Exam 15: International Financial Reporting Standards

When preparing a statement of cash flows, IFRS allows companies to report cash outflows from interest payments as either operating or financing cash flows, while U.S. GAAP requires these outflows to be reported as only operating activities.

The Norwalk Agreement:

In countries where debt financing is more common (Japan) compared to equity financing, there is greater emphasis on reporting the ability of the company to earn profits for its investors rather than the ability to repay debt.

Countries that have similar rules for financial accounting and tax accounting, rely more on debt financing, and have historical political and economic ties with Germany are referred to as what types of countries?

Suppose a severe storm floods a company's headquarters, causing damages to the building of $300,000 and destruction of inventory of $200,000. Because of the unusual nature of this event, the company had no flood insurance to cover these losses. Under U.S. GAAP, how much would the company report as an extraordinary loss in the current year's income statement?

The body primarily responsible for establishing a single set of global accounting standards is the:

Under IFRS, inventory write-downs due to using the lower-of-cost-or-market rule are allowed to be reversed in a future year if the market value subsequently increases.

For which of the following topics is accounting under both U.S. GAAP and IFRS essentially the same?

How is preferred stock reported differently under U.S. GAAP and IFRS? Do you think preferred stock is a liability or an equity item? Why?

Under U.S. GAAP, development expenditures are capitalized, while under IFRS, these expenditures must be expensed immediately.

The FIFO inventory method is not allowed under IFRS.

Suppose a company pays interest of $10,000 for the year on borrowed amounts due in two years. Under IFRS, what is the most the company can report as cash outflows from financing activities?

Some countries are more secretive (Brazil and Switzerland), leading to fewer financial disclosures.

How is the organization responsible for standard setting in the U.K. different from that in France? Which of these organizations is closer to the FASB in the U.S.?

Assuming rising costs, the switch from LIFO to FIFO or average cost would most likely have what effect(s)?

Describe at least five reasons why accounting practices differ across countries. Which reason do you think is most important? Explain why.

When preparing a statement of cash flows, IFRS allows companies to report cash inflows from interest and dividends as either operating or investing cash flows, while U.S. GAAP requires these inflows to be reported as only operating activities.

Which inventory cost flow assumption is allowed under U.S. GAAP but not under IFRS?

One motivation for reducing differences in accounting practices across countries is to:

Suppose a severe storm floods a company's headquarters, causing damages to the building of $300,000 and destruction of inventory of $200,000. Because of the unusual nature of this event, the company had no flood insurance to cover these losses. Under IFRS, how much would the company report as an extraordinary loss in the current year's income statement?