Accounting Seminar Midterm
Under IAS 39, Financial Instruments: Recognition and Measurement, which of the following is NOT a category into which a financial asset must be classified? A. Property, plant, and equipment B. Held-to-maturity investments C. Loans and receivables D. Available-for-sale financial assets
A. property, plant, and equipment
Carrying value 100,000 selling price 85,000 costs of disposal 3,000 expected future cash flows 75,000 present value of expected future cash flows 63,000 Using IAS 36, what is the amount of impairment loss? A. €18,000 B. €37,000 C. €15,000 D. €25,000
A. 18,000
Camerata Construction borrowed €19,000,000 for 10 years at 6% specifically to modernize its operations with new equipment. The average rate of interest on Camerata's debt after considering the most recent loan was 5.5%. What rate of interest should be used for capitalizing the borrowing costs on the new equipment under IAS 23? A. 5.5% B. 6% C. 5.75% D. Some other amount
B. 6%
Carrying value 100,000 selling price 85,000 costs of disposal 3,000 expected future cash flows 75,000 present value of expected future cash flows 63,000 Using IAS 36, what is the recoverable amount? A. €85,000 B. €82,000 C. €63,000 D. €75,000
B. 82,000
IAS 38 states that an intangible asset is deemed to have an indefinite life when there is no foreseeable end to the expected cash flows the asset is likely to generate. What is the impact of an indefinite life on amortization of the intangible asset's cost under IAS 38? A. Management may choose any number of years over which to amortize the cost. B. No amortization is taken as long as the life is considered indefinite. C. The cost of the asset should be amortized over 20 years. D. The cost of the asset should be expensed in the period the intangible asset is acquired.
B. no amortization is taken as long as the life is considered indefinite
Under the IASB's exposure draft, Income Tax, how would the term "substantively enacted", as it applies to tax laws, be determined? A. When the affected jurisdiction has issued final regulations with respect to a tax law B. When any future steps in the enactment process can't change the outcome C. When one part of a bicameral legislature has passed a tax bill D. All of the above
B. when any future steps in the enactment process can't change the outcome
A "bottom-up" test and "top-down" test must be applied under IASB standards to determine: A. impairment of tangible fixed assets. B. impairment of patents. C. impairment of goodwill. D. allocation of overhead costs.
C. impairment of goodwill
Zenith Company, a calendar-year entity, amends its defined benefit pension plan on January 1, 2013 and must recognize the increase in past service costs of its vested and non-vested employees as of that date in the calculation of its net 2013 pension expense (or revenue). The pertinent facts as of January 1, 2013 are: Increase in PSC-vested employees $5,000 Increase in PSC-non vested employees $2,000 Remaining vesting period-non vested employees: 5 years Remaining working life-vested employees: 10 years Remaining working life-non vested employees: 20 years Calculate the past service costs included in 2013 net pension expense (or revenue) under U.S GAAP. A. $5,100 B. $5,400 C. $600 D. $7,000
C. $600
Historical Cost $12,000 Replacement Cost 9,000 Expected Selling price 10,000 Expected selling cost 500 Normal profit margin 10% of selling price Under IAS 2, what should the balance sheet report for Inventory? A. $9,000 B. $8,500 C. $9,500 D. $10,000
C. 9,500
Under IAS 12, Income Taxes, how is the relationship between a hypothetical tax expense based on statutory rates and reported tax expense based on the effective tax rate explained? A. A numerical reconciliation between tax expense based on the statutory rate in the home country and tax expense based on the effective tax rate must be presented. B. A numerical reconciliation between tax expense based on the weighted-average statutory rate across jurisdictions in which the company pays income taxes and tax expense based on the effective tax rate must be presented. C. Both (A) and (B) can be acceptable explanations. D. Neither (A) nor (B) are acceptable explanations.
C. Both (A) and (B) can be acceptable explanations
Carrying value 100,000 selling price 85,000 costs of disposal 3,000 expected future cash flows 75,000 present value of expected future cash flows 63,000 What is the amount of impairment loss under U.S. GAAP? A. €37,000 B. €18,000 C. €15,000 D. €25,000
D. 25,000
Under U.S. GAAP, if the carrying value of a fixed asset was $50,000, the undiscounted expected future cash flows was $55,000, the discounted expected future cash flows was $51,000, and the selling price was $53,000, what is the amount of impairment loss? A. $5,000 B. $3,000 C. $1,000 D. $0
D. $0
Zenith Company, a calendar-year entity, amends its defined benefit pension plan on January 1, 2013 and must recognize the increase in past service costs of its vested and non-vested employees as of that date in the calculation of its net 2013 pension expense (or revenue). The pertinent facts as of January 1, 2013 are: Increase in PSC-vested employees $5,000 Increase in PSC-non vested employees $2,000 Remaining vesting period-non vested employees: 5 years Remaining working life-vested employees: 10 years Remaining working life-non vested employees: 20 years Calculate the past service costs included in 2013 net pension expense (or revenue) under IAS 19. A. $5,100 B. $5,400 C. $600 D. $7,000
D. 7,000
Under IAS 39, under what circumstances will derecognition of a financial liability occur? A. When the obligation has been paid B. When the obligation has been canceled C. When the obligation has expired D. All of the above
D. all of the above
Under IAS 32, which of the following is a financial asset? A. Investment in equity instruments accounted for under the equity method B. Investment in special-purpose entities C. A 30% investment in a subsidiary D. Loans to other entities
D. loans to other entities
Historical Cost $12,000 Replacement Cost 9,000 Expected Selling price 10,000 Expected selling cost 500 Normal profit margin 10% of selling price Under U.S. GAAP, what should the balance sheet report for Inventory? A. $9,000 B. $8,500 C. $9,500 D. $10,000
a. 9,000
In what way does IAS 16 (Property, Plant, and Equipment) differ from U.S. GAAP concerning fixed asset measurement subsequent to initial recognition? A. IAS 16 allows for upward revaluation of the asset based on fair value. B. IAS 16 does not allow accumulated depreciation to be shown on the balance sheet. C. IAS 16 requires that fixed assets be carried at fair value less accumulated impairment losses. D. IAS 16 allows both upward and downward revaluation of fixed assets, whereas U.S. GAAP only allows upward revaluation.
a. IAS 16 allows for upward revaluation of the asset based on fair value
Which of the following inventory valuation methods, commonly used under the U.S. GAAP, is NOT allowed under IAS 2 (Inventories)? A. LIFO B. FIFO C. Weighted average D. Retail inventory method
a. LIFO
Which of the following is a difference between IAS 37 and U.S. GAAP with respect to restructuring provisions? A. U.S. GAAP does not allow recognition of a restructuring provision until a liability has been incurred. B. There is no difference between IAS 37 and U.S. GAAP with respect to restructuring provisions. C. IAS 37 does not allow recognition of a restructuring provision until a liability has been incurred. D. A restructuring provision and related loss is more likely to occur later under IAS 37 than under U.S. GAAP.
a. US GAAP does not allow recognition of a restructuring provision until a liability has been incurred
Synergy Ltd. purchased a building in 2008 for €20,000,000 and as of December 31, 2014 had recorded accumulated depreciation on the building of €6,000,000. On December 31, 2014, the company conducted its first revaluation when the fair value was €24,000,000. Under IAS 16, the journal entry recorded on this date would include: A. a credit to Revaluation Surplus—Building for €10,000,000. B. a debit to Revaluation Surplus—Building for €14,000,000. C. a debit to Loss on Revaluation—Building for €14,000,000. D. a credit to Loss on Revaluation—Building for €10,000,000.
a. a credit to revaluation surplus-building for 10,000,000
According to IAS 16, a decrease in the carrying amount of a fixed asset that is identified on an asset's first revaluation should be recorded as: A. an expense on the income statement. B. a prior period adjustment to retained earnings. C. a credit to Revaluation Surplus. D. a debit to Revaluation Surplus.
a. an expense on the income statement
According to IFRS 8 (Segment Reporting), which is NOT one of the three criteria for defining an operating segment? A. An operating segment can't merely be a lessor. B. An operating segment is a component of a business that generates revenues. C. An operating segment is a component of a business whose operating results are regularly reviewed by the chief operating officer. D. An operating segment has separate financial information available.
a. an operating segment can't merely be a lessor
Under U.S. GAAP, with respect to equity-settled share-based payments, if the fair value of the equity instrument is used, the value is determined: A. at the earlier of the date a commitment for performance is reached or the date the services are actually completed. B. at the date the services are actually completed. C. at the date a commitment for performance is reached. D. None of the above
a. at the earlier of the date a commitment for performance is reached or the date the services are actually completed
Under IAS 17, in a sale-leaseback transaction, how must the initial owner treat any gain on a finance lease? A. Defer it and amortize it into income over the life of the lease. B. Recognize it in income immediately. C. Defer it until the end of the lease term, including extensions. D. He/she can choose to either defer it or recognize it in income immediately.
a. defer it and amortize it into income over the life of the lease
The primary difference between IAS 37, and U.S. GAAP concerning the treatment of contingent liabilities pertains to: A. definition of terms. B. measurement. C. classification on the balance sheet. D. disclosure of relevant information.
a. definition of terms
What is the journal entry required to recognize a deferred tax asset of $50,000? A. Dr. Deferred Tax Asset $50,000, Cr. Income Tax Benefit $50,000 B. Dr. Deferred Tax Asset $50,000, Cr. Equity $50,000 C. Dr. Income Tax Expense $50,000, Cr. Deferred Tax Asset $50,000 D. Dr. Deferred Tax Asset $50,000, Cr. Deferred Tax Liability $50,000
a. dr. deferred tax asset $50,000, cr. income tax benefit $50,000
Under U.S. GAAP, when new debt is issued for old debt: A. extinguishment costs are deferred and amortized over the term of the new debt. B. debt extinguishment costs are expensed as incurred. C. modification costs are amortized over the term of the old debt. D. old debt is not extinguished and new debt is recognized.
a. extinguishment costs are deferred and amortized over the term of the new debt
Under U.S. GAAP, if an entity issues 4% preferred stock that gives shareholders the right to redeem the shares if the prevailing interest rates on 5-year certificates of deposit exceed 4%, how should this stock be accounted for on the books of the entity? A. Initially as equity and then reclassified as a liability when the triggering event occurs B. As a liability since the chances are more likely than not that the triggering event will occur C. As equity or a liability at the option of the entity D. As a permanent part of equity, to be debited as shares are redeemed
a. initially as equity and then reclassified as a libility wen the triggering event occurs
In what way does the IASB standard on leases (IAS 17) differ from U.S. GAAP? A. It is less specific than U.S. GAAP in terms of defining what constitutes a finance lease. B. U.S. GAAP requires more professional judgment in accounting for leases than does IAS 17. C. IAS 17 is more specific than U.S. GAAP in defining an operating lease. D. Operating leases are capitalized under IAS 17 but are not capitalized under U.S. GAAP.
a. it is less specific than US GAAP in terms of defining what constitutes finance leases
Under IAS 12, current and deferred taxes are measured on the basis of: A. rates that have been enacted or substantively enacted by the balance sheet date. B. current rates and rates anticipated when temporary differences reverse. C. rates anticipated when temporary differences reverse. D. rates prevailing when the entity provided goods or services.
a. rates that have been enacted or substantively enacted by the balance sheet date
Under IAS 10 (Events after the Reporting Period), adjusting events that occur after the balance sheet date are: A. recognized through adjustment of the financial statements. B. disclosed in a footnote only. C. treated as a prior period adjustment. D. not disclosed, since they occurred after the fact.
a. recognized through adjustment of the financial statements
According to IAS 37, how should contingent assets be recognized? A. They should be disclosed in the notes to the financial statements if the inflow of resources is probable. B. They should be recognized like any other asset, with a debit to "contingent assets." C. They should not be disclosed anywhere in the financial statements due to their uncertainty. D. They should only be disclosed in the notes to the financial statements if the inflows of resources are virtually certain.
a. they should be disclosed in the notes to the financial statements if the inflow of resources is probable
How does IAS 38 (Intangible Assets) differ from U.S. GAAP with respect to development costs? A. U.S. GAAP does not allow capitalization of development costs, whereas IAS 38 allows capitalization of these costs. B. U.S. GAAP requires capitalization of development costs, whereas IAS 38 makes capitalization of these costs optional. C. U.S. GAAP treats development costs as part of "Goodwill", whereas IAS 38 treats these costs as an intangible asset. D. U.S. GAAP requires expensing of all development costs, and IAS 38 requires capitalizing all development costs.
a. us gaap does not allow capitalizaiton of development costs, wehreas IAS 38 allows capitalizaiton of these costs
Under IAS 38, which of the following items is specifically EXCLUDED from being recognized as an internally generated intangible asset? A. Computer software costs B. Copyrights C. Customer lists D. Motion picture films
c. customer lists
SilverStone Inc. supplies emission systems worth $100,000 to Horizon Enterprises. As per the terms of sale contract, SilverStone takes back all unused emission systems. Horizon estimates that 5% of the emission systems will be returned. Under IAS 18, only four out of the five conditions for recognizing revenue from the sale of goods are met as economic benefits of 95% of sale will flow to SilverStone. How much revenue should be recognized by SilverStone Inc.? A. The recognition of the entire sale must be deferred until the fifth condition has been met. B. $75,000 of the sales price can be currently recognized as revenue and $25,000 will be treated as a deferred revenue (liability). C. The entire $100,000 sales price can be currently recognized since most of the conditions have been met. D. None of the above represents a proper treatment of this sale.
b. $75,000 of the sales price can be currently recognized as revenue and $25,000 will be treated as a deferred revenue
Which of the following is generally true about the differences between U.S. GAAP and IFRS? A. U.S. GAAP is more flexible than IFRS. B. U.S. GAAP tends to be more rules-based and IFRS tend to be principles-based. C. More professional judgment is required to apply U.S. GAAP than is required for implementing IFRS. D. In all cases, U.S. GAAP is more detailed than the IFRS.
b. US GAAP tends to be more rules based and IFRS tends to be princples based
How does IAS 34 (Interim Financial Reporting) differ from U.S. GAAP? A. U.S. GAAP has no guidance for interim financial reporting. B. U.S. GAAP treats interim periods are an integral part of the full year. C. U.S. GAAP is the same as IAS 34. D. U.S. GAAP requires that an interim period be projected pro rata for the entire year.
b. US GAAP treats interim periods are an integral part of the full year
How should stock options be accounted for under IASB standard on stock options (IFRS 2)? A. Since their value is not determinable until a future date, they are not recorded, but only disclosed in the notes to the financial statements. B. A compensation expense is recorded based on the value of the options expected to vest as of the date the options are granted. C. An expense is recorded only if a market value for the options exists on the date the options are granted. D. The options are recorded as a liability for the value of the stock at the exercise date.
b. a comparison expense is recorded based on the value of the options expected to vest as of the date the options are granted
Sigma Company issued $12 million in 10 percent bonds 6 years ago currently having a carrying amount of $10.7 million. The bond agreement allows for early extinguishment by Sigma Company beginning in the current year. Sigma's investment bank has arranged for the company to issue $10 million of new 8 percent bonds at face value to a group of investors. The proceeds will be used to extinguish the 10 percent bonds. The banking, legal, and accounting costs to execute the transaction total $200,000. The journal entry to record the debt extinguishment will include: A. a debit to Bonds Payable—8% for $10,000,000. B. a credit to Gain on Extinguishment of 10% Bonds for $500,000. C. a credit to Bonds Payable—10% for $12,000,000. D. a debit to Loss on Extinguishment of 10% Bonds for of $200,000.
b. a credit to gain on extinguishment of 10% bonds for $500,000
Under IAS 1, Presentation of Financial Statements, how must deferred taxes be classified on the balance sheet? A. As either a current asset or a current liability B. As always a noncurrent asset or a noncurrent liability C. As either a current or noncurrent asset or liability based on the expected timing of realization D. As a separately stated positive or negative component of equity
b. as always a noncurrent asset or a noncurrent liabilitiey
Under U.S. GAAP, interest on loans secured to acquire fixed assets must be: A. expensed in the period they are incurred. B. capitalized as part of the fixed asset cost. C. either expensed currently or capitalized as part of the fixed asset cost. D. charged against revenue in the year the asset is put into service.
b. capitalized as part of the fixed asset cost
The term "provision" as it is used in IAS 37, is most closely related to what term in U.S. GAAP? A. Contingent liability, where the outflow of resources is "remote." B. Contingent liability, where the outflow of resources is "probable." C. Current liability, where the outflow is difficult to measure. D. Reserve for bad debt, where the amount recoverable is "uncertain."
b. contingent liability, where the outflow of resources is "probable"
Agro-World Technologies Inc. incurred $1,000,000 to construct a pilot plant to study the feasibility of building agricultural machinery more inexpensively for emerging economies. How would this cost be classified under IAS 38 (Intangible Assets)? A. Research costs B. Development costs C. Neither research nor development D. It could be either research or development, depending on management's wishes.
b. development costs
Under a joint Exposure Draft issued by the IASB and FASB in June 2010, Revenue from Contracts with Customers, which of the following is NOT one of the steps to be applied in the recognition of revenue across a wide range of transactions and industries? A. Identify the contract with a customer. B. Do not separate the transaction price for separate performance obligations if the contract is a bundled contract where goods and services are not sold separately. C. Identify the separate performance obligations in the contract. D. Determine the transaction price.
b. do not separate the transaction price for separate performance obligations if the contrac tis a bundles contract where goods and services are not sold separately
Under IFRS 2, Share-based Payment, what approach is used to account for the transaction? A. Comparable transaction approach B. Fair value approach C. Market approach D. Notional value approach
b. fair value approach
historical cost 15,000 replacement cost 11,000 expected selling price 13,500 expected selling cost 800 normal profit margin 2,500 How will income under the U.S. GAAP compare to income the company reported under IFRS after reconciliation? A. Income will not be affected by the reconciliation. B. Income under U.S. GAAP will be lower by $1,700. C. Income under U.S. GAAP will be lower by $2,500. D. Income under U.S. GAAP will be equal to income under IFRS.
b. income under US GAAP will be lower by 1,700
If a company chooses the revaluation model permitted in IAS 16 for fixed asset measurement: A. annual revaluations must be performed on each class of assets. B. it must update the valuation so that the balance sheet represents fair value on the balance sheet date. C. appraisals must be performed by an official of the IASB. D. the depreciated replacement cost must be used as the fair value of the fixed asset.
b. it must update the valuation so that the balance sheet represents fiar value on the balance sheet
How should the cost of borrowing funds to acquire or construct property, plant, and equipment be accounted for under IASB rules, as revised in 2007? A. It should be expensed in the period incurred. B. It should be added to the other costs of acquiring fixed assets to determine the amount for the balance sheet. C. Both methods are acceptable. D. Neither method is acceptable under IASB rules.
b. it should be added to the other costs of acquiring fixed assets to determine the amount for the balance sheet
Under a joint exposure draft issued by the IASB and FASB in 2010, what is one of the most significant proposals? A. IFRS and U.S. GAAP would have identical quantifiable criteria for lease classification. B. Leases would no longer be classified as finance or operating. C. Lessors would recognize income immediately at the inception of the lease. D. There would be no lease disclosure required in the notes to the financial statements.
b. leases would no longer be classified as finance or operating
Under IAS 37, inflows of resources that are "virtually certain" to be received should be: A. disclosed as contingent assets in the notes to the financial statements. B. recognized as assets. C. undisclosed until management is absolutely certain that resources will be received. D. reported only in the cash flow statement.
b. recognized as assets
Under IAS 40 (Investment Property), gains or losses from revaluation are: A. recognized in revaluation surplus. B. recognized in current income. C. not permitted. D. recognized either in current income or revaluation surplus at the option of management.
b. recognized in current income
Under IAS 39, Financial Instruments: Recognition and Measurement, which of the following terms describes the removal of a financial asset or liability from the balance sheet when certain appropriate criteria have been met? A. Decoupling B. Extinguishment C. Derecognition D. Reversal
c. derecognition
In what way should operating leases be accounted for under IAS 17? A. The lease payments should be capitalized and shown on the balance sheet as an asset. B. The lease payments must be expensed by the lessee as they are incurred. C. IAS 17 is flexible, allowing both capitalization and expensing of operating lease costs. D. The lessee capitalizes the operating lease and the lessor expenses the lease.
b. the lease payments must be expensed by the lessee as they are incurred
Under IAS 18, which of the following is NOT a condition that must be met in order for revenue from the sale of goods to be recognized? A. The significant risks and rewards of ownership of the goods have been transferred to the buyer. B. There must be a binding, written contract between the seller and the buyer. C. The amount of revenue can be measured reliably. D. Neither continued managerial involvement normally associated with ownership nor effective control of the goods is retained.
b. there must be a binding, written contract between the seller and the buyer
Under IFRS 2, with respect to cash-settled share-based payments, when an employee has received stock appreciation rights, how is the fair value of those rights measured? A. Using the consolidation method B. Using an option pricing model C. Using the dividend discount approach D. All of the above
b. using an option pricing model
What is true about both IFRS and U.S. GAAP with respect to service contracts? A. IFRS and U.S. GAAP both allow the use of the percentage-of-completion method. B. Neither IFRS, nor U.S. GAAP allows the use of the percentage-of-completion method. C. IFRS allows the use of the percentage-of-completion method while U.S. GAAP does not. D. U.S. GAAP allows the use of the percentage-of-completion method while IFRS does not.
c. IFRS allows the use of the percentage of completion method while US GAAP does not
Which of the following statements is true of the treatment of actuarial gains and losses under IFRS and U.S. GAAP? A. IFRS requires the disclosure of actuarial gains and losses in the notes to financial statements. B. IFRS requires immediate recognition of actuarial gains and losses in net income. C. U.S. GAAP allows a choice between immediate recognition in other comprehensive income or in net income. D. U.S. GAAP requires the actuarial gains and losses to be recognized immediately through other comprehensive income.
c. US GAAP allows a choice between immediate recognition in other comprehensive income or in net income
IAS 32 defines a financial instrument as: A. the currency of a foreign country in which the enterprise does business. B. a certified check. C. any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. D. a recognized stock exchange.
c. any contract that gives rise to a financial asset of one entity and a financial liabilitiy or equity instrument of another entitty
Blanco Chemical Company spent €15,000,000 in development efforts to create a fertilizer for which it was able to obtain a patent; however, the expected distribution costs make it infeasible to market the chemical in the foreseeable future. According to IAS 38 (Intangible Assets), how should Blanco Chemical Company record the €15,000,000? A. As a "Deferred Development Cost" on the Balance Sheet B. As "Fertilizer Revenue" on the Income Statement C. As "Development Expense" on the Income Statement D. It should only be reported in the notes to the financial statements.
c. as "devleopment expense" on the income statemetn
What kinds of temporary differences related to income taxes can arise under IFRS that don't occur under U.S. GAAP? A. Book and tax differences related to the amortization of property, plant, and equipment for book purposes and cost method for tax purposes. B. Book and tax differences related to the calculation of impairments for book purposes with adjustment for tax purposes. C. Book and tax differences related to the revaluation of property, plant, and equipment for book purposes and cost method for tax purposes. D. Book and tax differences related to the calculation of contingent liability for book purposes with no like adjustment for tax purposes.
c. book and tax differences related to the revaluation of property, plant, and equipment for book purposes and cost method for tax purposes
According to IAS 16 (Property, Plant and Equipment), what is the term used to indicate the amount for which an asset could be exchanged between knowledgeable, willing parties in an arm's length transaction? A. Replacement cost B. Net realizable value C. Fair value D. Historical cost
c. fair value
Under IAS 32, how should an equity instrument be classified? A. It must always be classified as equity by its very nature. B. The entity has the option of classifying it as a liability or equity. C. If it contains a contractual obligation that meets the definition of a financial liability, it should be classified as a liability. D. The entity should apportion the classification between liability and equity if there is a contractual obligation that meets the definition of a financial liability.
c. if it contains a contractual obligation that meets the definition of a financial liability, it should be classified as a liability
Under IFRS 2, with respect to choice-of-settlement share-based payments, if it is the entity that has the right to choose between equity settlement and cash settlement, when must the entity choose the cash settlement? A. If the supplier provides services B. If the supplier provides goods C. If the entity has a present obligation to settle in cash D. The entity always has the option to choose either method.
c. if the entity has a present obligation to settle in cash
Under IAS 1, Presentation of Financial Statements, which of the following is NOT a criterion in the definition of a current liability? A. It is a liability that is expected to be settled in an entity's normal operating cycle. B. It is a liability primarily held for the purpose of trading. C. It is a liability that does not have the right to defer until 18 months after the balance sheet date. D. It is a liability that is expected to be settled within 12 months of the balance sheet date.
c. it is a liability that does not have the right to defer until 18 months after the balance sheet date
Rive Rouge Confections Company incurred €5,000,000 to determine if chocolate could be made to resist melting by adding certain inert minerals to the mixture. According to IAS 38, how should Rive Rouge record this cost? A. It should be capitalized as a deferred development cost. B. It should be treated as a cost of products it currently markets. C. It should be expensed currently. D. It should be amortized over 20 years.
c. it should be expensed currently
Alpha Inc. has receivables from unrelated parties with a face value of $5,000. It transfers these receivables to bank for $4,500, without recourse. It will continue to collect the receivables, depositing them in a non-interest-bearing bank account with the cash flows remitted to the bank at the end of each month. It is not allowed to sell or pledge the receivables to anyone else and is under no obligation to repurchase the receivables from bank. Which of the following is the appropriate treatment for these Accounts receivables? A. It should show these receivables in its Balance Sheet. B. It should amortize these receivables. C. It should derecognize these receivables. D. It should derecognize these receivables if it retains the interest earned on these.
c. it should derecognize these receivables
Which of the following statements is true of IAS 19? A. It establishes guidance for measuring onerous contract. B. It requires all past service costs to be recognized in net income in a subsequent period in which the benefit plan is changed. C. Its revised version became effective in the year 2013. D. It covers all employee benefits including share-based compensation.
c. its revised version became effective in the year 2013
Under IAS 38, which of the following items might qualify for capitalization as internally generated intangible assets? A. Brands B. Publishing titles C. Market share D. Customer lists
c. market share
In an Ernst & Young 2005 survey of 130 companies' Forms 20-F filed with the SEC, what issue required adjustments by the greatest number of companies? A. Goodwill B. Leases C. Pensions D. Wages
c. pensions
Under U.S. GAAP, a deferred tax asset must be realized when: A. realization is probable. B. realization is possible. C. realization is more likely than not. D. realization is greater than 75% likely.
c. realization is more likely than not
Chien Bleu Ltd. purchased a building in 2009 for €10,000,000 and as of December 31, 2015 had recorded accumulated depreciation on the building of €3,000,000. On December 31, 2015, the company conducted its first revaluation when the fair value was €12,000,000. According to IAS 16, what account should be credited for €5,000,000? A. Loss on Revaluation—Building B. Gain From Revaluation of Building C. Revaluation Surplus—Building D. Revaluation Revenue—Building
c. revaluation surplus - building
Under IAS 2, what adjustment needs to be made after an inventory write-down if the selling price subsequently increases? A. No adjustment is necessary. Once inventory is written down, it cannot be increased under IASB standards. B. It should be sold at the replacement cost. C. The inventory write-down should be reversed to bring it in line with the new net realizable value. D. Recovery of inventory loss should be debited to reflect the increase in inventory value.
c. the inventory write down should be reversed to bring it in line with the new net realizable value
According to IAS 37, with respect to onerous contracts, a provision should be recognized for "unavoidable costs of the contract", which is: A. the intrinsic value of the contract. B. the lower of cost or market value of the contract. C. the lower of cost of fulfillment or the penalty from non-fulfillment of the contract. D. None of the above
c. the lower of cost of fulfillment or the penalty from non-fulfillment of the contract
Why is it difficult to compare IAS 18, Revenue, to U.S. GAAP? A. The IASB definition of revenue is very complicated, whereas the definition of revenue under U.S. GAAP is straightforward. B. Revenue is not defined under U.S. GAAP. C. There is no single standard in U.S. GAAP that deals solely with revenue. D. Under U.S. GAAP, revenue is defined in terms of cash, whereas IAS 18 defines revenue in terms of a variety of resources.
c. there is no single standard in US GAAP that deals solely with revenue
Under IAS 37, how are contingent liabilities treated in the financial statements? A. IAS 37 does not address contingent liabilities. B. They are recorded as current liabilities if the amount is reasonably measured. C. They are disclosed in the notes to the financial statements when there is more than a remote possibility of an outflow of resources. D. They are not disclosed.
c. they are disclosed in the notes to the financial statements when there is more than a remote possibility of an outflow of resources
What do IASB standards say about related party transactions? A. They are illegal in most countries and must be avoided. B. Related party transactions should be eliminated from the financial statements. C. They must be disclosed in the notes to the financial statements. D. None of the above
c. they must be disclosed in the notes to the financial statements
Under what circumstance, both U.S. GAAP and IAS 2 will provide similar result with respect to inventory valuation? A. When historical cost is greater than the net realizable value B. When replacement cost is lower than historical cost C. When replacement cost is greater than the net realizable value D. When normal profit margin is less than 15%
c. when replacement cost is greater than the net realizable value
Under IAS 32, which of the following is a financial liability? A. A payable B. A bank loan C. An intercompany loan payable D. All of the above
d. all of the above
Which of the following is true about the IASB standards on statement of cash flows? A. Cash flow statements are not required under the IASB standards. B. Operating cash flows must be determined using the "direct method only." C. Operating cash flows may be combined with financing cash flows. D. IAS 7 requires essentially the same information in the statement of cash flows as U.S. GAAP.
d. IAS 7 requires essentially the same informaiton in the statement of cash flows as US GAAP
How does U.S. GAAP differ from IFRS with respect to cash-settled share-based payments? A. U.S. GAAP always treats such payments as a liability. B. U.S. GAAP offers the option to treat such payments as either a liability or equity. C. IFRS and U.S. GAAP follow the same approach with respect to such payments. D. U.S. GAAP, under certain circumstances, may treat such payments as equity.
d. US GAAP, under certain circumstances, may treat such payments as equity
How does the treatment of borrowing costs under U.S. GAAP differ from IFRS? A. U.S. GAAP has no guidance for accounting treatment related to borrowing costs. B. U.S. GAAP specifically includes foreign exchange gains and losses on foreign currency borrowings. C. The definition of borrowing costs under U.S. GAAP is broader in scope than the definition of interest cost under IAS 23. D. U.S. GAAP does not allow netting of interest income against interest cost.
d. US GAAp does not allow netting of interest income against interest cost
IAS 18, Revenue, covers which types of revenues? A. Sale of goods B. Rendering of services C. Interest, royalties, and dividends D. All of the above
d. all of the above
Under IAS 12, Income Taxes, which of the following issues are covered? A. Temporary differences B. Operating loss carry forwards C. Tax credit carry forwards D. All of the above
d. all of the above
Under IAS 19, Employee Benefits, which of the following benefits are covered? A. Compensated absences and bonuses B. Post-employment benefits C. Deferred compensation and disability benefits D. All of the above
d. all of the above
Which of the following represents a difference in the classification of current liabilities between IFRS and U.S. GAAP? A. Refinanced short-term debt B. Amounts payable on demand due to violation of debt covenants C. Bank overdrafts D. All of the above
d. all of the above
How does the definition of asset impairment differ between IAS 36 and U.S. GAAP? A. U.S. GAAP does not consider selling price in determining impairment, but IAS 36 does. B. U.S. GAAP considers cash flows in assessing value of continued use, but does not discount them, whereas IAS 36 requires discounting in assessing asset impairment. C. Asset impairment is more likely to occur under IAS 36 than under U.S. GAAP. D. All of the above are differences between IAS 36 and U.S. GAAP.
d. all of the above are differences between IAS 36 and US GAAP
Which of the following is NOT a share-based payment transaction under IFRS 2? A. Equity-settled share-based payment B. Cash-settled share-based payment C. Choice-of-settlement share-based payment D. All of the above are share-based payment transactions under IFRS 2.
d. all of the above are shared based payment transactions under IFRS 2
IASB standards address related party transactions. According to these standards, which of the following is considered a "related party?" A. Parent companies B. Subsidiary companies C. Key members of management D. All of the above could be related parties.
d. all of the above could be related parties
Under IAS 18, when it is probable that the economic benefits of interest, royalties, and dividends will flow to the enterprise and can be measured reliably, how should revenue be recognized? A. Interest income shall be recognized based on an effective yield basis. B. Royalties are recognized on an accrual basis with reference to the terms of the agreement. C. Dividends are recognized when the shareholders' right to receive payment is established. D. All of the above govern revenue recognition under these circumstances.
d. all of the above govern revenue recognition under these circumstances
What types of differences can cause issues between International Financial Reporting Standards and U.S. GAAP? A. Measurement B. Alternatives available C. Disclosure D. All of the above may be different between IFRS and U.S. GAAP.
d. all of the above may be different between IFRS and US GAAP
Which of the following items should be included in the cost of property, plant, and equipment under IAS 16? A. All costs directly attributable to getting the asset to the proper location B. Import duties and taxes C. Estimated costs of removing the asset D. All of these should be considered part of the cost of the asset.
d. all of these should be considered part of the cost of the asset
How does U.S. GAAP require the prior service cost related to retirees to be recognized? A. Amortize over the average remaining working lives of active employees B. Recognize immediately C. Don't recognize at all D. Amortize over remaining expected life of the retirees
d. amortize over remaining expected life of the retirees
Under both IFRS and U.S. GAAP, in an equity-settled share-based payment transaction, how are such payments to non-employees measured? A. At the cost of the goods or services received. B. Both standards are silent as to the treatment of payments to non-employees. C. Always the fair value of the equity instrument. D. At the fair value of goods or services received, if a reliable determination is available—otherwise, the fair value of the equity instrument.
d. at the fiar value of goods or services received, if a reliable determiniation is availabe-otherwise, the fiar value of the equity instrument
Under IAS 16 (Property, Plant, and Equipment), subsequent revaluation decreases are: A. never recognized. B. credited to a revaluation surplus account. C. recognized as an expense on the income statement. D. first recognized as a reduction in any related revaluation surplus.
d. first recognized as a reduction in any related revaluation surplus
With respect to post-employment medical benefits, U.S. GAAP: A. does not recognize the concept of post-employment medical benefits. B. has considerably less guidance than IAS 19. C. follows the guidance of IAS 19. D. has considerably more guidance than IAS 19.
d. has considerably more guidance than IAS 19
What is a "contingent asset?" A. There is no such thing, in IASB standards, as a "contingent asset." B. This is an asset that has been put up as collateral against a loan. C. This is a possible inflow of resources arising from a future activity. D. It is a probable asset, arising from past events, whose existence is yet to be confirmed definitively by a future event.
d. it is a probable asset, arising from past events, whose exitence is yet to be confirmed definitively by a future event
Through 50 years of high quality service, Domo Diagnostics Laboratory has created goodwill with its clients that management estimates is worth at least $20,000,000. Under IAS 38, how should this be recognized? A. An intangible asset "Goodwill" should be debited for $20,000,000. B. The $20,000,000 should be expensed over a period of 20 years. C. The $20,000,000 should be expensed over a period of 50 years. D. It should not be recognized in Domo's accounting records at all.
d. it should not be recognized in domo's accounting records at all
Under IFRS 2, with respect to choice-of-settlement share-based payments, if the supplier chooses the cash settlement, the entity is deemed to have issued a compound financial instrument consisting of debt and equity. When cash is received, how does the supplier applies it? A. Only against the equity portion B. Apportioned between debt and equity based on relative fair market value of each component C. Only against current year liabilities D. Only against the debt portion
d. only against the debt prtion
What should be the basis for choosing depreciation methods for fixed assets under IAS 16 (Property, Plant, and Equipment)? A. Tax minimization B. Profit maximization C. Useful life of the fixed asset D. Pattern of economic benefits to be derived from the asset
d. pattern of economic benefits to be derived from the asset
Under IAS 18, which of the following is an example of retention of significant risks and rewards by the seller? A. The buyer has no right to rescind the purchase. B. The seller is under no obligation for satisfactory performance not covered by normal warranties. C. Goods are sold subject to installation, but installation is not a significant part of the contract and has not yet been completed. D. Receipt of revenue by the seller is contingent on the buyer generating revenue through its sale of the goods.
d. receipt of revenue by the seller is contingent on the buyer generating revenue through its sale of the goods
If a derivative is not designated as a hedge: A. the change in market value must be recognized in net income when it changes. B. the change in market value is not recognized in net income. C. the change in fair value is not recognized in net income. D. the change in fair value must be recognized in net income when it changes.
d. the change in fair value must be recognized in net income when it changes
As defined by IAS 38, how are intangible assets unlike other assets? A. They must have arisen from past events. B. Their value cannot be reasonably measured. C. They must be controlled by enterprises. D. They are nonmonetary and lack physical substance.
d. they are nonmonetary and lack physical substance
What is one major difference between IFRS and U.S. GAAP relative to correction of errors? A. U.S. GAAP is silent as to how to treat errors that have been discovered. B. IFRS is silent as to how to treat errors that have been discovered. C. Under U.S. GAAP, a prospective approach is taken. D. Under IFRS, if it's impractical to restate financial statements, then no restatement is necessary.
d. under IFRS, if its impractical to restate financial statements, then no restatement is necessary