Chapter 5 exam with correct answers |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
Comparison of US GAAP and IFRS: |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
Contingent assets/contingent liabilities - correct answer✔✔IFRS → contingent assets must be
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
virtually certain to recognize, contingent liabilities must be a provision/liability and estimable
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
and probable (51%)
|||\\\ |||\\\
GAAP → contingent assets are never recorded, contingent liabilities must be estimable and
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
probable to be recorded (70%) |||\\\ |||\\\ |||\\\ |||\\\
Comparison of US GAAP and IFRS: |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
Treatment of current liabilities - correct answer✔✔Make ratios look better, more strict under
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
IFRS for first two
|||\\\ |||\\\ |||\\\
Refinanced short-term debt |||\\\ |||\\\
IFRS: Long-term if refinanced prior to balance sheet date
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
U.S. GAAP: Long-term if refinancing is agreed prior to annual report being issued
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
Accounts payable on demand due to violation of debt covenants:
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
IFRS: Long-term if lender issued waiver of 12 months by balance sheet date
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
U.S. GAAP: Long-term if lender issued waiver obtained by annual report issuance date
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
Bank overdrafts |||\\\
IFRS: Netted against cash
|||\\\ |||\\\ |||\\\
U.S. GAAP: Always treated as current liabilities
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
, Comparison of US GAAP and IFRS: |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
Restructuring provisions - correct answer✔✔A program planned and controlled by |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
management that changes either: |||\\\ |||\\\ |||\\\
Scope of business |||\\\ |||\\\
Manner in which business is conducted |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
IFRS → liability recognized when a formal plan exists and there is a valid expectation of the
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
restructuring
GAAP → does not allow recognition until liability has been incurred
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
Comparison of US GAAP and IFRS: |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
Onerous contracts - correct answer✔✔Unavoidable costs of obligation exceed economic
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
benefits to be received (not a good contract) |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
IFRS → set up a liability at the lower of:
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
Cost of fulfillment
|||\\\ |||\\\
Penalty from non-fulfillment |||\\\ |||\\\
Comparison of US GAAP and IFRS: |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
Deferred income taxes - correct answer✔✔Temporary differences (deferred tax
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
assets/liabilities)
Under IFRS, measure on the basis of tax laws and rates enacted or substantively enacted
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
DTA → recognize if future realization of tax benefit probable
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
IFRS requires Extensive disclosures of tax expense
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
Comparison of US GAAP and IFRS: |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
Contingent assets/contingent liabilities - correct answer✔✔IFRS → contingent assets must be
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
virtually certain to recognize, contingent liabilities must be a provision/liability and estimable
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
and probable (51%)
|||\\\ |||\\\
GAAP → contingent assets are never recorded, contingent liabilities must be estimable and
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
probable to be recorded (70%) |||\\\ |||\\\ |||\\\ |||\\\
Comparison of US GAAP and IFRS: |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
Treatment of current liabilities - correct answer✔✔Make ratios look better, more strict under
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
IFRS for first two
|||\\\ |||\\\ |||\\\
Refinanced short-term debt |||\\\ |||\\\
IFRS: Long-term if refinanced prior to balance sheet date
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
U.S. GAAP: Long-term if refinancing is agreed prior to annual report being issued
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
Accounts payable on demand due to violation of debt covenants:
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
IFRS: Long-term if lender issued waiver of 12 months by balance sheet date
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
U.S. GAAP: Long-term if lender issued waiver obtained by annual report issuance date
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
Bank overdrafts |||\\\
IFRS: Netted against cash
|||\\\ |||\\\ |||\\\
U.S. GAAP: Always treated as current liabilities
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
, Comparison of US GAAP and IFRS: |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
Restructuring provisions - correct answer✔✔A program planned and controlled by |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
management that changes either: |||\\\ |||\\\ |||\\\
Scope of business |||\\\ |||\\\
Manner in which business is conducted |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
IFRS → liability recognized when a formal plan exists and there is a valid expectation of the
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
restructuring
GAAP → does not allow recognition until liability has been incurred
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
Comparison of US GAAP and IFRS: |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
Onerous contracts - correct answer✔✔Unavoidable costs of obligation exceed economic
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
benefits to be received (not a good contract) |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
IFRS → set up a liability at the lower of:
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
Cost of fulfillment
|||\\\ |||\\\
Penalty from non-fulfillment |||\\\ |||\\\
Comparison of US GAAP and IFRS: |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
Deferred income taxes - correct answer✔✔Temporary differences (deferred tax
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
assets/liabilities)
Under IFRS, measure on the basis of tax laws and rates enacted or substantively enacted
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
DTA → recognize if future realization of tax benefit probable
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
IFRS requires Extensive disclosures of tax expense
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
