Question 1

How does the definition of asset impairment differ between IAS 36 and U.S. GAAP?

Accepted Answer

A)  U.S. GAAP does not consider selling price in determining impairment, but IAS 36 does. 
B)  U.S. GAAP considers cash flows in assessing value of continued use, but does not discount them, whereas IAS 36 requires discounting in assessing asset impairment. 
C)  Asset impairment is more likely to occur under IAS 36 than under U.S. GAAP. 
D)  All of the above are differences between IAS 36 and U.S. GAAP. 
A)  U.S. GAAP does not consider selling price in determining impairment, but IAS 36 does. 
B)  U.S. GAAP considers cash flows in assessing value of continued use, but does not discount them, whereas IAS 36 requires discounting in assessing asset impairment. 
C)  Asset impairment is more likely to occur under IAS 36 than under U.S. GAAP. 
D)  All of the above are differences between IAS 36 and U.S. GAAP.

Question 2

How does IAS 38 (Intangible Assets) differ from U.S. GAAP with respect to development costs?

Accepted Answer

A)  U.S. GAAP does not allow capitalization of development costs, whereas IAS 38 allows capitalization of these costs. 
B)  U.S. GAAP requires capitalization of development costs, whereas IAS 38 makes capitalization of these costs optional. 
C)  U.S. GAAP treats development costs as part of "Goodwill", whereas IAS 38 treats these costs as an intangible asset. 
D)  U.S. GAAP requires expensing of all development costs, and IAS 38 requires capitalizing all development costs. 
A)  U.S. GAAP does not allow capitalization of development costs, whereas IAS 38 allows capitalization of these costs. 
B)  U.S. GAAP requires capitalization of development costs, whereas IAS 38 makes capitalization of these costs optional. 
C)  U.S. GAAP treats development costs as part of "Goodwill", whereas IAS 38 treats these costs as an intangible asset. 
D)  U.S. GAAP requires expensing of all development costs, and IAS 38 requires capitalizing all development costs.

Question 3

Under IAS 40 (Investment Property), gains or losses from revaluation are:

Accepted Answer

A)  recognized in revaluation surplus. 
B)  recognized in current income. 
C)  not permitted. 
D)  recognized either in current income or revaluation surplus at the option of management. 
A)  recognized in revaluation surplus. 
B)  recognized in current income. 
C)  not permitted. 
D)  recognized either in current income or revaluation surplus at the option of management.

Question 4

Under IAS 38, which of the following items might qualify for capitalization as internally generated intangible assets?

Accepted Answer

A)  Brands 
B)  Publishing titles 
C)  Market share 
D)  Customer lists 
A)  Brands 
B)  Publishing titles 
C)  Market share 
D)  Customer lists

Question 5

Camerata Construction borrowed €19,000,000 for 10 years at 6% specifically to modernize its operations with new equipment. The average rate of interest on Camerata's debt after considering the most recent loan was 5.5%. What rate of interest should be used for capitalizing the borrowing costs on the new equipment under IAS 23?

Accepted Answer

A)  5.5% 
B)  6% 
C)  5.75% 
D)  Some other amount 
A)  5.5% 
B)  6% 
C)  5.75% 
D)  Some other amount

Question 6

The following inventory information was taken from the records of Kleinfeld Inc.:   Under IAS 2, what should the balance sheet report for Inventory?

Accepted Answer

A)  $7,000 
B)  $8,500 
C)  $7,600 
D)  $9,000 
A)  $7,000 
B)  $8,500 
C)  $7,600 
D)  $9,000

Question 7

Through 50 years of high quality service, Domo Diagnostics Laboratory has created goodwill with its clients that management estimates is worth at least $20,000,000. Under IAS 38, how should this be recognized?

Accepted Answer

A)  An intangible asset "Goodwill" should be debited for $20,000,000. 
B)  The $20,000,000 should be expensed over a period of 20 years. 
C)  The $20,000,000 should be expensed over a period of 50 years. 
D)  It should not be recognized in Domo's accounting records at all. 
A)  An intangible asset "Goodwill" should be debited for $20,000,000. 
B)  The $20,000,000 should be expensed over a period of 20 years. 
C)  The $20,000,000 should be expensed over a period of 50 years. 
D)  It should not be recognized in Domo's accounting records at all.

Question 8

What types of differences can cause issues between International Financial Reporting Standards and U.S. GAAP?

Accepted Answer

A)  Measurement 
B)  Alternatives available 
C)  Disclosure 
D)  All of the above may be different between IFRS and U.S. GAAP. 
A)  Measurement 
B)  Alternatives available 
C)  Disclosure 
D)  All of the above may be different between IFRS and U.S. GAAP.

Question 9

According to IAS 16 (Property, Plant and Equipment), what is the term used to indicate the amount for which an asset could be exchanged between knowledgeable, willing parties in an arm's length transaction?

Accepted Answer

A)  Replacement cost 
B)  Net realizable value 
C)  Fair value 
D)  Historical cost 
A)  Replacement cost 
B)  Net realizable value 
C)  Fair value 
D)  Historical cost

Question 10

Which of the following inventory valuation methods, commonly used under the U.S. GAAP, is NOT allowed under IAS 2 (Inventories)?

Accepted Answer

A)  LIFO 
B)  FIFO 
C)  Weighted average 
D)  Retail inventory method 
A)  LIFO 
B)  FIFO 
C)  Weighted average 
D)  Retail inventory method

Question 11

Agro-World Technologies Inc. incurred $1,000,000 to construct a pilot plant to study the feasibility of building agricultural machinery more inexpensively for emerging economies. How would this cost be classified under IAS 38 (Intangible Assets)?

Accepted Answer

A)  Research costs 
B)  Development costs 
C)  Neither research nor development 
D)  It could be either research or development, depending on management's wishes. 
A)  Research costs 
B)  Development costs 
C)  Neither research nor development 
D)  It could be either research or development, depending on management's wishes.

Question 12

According to IAS 16, a decrease in the carrying amount of a fixed asset that is identified on an asset's first revaluation should be recorded as:

Accepted Answer

A)  an expense on the income statement. 
B)  a prior period adjustment to retained earnings. 
C)  a credit to Revaluation Surplus. 
D)  a debit to Revaluation Surplus. 
A)  an expense on the income statement. 
B)  a prior period adjustment to retained earnings. 
C)  a credit to Revaluation Surplus. 
D)  a debit to Revaluation Surplus.

Question 13

Under what circumstance will both U.S. GAAP and IAS 2 provide a similar result with respect to inventory valuation?

Accepted Answer

A)  When historical cost is greater than the net realizable value 
B)  When replacement cost is lower than historical cost 
C)  When replacement cost is greater than the net realizable value 
D)  When normal profit margin is less than 15% 
A)  When historical cost is greater than the net realizable value 
B)  When replacement cost is lower than historical cost 
C)  When replacement cost is greater than the net realizable value 
D)  When normal profit margin is less than 15%

Question 14

In what way does IAS 16 (Property, Plant, and Equipment) differ from U.S. GAAP concerning fixed asset measurement subsequent to initial recognition?

Accepted Answer

A)  IAS 16 allows for upward revaluation of the asset based on fair value. 
B)  IAS 16 does not allow accumulated depreciation to be shown on the balance sheet. 
C)  IAS 16 requires that fixed assets be carried at fair value less accumulated impairment losses. 
D)  IAS 16 allows both upward and downward revaluation of fixed assets, whereas U.S. GAAP only allows upward revaluation. 
A)  IAS 16 allows for upward revaluation of the asset based on fair value. 
B)  IAS 16 does not allow accumulated depreciation to be shown on the balance sheet. 
C)  IAS 16 requires that fixed assets be carried at fair value less accumulated impairment losses. 
D)  IAS 16 allows both upward and downward revaluation of fixed assets, whereas U.S. GAAP only allows upward revaluation.

Question 15

As defined by IAS 38, how are intangible assets unlike other assets?

Accepted Answer

A)  They must have arisen from past events. 
B)  Their value cannot be reasonably measured. 
C)  They must be controlled by enterprises. 
D)  They are nonmonetary and lack physical substance. 
A)  They must have arisen from past events. 
B)  Their value cannot be reasonably measured. 
C)  They must be controlled by enterprises. 
D)  They are nonmonetary and lack physical substance.

Question 16

Chien Bleu Ltd. purchased a building in 2009 for €10,000,000 and as of December 31, 2015 had, recorded accumulated depreciation on the building of €3,000,000. On December 31, 2015, the company conducted its first revaluation when the fair value was €12,000,000. According to IAS 16, what account should be credited for €5,000,000?

Accepted Answer

A)  Loss on Revaluation-Building 
B)  Gain From Revaluation of Building 
C)  Revaluation Surplus-Building 
D)  Revaluation Revenue-Building 
A)  Loss on Revaluation-Building 
B)  Gain From Revaluation of Building 
C)  Revaluation Surplus-Building 
D)  Revaluation Revenue-Building

Question 17

The following inventory information was taken from the records of GlobeKom Ltd.:   Under IAS 2, what should the balance sheet report for Inventory?

Accepted Answer

A)  $9,000 
B)  $8,500 
C)  $9,500 
D)  $10,000 
A)  $9,000 
B)  $8,500 
C)  $9,500 
D)  $10,000

Question 18

IAS 38 states that an intangible asset is deemed to have an indefinite life when there is no foreseeable end to the expected cash flows the asset is likely to generate. What is the impact of an indefinite life on amortization of the intangible asset's cost under IAS 38?

Accepted Answer

A)  Management may choose any number of years over which to amortize the cost. 
B)  No amortization is taken as long as the life is considered indefinite. 
C)  The cost of the asset should be amortized over 20 years. 
D)  The cost of the asset should be expensed in the period the intangible asset is acquired. 
A)  Management may choose any number of years over which to amortize the cost. 
B)  No amortization is taken as long as the life is considered indefinite. 
C)  The cost of the asset should be amortized over 20 years. 
D)  The cost of the asset should be expensed in the period the intangible asset is acquired.

Question 19

Synergy Ltd. purchased a building in 2008 for €20,000,000 and as of December 31, 2014 had recorded accumulated depreciation on the building of €6,000,000. On December 31, 2014, the company conducted its first revaluation when the fair value was €24,000,000. Under IAS 16, the journal entry recorded on this date would include:

Accepted Answer

A)  a credit to Revaluation Surplus-Building for €10,000,000. 
B)  a debit to Revaluation Surplus-Building for €14,000,000. 
C)  a debit to Loss on Revaluation-Building for €14,000,000. 
D)  a credit to Loss on Revaluation-Building for €10,000,000. 
A)  a credit to Revaluation Surplus-Building for €10,000,000. 
B)  a debit to Revaluation Surplus-Building for €14,000,000. 
C)  a debit to Loss on Revaluation-Building for €14,000,000. 
D)  a credit to Loss on Revaluation-Building for €10,000,000.

Question 20

Which intangible assets are subject to annual impairment testing?

Accepted Answer

A)  Definite-lived intangible assets. 
B)  Definite-lived tangible assets. 
C)  Indefinite-lived intangible assets. 
D)  Indefinite-lived intangibles and goodwill are subject to impairment testing at least annually. 
A)  Definite-lived intangible assets. 
B)  Definite-lived tangible assets. 
C)  Indefinite-lived intangible assets. 
D)  Indefinite-lived intangibles and goodwill are subject to impairment testing at least annually.

How does the definition of asset impairment differ between IAS 36 and U.S. GAAP?

How does IAS 38 (Intangible Assets) differ from U.S. GAAP with respect to development costs?

Under IAS 40 (Investment Property), gains or losses from revaluation are:

Under IAS 38, which of the following items might qualify for capitalization as internally generated intangible assets?

The following inventory information was taken from the records of Kleinfeld Inc.: Under IAS 2, what should the balance sheet report for Inventory?

Through 50 years of high quality service, Domo Diagnostics Laboratory has created goodwill with its clients that management estimates is worth at least $20,000,000. Under IAS 38, how should this be recognized?

What types of differences can cause issues between International Financial Reporting Standards and U.S. GAAP?

According to IAS 16 (Property, Plant and Equipment), what is the term used to indicate the amount for which an asset could be exchanged between knowledgeable, willing parties in an arm's length transaction?

Which of the following inventory valuation methods, commonly used under the U.S. GAAP, is NOT allowed under IAS 2 (Inventories)?

Agro-World Technologies Inc. incurred $1,000,000 to construct a pilot plant to study the feasibility of building agricultural machinery more inexpensively for emerging economies. How would this cost be classified under IAS 38 (Intangible Assets)?

According to IAS 16, a decrease in the carrying amount of a fixed asset that is identified on an asset's first revaluation should be recorded as:

Under what circumstance will both U.S. GAAP and IAS 2 provide a similar result with respect to inventory valuation?

In what way does IAS 16 (Property, Plant, and Equipment) differ from U.S. GAAP concerning fixed asset measurement subsequent to initial recognition?

As defined by IAS 38, how are intangible assets unlike other assets?

The following inventory information was taken from the records of GlobeKom Ltd.: Under IAS 2, what should the balance sheet report for Inventory?

IAS 38 states that an intangible asset is deemed to have an indefinite life when there is no foreseeable end to the expected cash flows the asset is likely to generate. What is the impact of an indefinite life on amortization of the intangible asset's cost under IAS 38?

Which intangible assets are subject to annual impairment testing?

Introduction to International Accounting

Worldwide Accounting Diversity

International Convergence of Financial Reporting

International Financial Reporting Standards: Part II

Foreign Currency Transactions and Hedging Foreign Exchange Risk

Translation of Foreign Currency Financial Statements

International Taxation

International Transfer Pricing

Management Accounting Issues in Multinational Corporations

Auditing and Corporate Governance: An International Perspective

International Sustainability Reporting

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Exam 4: International Financial Reporting Standards: Part I

How does the definition of asset impairment differ between IAS 36 and U.S. GAAP?

How does IAS 38 (Intangible Assets) differ from U.S. GAAP with respect to development costs?

Under IAS 40 (Investment Property), gains or losses from revaluation are:

Under IAS 38, which of the following items might qualify for capitalization as internally generated intangible assets?

The following inventory information was taken from the records of Kleinfeld Inc.: Under IAS 2, what should the balance sheet report for Inventory?

Through 50 years of high quality service, Domo Diagnostics Laboratory has created goodwill with its clients that management estimates is worth at least $20,000,000. Under IAS 38, how should this be recognized?

What types of differences can cause issues between International Financial Reporting Standards and U.S. GAAP?

According to IAS 16 (Property, Plant and Equipment), what is the term used to indicate the amount for which an asset could be exchanged between knowledgeable, willing parties in an arm's length transaction?

Which of the following inventory valuation methods, commonly used under the U.S. GAAP, is NOT allowed under IAS 2 (Inventories)?

Agro-World Technologies Inc. incurred $1,000,000 to construct a pilot plant to study the feasibility of building agricultural machinery more inexpensively for emerging economies. How would this cost be classified under IAS 38 (Intangible Assets)?

According to IAS 16, a decrease in the carrying amount of a fixed asset that is identified on an asset's first revaluation should be recorded as:

Under what circumstance will both U.S. GAAP and IAS 2 provide a similar result with respect to inventory valuation?

In what way does IAS 16 (Property, Plant, and Equipment) differ from U.S. GAAP concerning fixed asset measurement subsequent to initial recognition?

As defined by IAS 38, how are intangible assets unlike other assets?

The following inventory information was taken from the records of GlobeKom Ltd.: Under IAS 2, what should the balance sheet report for Inventory?

IAS 38 states that an intangible asset is deemed to have an indefinite life when there is no foreseeable end to the expected cash flows the asset is likely to generate. What is the impact of an indefinite life on amortization of the intangible asset's cost under IAS 38?

Which intangible assets are subject to annual impairment testing?

Introduction to International Accounting

Worldwide Accounting Diversity

International Convergence of Financial Reporting

International Financial Reporting Standards: Part II

Foreign Currency Transactions and Hedging Foreign Exchange Risk

Translation of Foreign Currency Financial Statements

International Taxation

International Transfer Pricing

Management Accounting Issues in Multinational Corporations

Auditing and Corporate Governance: An International Perspective

International Sustainability Reporting

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