Question 1

What two reconciliations are required by IFRS 1 for first-time IFRS Adopters?

Accepted Answer

(1) Reconciliation of total equity measured under previous GAAP to total equity measured under IFRS at: (a) the date of transition and (b) the end of the comparative period. (2) Reconciliation of net income measured under previous GAAP to net income measured under IFRS for the comparative period.

Question 2

Convergence of accounting standards would not occur by:

Accepted Answer

A)   FASB adopting an existing IASB standard.
B)   IASB adopting an existing FASB standard.
C)   IASB issuing a new standard.
D)   IASB and FASB jointly developing a new standard.
E)   IASB and FASB each issuing a similar but not identical standard.F) B) and C)
G) A) and E)

Question 3

All of the following are true regarding IASB members except:

Accepted Answer

A)   IASB shall comprise 16 members, and up to 3 of those members may be part-time.
B)   Full-time members must sever employment relationships with former employers.
C)   Full-time members are not allowed to hold any position giving rise to perceived economic incentives that might call their independence into question.
D)   Part-time members must sever employment relationships with former employers.
E)   Primary qualifications for IASB membership are professional competence and practical experience.F) B) and C)
G) C) and E)

Question 4

Use the following to answer questions 31 and 32:
REFERENCE 11-01
A foreign subsidiary of a U.S.-based company has been notified of a loss contingency with an estimated cost ranging between $220,000 and $250,000 which is probable of resulting in an actual loss. Each dollar amount within this range of cost is equally likely of being the actual outcome.
[QUESTION]
REFER TO: 11-01
-According to IFRS, what is the amount recognized as a provision for loss contingency?

Accepted Answer

A)   No amount will be recorded but an amount will be disclosed in the notes to the financial statements.
B)   $110,000
C)   $220,000
D)   $235,000
E)   $250,000F) A) and B)
G) A) and D)

Question 5

Which of the following is not true about IFRS?

Accepted Answer

A)   The IASB does not have the ability to enforce proper usage of IFRS.
B)   IFRS is available to any organization or nation that wishes to use those standards.
C)   IFRS is a comprehensive set of financial reporting standards.
D)   IFRS includes only pronouncements issued by the IASB.
E)   IFRS are considered as generally accepted accounting principles.F) A) and B)
G) A) and C)

Question 6

With regard to IFRS, what does SME refer to, and what is the significance with regard to financial reporting requirements?

Accepted Answer

With regard to IFRS, SME refers to small...

Question 7

Principal Company is a U.S.-based company that prepares its consolidated financial statements in accordance with U.S.GAAP.Principal reported net income of $ 2,600,000 in 2018 and stockholders' equity of $12,000,000 at December 31, 2018.Principal wants to determine the reporting impact of switching to IFRS.The following three items would create differences in financial reporting:
1) At December 31, 2018, management had determined that a contingent liability was reasonably possible with regard to a defective product and Principal disclosed an amount of $80,000 for this possibility.However, under IFRS, the likelihood of occurrence of an outflow of resources to settle the liability was considered probable.(Ignore income tax.)
2) Principal acquired a building at the beginning of 2016 at a cost of $5,000,000.The building has an estimated useful life of 20 years, an estimated residual value of $1,000,000, and is being depreciated on a straight-line basis.On January 1, 2018, the building has a fair value of $5,500,000.There is no change in the estimated useful life or residual value.In a switch to IFRS, Principal would use the revaluation model in IAS 16 to determine the carrying value of property, plant, and equipment subsequent to acquisition.
3) In 2018, Principal incurred $800,000 of research and development for a new product, of which 35% relates to development activities subsequent to the point at which criteria indicating the creation of an intangible asset had been met.As of the end of 2018, development of the new product had not been completed.
Required:
1) Prepare a schedule reconciling net income under U.S.GAAP to net income under IFRS for the year ended December 31, 2018.
2) Prepare a schedule reconciling stockholders' equity under U.S.GAAP to stockholders' equity under IFRS at December 31, 2018.

Accepted Answer

The answer of Principal Company is a U.S.-based company that...

Question 8

A U.S.company has many foreign subsidiaries and wants to convert its consolidated financial statements from U.S.GAAP to IFRS.Which of the following items is not one of the likely accounting issues to resolve for the opening IFRS balance sheet?

Accepted Answer

A)   Inventory valuation.
B)   Capitalizing development costs.
C)   Bank overdrafts that are integral to cash management.
D)   Goodwill calculation from acquisition of a subsidiary.
E)   Liability for restructuring charges.F) A) and C)
G) All of the above

Question 9

IFRS for SMEs are primarily designed to meet the needs of:

Accepted Answer

A)   Small Manufacturing Enterprises.
B)   Governmental entities.
C)   Companies whose shares of stock are not publicly traded.
D)   Not-for-profit organizations.
E)   Special Model Entities.F) A) and E)
G) B) and E)

Question 10

Use the following to answer questions 33 and 34:
REFERENCE 11-02
Bugs, Inc., a wholly owned subsidiary of the U.S.-based company, Pillows Ltd., was notified of a loss contingency with an estimated cost ranging between $50,000 and $150,000. Bugs, Inc. hired an expert appraiser who assessed that all possible dollar amounts of liability in this range are equally likely. Management of Bugs, Inc. has estimated that there is a 60 percent chance that this contingency will result in an actual loss.
[QUESTION]
REFER TO: 11-02
-In the conversion from U.S.GAAP financial statements to IFRS financial statements, what is the amount of adjustment needed to adjust for the difference in accounting for a provision for loss contingency?

Accepted Answer

A)   $0
B)   $50,000
C)   $100,000
D)   $150,000
E)   $200,000F) A) and B)
G) A) and C)

Question 11

What problems are caused by diverse accounting practices?

Accepted Answer

(1) Difficulty in preparation of consoli...

Question 12

The FASB-IASB convergence project on leases resulted in the following:

Accepted Answer

A)   Lease accounting will be the same under IFRS and under U.S. GAAP in that lessors and lessees will capitalize all leases as finance leases and treat them as such in the measurement of income.
B)   Lessor and lessee accounting will be the same under IFRS and under U.S. GAAP in that lessors will capitalize all leases and lessees will capitalize some leases as finance leases but treat others as operating leases.
C)   Lease accounting will differ in that under IFRS lessees will capitalize some leases as finance leases and others as operating leases, while under U.S. GAAP lessees will capitalize all leases as finance leases but treat them as traditional operating leases in the measurement of net income.
D)   Lease accounting will be similar under IFRS and U.S. GAAP for lessees but will differ for lessors in their treatment of the measurement of net income.
E)   Lease accounting will differ for lessees in that, under IFRS, all leases will be treated as finance leases both on the balance sheet and in the measurement of net income, and under U.S. GAAP lessees will capitalize operating leases on the balance sheet similar to finance leases but will treat them as traditional operating leases in the measurement of income.F) B) and C)
G) C) and D)

Question 13

The most relevant factor in determining the purpose of financial reporting is:

Accepted Answer

A)   The nature of the country's financing system
B)   The country's current economic conditions
C)   The ability to control inflation
D)   A strong equity financing system which is more conservative, minimal disclosures, and tight tax laws.
E)   A weak equity financing system which is less conservative, extensive disclosures and loose tax laws.F) C) and D)
G) B) and D)

Question 14

What are recognition differences in financial reporting and what would be an example of a recognition difference between IFRS and U.S.GAAP?

Accepted Answer

Recognition differences relate to whether an item is recognized or not, how it is recognized, or when it is recognized. An example of recognition differences between IFRS and U.S. GAAP exists for the recognition of research and development costs. U.S. GAAP requires that research and development costs must be expensed immediately. The only exception relates to costs incurred in developing computer software, which must be capitalized when several restrictive criteria are met. IFRS (IAS 38) also requires immediate expensing of all research costs. Development costs, on the other hand, must be recognized as an internally generated intangible asset when certain criteria are met. These costs are amortized over their useful life not to exceed 20 years.

Question 15

Use the following to answer questions 31 and 32:
REFERENCE 11-01
A foreign subsidiary of a U.S.-based company has been notified of a loss contingency with an estimated cost ranging between $220,000 and $250,000 which is probable of resulting in an actual loss. Each dollar amount within this range of cost is equally likely of being the actual outcome.
[QUESTION]
REFER TO: 11-01
-According to U.S.GAAP, what is the amount recognized as a provision for loss contingency?

Accepted Answer

A)   No amount will be recorded but an amount will be disclosed in the notes to the financial statements.
B)   $110,000
C)   $220,000
D)   $235,000
E)   $250,000F) A) and E)
G) A) and D)

Question 16

A company is preparing financial statements using IFRS for the first time for the year ended December 31, 2018.The "transition date" for reporting is

Accepted Answer

A)   December 31, 2018.
B)   December 31, 2017.
C)   January 1, 2017.
D)   January 1, 2018.
E)   January 1, 2019.F) A) and E)
G) A) and D)

Question 17

Which of the following is a pronouncement originally issued by the IASC and is not a pronouncement originally issued by the IASB?

Accepted Answer

A)   Business Combinations.
B)   First-Time Adoption of IFRS.
C)   Financial Instruments: Disclosures.
D)   Interim Financial Reporting.
E)   Operating Segments.F) C) and D)
G) B) and D)

Question 18

All of the following are ways a country may use IFRS except:

Accepted Answer

A)   A country may require foreign companies listed on its domestic stock exchange to use IFRS.
B)   A country may permit companies listed on its domestic stock exchange to use IFRS.
C)   A country may permit foreign companies listed on a foreign stock exchange to use foreign GAAP.
D)   A country may require companies listed on its domestic stock exchange to use IFRS in preparing consolidated financial statements.
E)   A country may adopt IFRS as its national GAAP.F) A) and E)
G) B) and C)

Question 19

Use the following to answer questions 33 and 34:
REFERENCE 11-02
Bugs, Inc., a wholly owned subsidiary of the U.S.-based company, Pillows Ltd., was notified of a loss contingency with an estimated cost ranging between $50,000 and $150,000. Bugs, Inc. hired an expert appraiser who assessed that all possible dollar amounts of liability in this range are equally likely. Management of Bugs, Inc. has estimated that there is a 60 percent chance that this contingency will result in an actual loss.
[QUESTION]
REFER TO: 11-02
-Of the following IFRS, which was the most recently issued?

Accepted Answer

A)   First-Time Adoption of IFRS
B)   Leases
C)   Revenue from Contracts with Customers
D)   Insurance Contracts
E)   Financial Instruments: DisclosuresF) A) and C)
G) A) and B)

Question 20

Which of the following is not a likely step to furthering convergence of FASB and IFRS?

Accepted Answer

A)   FASB adopting an existing IASB Standard.
B)   IASB adopting an existing FASB standard.
C)   FASB and IASB issuing an identical standard.
D)   FASB working with IASB to develop a new standard.
E)   Realizing that identical standards, rather than similar standards, is not realistic.F) A) and E)
G) A) and B)

Exam 11: Worldwide Accounting Diversity and International Accounting Standards

What two reconciliations are required by IFRS 1 for first-time IFRS Adopters?

Convergence of accounting standards would not occur by:

Correct Answer
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All of the following are true regarding IASB members except:

Correct Answer
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Correct Answer
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Which of the following is not true about IFRS?

Correct Answer
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With regard to IFRS, what does SME refer to, and what is the significance with regard to financial reporting requirements?

Correct Answer
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With regard to IFRS, SME refers to small...
View Answer

Correct Answer
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A U.S.company has many foreign subsidiaries and wants to convert its consolidated financial statements from U.S.GAAP to IFRS.Which of the following items is not one of the likely accounting issues to resolve for the opening IFRS balance sheet?

Correct Answer
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IFRS for SMEs are primarily designed to meet the needs of:

Correct Answer
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Correct Answer
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What problems are caused by diverse accounting practices?

Correct Answer
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(1) Difficulty in preparation of consoli...
View Answer

The FASB-IASB convergence project on leases resulted in the following:

Correct Answer
verified

The most relevant factor in determining the purpose of financial reporting is:

Correct Answer
verified

What are recognition differences in financial reporting and what would be an example of a recognition difference between IFRS and U.S.GAAP?

Correct Answer
verified

A company is preparing financial statements using IFRS for the first time for the year ended December 31, 2018.The "transition date" for reporting is

Correct Answer
verified

Which of the following is a pronouncement originally issued by the IASC and is not a pronouncement originally issued by the IASB?

Correct Answer
verified

All of the following are ways a country may use IFRS except:

Correct Answer
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Correct Answer
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Which of the following is not a likely step to furthering convergence of FASB and IFRS?

Correct Answer
verified

Exam 11: Worldwide Accounting Diversity and International Accounting Standards

What two reconciliations are required by IFRS 1 for first-time IFRS Adopters?

Convergence of accounting standards would not occur by:

Correct AnswerverifiedShow Answer

All of the following are true regarding IASB members except:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is not true about IFRS?

Correct AnswerverifiedShow Answer

With regard to IFRS, what does SME refer to, and what is the significance with regard to financial reporting requirements?

Correct AnswerverifiedWith regard to IFRS, SME refers to small...View AnswerShow Answer

Correct Answerverified11ea7e46_dc97_8822_ab1f_2dcab9f0a203_TB2563_00 11ea7e46_dc97_8823_ab1f_69af17ae2713_TB2563_00

A U.S.company has many foreign subsidiaries and wants to convert its consolidated financial statements from U.S.GAAP to IFRS.Which of the following items is not one of the likely accounting issues to resolve for the opening IFRS balance sheet?

Correct AnswerverifiedShow Answer

IFRS for SMEs are primarily designed to meet the needs of:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

What problems are caused by diverse accounting practices?

Correct Answerverified(1) Difficulty in preparation of consoli...View AnswerShow Answer

The FASB-IASB convergence project on leases resulted in the following:

Correct AnswerverifiedShow Answer

The most relevant factor in determining the purpose of financial reporting is:

Correct AnswerverifiedShow Answer

What are recognition differences in financial reporting and what would be an example of a recognition difference between IFRS and U.S.GAAP?

Correct AnswerverifiedShow Answer

A company is preparing financial statements using IFRS for the first time for the year ended December 31, 2018.The "transition date" for reporting is

Correct AnswerverifiedShow Answer

Which of the following is a pronouncement originally issued by the IASC and is not a pronouncement originally issued by the IASB?

Correct AnswerverifiedShow Answer

All of the following are ways a country may use IFRS except:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is not a likely step to furthering convergence of FASB and IFRS?

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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With regard to IFRS, SME refers to small...
View Answer

Correct Answer
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(1) Difficulty in preparation of consoli...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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