Question 1

Which of the following is a true statement about the terms used on the balance sheet?

Accepted Answer

Neither IFRS nor U.S. GAAP requires a standard set of terms on the balance sheet. While there are some common terms used on balance sheets, there may be differences in terminology between companies and industries. It is important for users of financial statements to understand the specific terminology used by each company in order to properly interpret the information presented on the balance sheet.

Question 2

The state of economic development can affect accounting standards.

Accepted Answer

Accounting standards can vary depending on the level of economic development, as the complexity of business transactions and financial reporting can differ between developed and developing economies. In developing economies, accounting standards may be less strict or less complex, while in developed economies they may be more standardized and detailed. Additionally, issues such as corruption and lack of resources can also impact the implementation and enforcement of accounting standards in developing economies.

Question 3

The U.S. accounting standards are more principle-based than IFRS.

Accepted Answer

The opposite is true. IFRS is more principle-based, while U.S. GAAP is more rules-based.

Question 4

IFRS is now mandatory in all member states of the economic and political organization known as the European Union.

Accepted Answer

This is correct, as of January 2005, all member states of the European Union are required to use IFRS as the basis for their financial reporting.

Question 5

Essentially, the entire statement of financial position is inverted compared to what is commonly seen in the United States.

Accepted Answer

In many countries outside of the United States, the statement of financial position (also known as the balance sheet) lists liabilities and equity before assets, which is the opposite of what is typically seen in the US.

Question 6

Companies in Mexico had to begin using IFRS by 2012.

Accepted Answer

The Mexican government adopted IFRS (International Financial Reporting Standards) as the official set of accounting standards to be used in the country's financial reporting. All publicly traded companies in Mexico were required to switch to IFRS by 2012.

Question 7

Ultimately, it will be the responsibility of the FASB in the U.S. to decide if the advantages of IFRS's outweigh the
disadvantages.

Accepted Answer

The answer of Ultimately, it will be the responsibility of...

Question 8

Under IFRS, if inventory is written down to a new lower market value, this cannot be reversed in later periods.

Accepted Answer

Under IFRS, if inventory is written down to a new lower market value, and if the reason for the write-down no longer exists, then it can be reversed in later periods, but only up to the original cost of the inventory.

Question 9

Regarding the valuation of operating assets, IFRS allows companies to use fair value.

Accepted Answer

According to IFRS, companies have the option to measure their operating assets using either historical cost or fair value. However, fair value might not be suitable for all assets, and companies need to carefully consider the nature of each asset before choosing their valuation method.

Question 10

U.S. GAAP requires companies to present a balance sheet with classifications for current and long-term liabilities, while IFRS does not.

Accepted Answer

The answer of U.S. GAAP requires companies to present a...

Question 11

Which of the following presents the proper ordering of assets, liabilities and equities on the statement of financial position used by some countries that is different from the U.S.?

Accepted Answer

The answer of Which of the following presents the proper...

Question 12

A single set of accounting standards could help a U.S. company save time and money in the acquisition of a German company.

Accepted Answer

With a single set of accounting standards, there would be less need for costly and time-consuming adjustments to financial statements when a U.S. company acquires a German company. This is because both companies would be using the same set of standards, making it easier to compare and reconcile their financial information.

Question 13

Japan has a greater number of differences than the U.S. between the amount of income reported to stockholders and that reported to the taxing authorities.

Accepted Answer

The answer of Japan has a greater number of differences...

Question 14

There is a standard format in various countries for the statement of financial position.

Accepted Answer

The answer of There is a standard format in various...

Question 15

According to the text, in economies like those that made up the former Soviet Union, accounting standards are relatively less complex due to the fact that they are just beginning to be developed.

Accepted Answer

The text states that in economies like those of the former Soviet Union, the accounting standards are relatively less complex because they are just beginning to be developed.

Question 16

In countries, like Japan and much of Europe, fewer differences between the amount of income reported to stockholders and that reported to the taxing authorities exist than in the U.S.

Accepted Answer

In Japan and much of Europe, companies tend to report similar amounts of income to both stockholders and taxing authorities, leading to fewer differences between the two. This is in contrast to the U.S., where there can be significant discrepancies between reported income and taxable income.

Question 17

While U.S. GAAP requires a complete set of financial statements, including a balance sheet, statement of
stockholders' equity, income statement, and statement of cash flows, IFRS does not.

Accepted Answer

IFRS also requires a complete set of financial statements, including a balance sheet, income statement, statement of changes in equity, statement of cash flows, and notes to the financial statements.

Question 18

Both U.S. GAAP and IFRS classify gains and losses that are both unusual in nature and infrequent in occurrence as extraordinary and present them in a separate section of the income statement.

Accepted Answer

Both U.S. GAAP and IFRS eliminated the separate reporting of extraordinary items in the income statement. Gains and losses that are both unusual in nature and infrequent in occurrence are now reported as part of the income from continuing operations, net of tax.

Question 19

Both U.S. GAAP and IFRS apply the lower-of-cost-or market rule in a similar manner to inventory.

Accepted Answer

Under U.S. GAAP, the lower-of-cost-or-market rule is applied to inventory, where "market" can mean replacement cost, net realizable value, or net realizable value less a normal profit margin. However, IFRS uses the lower of cost and net realizable value, without the option to use replacement cost as a measure.

Question 20

No single explanation can be given for the divergence of accounting standards.

Accepted Answer

The divergence of accounting standards is a complex issue with multiple factors contributing to it, such as cultural differences, legal and regulatory frameworks, and economic development. Therefore, no single explanation can fully account for it.

Quiz 14: International-Financial-Reporting-Standards