Please help!

CFA Level I
#1

Hi,guys. can anyone help me with the following question:

In 2015, a company undertook the following two transactions :

(1) Borrowed money from an insurance company and pledged some of its production facilities as collateral for the loan.

(2) Entered into an agreement with a local construction company to build a new research facility at a fixed price. Construction is to begin by 1 January 2016 and be completed by 31 December 2018.

With respect to required disclosures in the company’s financial statements, which of the following is most accurate? If the company reports under:

A. International Financial Reporting Standards (IFRS), neither transaction must be disclosed.

B. US GAAP, only the pledged borrowing must be disclosed.

C. US GAAP, neither transaction must be disclosed.

The correct answer is C with explanation: Under US GAAP, neither transaction must be disclosed, but disclosure of both transactions is required under IFRS.

I just wanna know why,under US GAAP , neither transaction must be disclosed and why both transactions have to be disclosed under IFRS. please help and thanks in advance.

#2

I’m pretty sure that if you borrow money, you have to disclose it.

I recall reading that somewhere.

Where’d you get this question?

#3

saw it on the internet

#4

Well, in that case, it has to be true.

1 Like
#5

Borrowing loan must be disclosed