional currency is the currency's of the entity's PRIMARY economic environment.

The local currency is the functional currency when the foreign operations are relatively SELF-contained and INTEGRATED within the country, the day-to-day operations do not depend on the parent's FUNCTIONAL currency and the local economy is not highly INFLATIONARY.

20

Foreign currency translation - IFRS

The financial statements of a foreign subsidiary operating in ___inflationary economy must first be ____ for the effects of inflation and then must be converted from the foreign currency to the ___ currency using the current/year-end rate for all finacnilal statements

Foreign currency translation - IFRS

The financial statements of a foreign subsidiary operating in HIGH inflationary economy must first be RESTATED for the effects of inflation and then must be converted from the foreign currency to the REPORTING currency using the current/year-end rate for all finanncial statements.

21

Foreign currency translation - US GAAP

The re-measurement method must be used when a foreign subsidiary is operating in a highly ____ environment.

Foreign currency translation - US GAAP

The re-measurement method must be used when a foreign subsidiary is operating a highly INFLATIONARY environment.

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