International Accounting Ch4 Solution

CHAPTER 4

INTERNATIONAL FINANCIAL REPORTING STANDARDS

Chapter Outline

I. The International Accounting Standards Board (IASB) had 30 International Accounting Standards (IAS) and 8 International Financial Reporting Standards (IFRS) in force in May 2008.

A. In 2002, the IASB and U.S. Financial Accounting Standards Board (FASB) agreed to work together to reduce differences between IFRS and U.S. GAAP.

II. There are several types of differences between IFRS and U.S. GAAP.

A. Definition differences. Differences in definitions can occur even though concepts are similar. Definition differences can lead to differences in recognition and/or measurement.

B. Recognition differences. Differences in recognition criteria and/or guidance related to (a) whether an item is recognized, (b) how it is recognized, and/or (c) when it is recognized (timing difference).

C. Measurement differences. Differences in approach for determining the amount recognized resulting from either (a) a difference in the method required, or (b) a difference in the detailed guidance for applying a similar method.

D. Alternatives. One set of standards allows a choice between two or more alternative methods; the other set of standards requires one specific method to be used.

E. Lack of requirements or guidance. IFRS do not cover an issue addressed by U.S. GAAP, and vice versa.

F. Presentation differences. Differences in the presentation of items in the financial statements.

G. Disclosure differences. Differences in information presented in the notes to financial statements related to (a) whether a disclosure is required and/or (b) the manner in which a disclosure is required to be made.

III. A variety of differences exist between IFRS and U.S. GAAP with respect to the recognition and measurement of assets.

A. Inventory – IFRS require inventory to be reported on the balance sheet at the lower of cost or net realizable value;...