Chapter 05 – IFRS

Part II
Multiple Choice Questions
1.
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.
2.
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.
3.
The IASB standard on stock options (IFRS 2) is substantially the same as
U.S. GAAP. How should stock options be accounted for?
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.
4.
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
5.
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.
6.
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
7.
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 Black Motor Pool method
b. using an option pricing model
c. using the Van der Graaf approach
d. all of the above
8.
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. whether the entity provides goods or services.
9.
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. Either (A) or (B) are acceptable explanations.
d. Neither (A) nor (B) are acceptable explanations.
10.
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.