Deck 14: International Financial Reporting Standards

Question 1

Which of the following is a commonly cited disadvantage of having a new unified set of accounting standards?

A)Acquiring foreign companies would become a more confusing proposition.
B)Corporations may find themselves more susceptible to lawsuits due to the principles-based system.
C)Time and money would not be saved in accessing capital markets abroad.
D)The SEC would be dissolved if international accounting standards were adopted.

Answer 1

B

Question 2

When analyzing foreign statements,all of the following are accurate positions of non-current liabilities listings except:

A)After current liabilities
B)Before current liabilities
C)After share capital
D)After total equity

Answer 2

A

Question 3

Significant differences exist in terms on financial statements around the world.For example,another name for what we know as Contingent Liabilities in the U.S.is:

A)Share Capital
B)Capital Reserves
C)Provisions for Other Risks
D)Deferred Income

Answer 3

C

Question 4

On the reporting of liabilities where a range of values exists as a possible outcome,IFRS requires which of the following points to be recorded as a provision,if the outcome is probable?

A)Low end of the range.
B)High end of the range.
C)Midpoint of the range.
D)IFRS presents no specific guidance as to this point.

Question 5

When comparing U.S.GAAP and IFRS,regarding the level of details in the standards and the level of disclosure required,which of the following is correct? U.S.GAAP IFRS

A)Detail: More Detail: Less Disclosure: More Disclosure: Less
B)Detail: More Detail: Less Disclosure: Less Disclosure: More
C)Detail: Less Detail: More Disclosure: Less Disclosure: More
D)Detail: Less Detail: More Disclosure: More Disclosure: Less

Question 6

All of the following statements are true about inflation except:

A)The U.S.and Germany adjust their financial statements for inflation.
B)In recent years,inflation has been more rampant in Latin America and South America than the rest of the world.
C)The FASB developed rules for companies in the United States to use to adjust for inflation.
D)U.S.companies no longer present financial information adjusted for the effects of inflation.

Question 7

The benefits of a single set of accounting standards used around the world would include all of the following except:

A)They would eventually save companies considerable money in accounting fees.
B)They would prevent competitors from acquiring each other.
C)They would allow easier comparisons by analysts and investors.
D)They would facilitate access to foreign capital markets.

Question 8

Significant differences exist in terms on financial statements around the world.For example,another name for what we know as Additional Paid-In Capital in the U.S.is:

A)Share Capital
B)Capital Reserves
C)Provisions for Other Risks
D)Deferred Income

Question 9

All of the following are advantages available to companies if a single set of accounting standards were used except:

A)A single set of worldwide accounting standards would have no effect on accounting fee costs.
B)A single set of standards would make it much easier to decide whether to acquire a foreign company.
C)A single set of worldwide accounting standards would facilitate comparisons for investment purposes.
D)A single set of worldwide accounting standards would make it easier to access foreign capital markets

Question 10

Significant differences exist in terms on financial statements around the world.For example,another name for what we know as Capital Stock in the U.S.is:

A)Share Capital
B)Capital Reserves
C)Provisions for other Risks
D)Deferred Income

Question 11

During what year did the IASB and FASB reaffirm their commitment to achieving convergence of accounting standards in the U.S.?

A)2007
B)2009
C)2002
D)2008

Question 12

Which of the following countries do not use a common law system?

A)The United States
B)Germany
C)The United Kingdom
D)Both a and c are correct.

Question 13

All of the following are among the most important reasons why accounting standards differ around the world except:

A)differences in the state of economic development
B)differences in taxation
C)differences in inflation
D)differences in code law in all countries around the world

Question 14

The International Accounting Standards Committee was established in 1973 to develop worldwide standards.Which group replaced it in 2001?

A)FASB
B)IFRS
C)IASB
D)IIA

Question 15

The group with primary responsibility for development of a single set of accounting standards around the world is the

A)FASB
B)SEC
C)IFRS
D)IASB

Question 16

Which organization would have the ultimate responsibility of deciding if the advantages outweigh the disadvantages in the adoption of IFRS accounting standards in the U.S.?

A)FASB
B)SEC
C)IASB
D)AICPA

Question 17

Which of the following statements is true regarding common law?

A)In common law countries,there are generally more statutes written into the laws.
B)In common law countries,there is less reliance on interpretation by the courts.
C)Because more details are written into U.S.law,FASB has shorter and more general accounting standards than most countries.
D)The common law system has its roots in the United Kingdom.

Question 18

Which of the following inventory costing methods is prohibited under IFRS?

A)FIFO
B)Weighted-average
C)LIFO
D)Perpetual

Question 19

What is the name of the formalized commitment of the IASB and the FASB to converge U.S.and international accounting standards?

A)The Sarbanes-Oxley Act
B)The Norwalk Agreement
C)The IFRS Foundation
D)The Conceptual Framework

Question 20

What is the name for the balance sheet under international accounting standards?

A)Assets and Equity Attributable to Shareholders
B)Statement of Financial Position
C)Statement of Balance
D)The Equitable Claims Statement

Question 21

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.

Question 22

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

Question 23

The state of economic development can affect accounting standards.

Question 24

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

Question 25

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

A)U.S.GAAP requires a standard set of terms on the balance sheet.
B)IFRS requires a standard set of terms on the balance sheet.
C)Terminology is consistent across all countries.
D)Neither IFRS nor U.S.GAAP requires a standard set of terms on the balance sheet.

Question 26

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

Question 27

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.

Question 28

Companies in Mexico must begin using IFRS by 2012.

Question 29

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

A)current assets,long-term assets,current liabilities
B)inventories,trade-receivables,cash
C)assets,liabilities,equities
D)current liabilities,long-term liabilities,equities

Question 30

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

Question 31

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

Question 32

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

Question 33

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

Question 34

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

Question 35

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.

Question 36

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

Question 37

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.

Question 38

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.

Question 39

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

Question 40

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

Question 41

Explain the two primary legal systems used around the world and what these differences have to do with accounting standards.

Question 42

How does the application of the lower-of-cost-or-market rule differ between U.S.GAAP and IFRS?

Question 43

Explain some of the differences in accounting for operating assets that exist between U.S.GAAP and IFRS.

Question 44

Summarize some of the common differences between U.S.GAAP and IFRS.

Question 45

How would you describe the current role of the IASB in setting accounting standards?

Question 46

Explain the meaning of the terms contingent liabilities and provisions as they relate to U.S.GAAP and IFRS?

Question 47

Discuss at least four reasons that accounting standards currently differ between countries.

Question 48

The cost of Fulton's inventory at the end of the year was $145,000.Due to obsolescence,the cost to replace the inventory was only $90,000.Net realizable value-what the inventory could be sold for-is $102,000.
REQUIRED:
Determine the amount Fulton should report on its year-end balance sheet for inventory assuming the company follows (a)U.S.GAAP and (b)IFRS.