IFRS Refresher

CFA Level I
#1

I guess we could all use a quick refresher (all material from CFAI text): 1. Under IFRS, changes in elements of financial statements are most likely portrayed in the: A. BS B. IS C. CF D. Accounting policies and notes 2. According to IASB standards, which of the following inventory method is most preferred? A. Specific identification B. weighted average cost C. FIFO D. LIFO 3. Under IASB standards, inventory writedowns are: A. not allowed B. allowed but not reversible C. allowed and subject to reversal D. treated similarly to U.S. GAAP 4. Under IASB Standards, identifiable intangible assets are: A. only revalued downward, with the decrease reported to equity B. only revalued downward, with the decrease reported to profit and loss C. revalued upward and reported to equity when reversing a previous revaluation decrease D. revalued upward and reported to profit and loss when reversing a previous revaluation decrease 5. Under IASB standard, negative goodwill: A. must be recorded as gain B. is prorated to the noncurrent assets C. is accounted for as an extraordinary gain D. is amortized to income over a 10-year period 6. Under IASB standards, cash outflows for the payment of dividends are: A. financing CF B. either CFO or CFI C. either CFI or CFF D. either CFO or CFF 7. When comapring an IFRS company that has written up the value of its intangible assets with a U.S. company, an analyst will eliminate the effect of the write-ups in calculating: A. gross margin B. EPS C. fixed asset turnover D. financial leverage multiplier

#2

1- B. IS 2- A. Specific identification (LIFO is prohibited) 3-C. allowed and subject to reversal 4-D. revalued upward and reported to profit and loss when reversing a previous revaluation decrease (profit up to the loss incurred, otherwise direct adjustment to equity) 5-A. must be recorded as gain 6-D. either CFO or CFF 7-D. financial leverage multiplier i guessed about 3 of those

#3

I don’t understand no. 5 ? why negative good will recorded as a gain ??

#4

any one is able to post the answer ?

#5

thunderanalyst Wrote: ------------------------------------------------------- > I don’t understand no. 5 ? why negative good will > recorded as a gain ?? you paid less than the fair market value to buy the company that was one of the answers i had to guess

#6

i also don’t think it can be an “extraordinary gain” because IFRS prohibits classifying items as ‘extraordinary’ on the income statement

#7

but it could be pro-rated to noncurrent assets so you never know :-F

#8

supersharpshooter Wrote: ------------------------------------------------------- > i also don’t think it can be an “extraordinary > gain” because IFRS prohibits classifying items as > ‘extraordinary’ on the income statement you report it as an item “above the line”. It is a gain because you paid a bargain price for the company.

#9

i concur

#10
  1. A - elements are assets, liabilities, expenses and revenues…so they will all be reported on the B/S one way or another? (guess) 2. B (guess) 3. C (guess) 4. C (guess) pretty sure though 5. A 6. A 7. D …goes along with 4 as you revalue assets through equity you would need to adjust any ratio with equity in it… I suck at life!
#11

i’ll post answers shortly

#12

Here we go: 1-C 2-A 3-C 4-D 5-A 6-D 7-D super u got 6/7, that’s great. You missed probably the most obvious one - 1. All 5 elements (assets,liabilities,equity,income and expenses) are portrayed in the Cash Flow statement (and the statement of changes in equity).

#13

ahh, not bad i thought the first question was talking about revaluations of financial statement items so i picked IS thanks for the q’s

#14

But under US GAAP inventory write down are not reversible?

#15

From my understanding, GAAP does not allow for inventory writedown reversals, while such provisions exist in IFRS.

#16

inventory, PP&E, identifiable intangibles can all be revalued upward under IFRS none can be revalued upward under GAAP

#17

Thanks guys!

#18

super, what about long-lived assets under GAAP? Isn’t it that gains could be recognized up to the extent of previous writedowns?

#19

you can revalue long-lived assets to the extent to which they have been written down, this is reported on the income statement - any upward revaluation past that point has to be recorded as a direct adjustment to equity i think identifiable intangibles can only be revalued up to the extent that they have been amortized/impaired edit: oops i mean IFRS not GAAP

#20

I think that under US GAAP, once you write down something, you cannot revaluate upward it.