I’ve been doing the Mock exams and came across a question about the difference between IFRS and GAAP treatment of available-for-sale securities. The question states: Listed debt securities owned by a company, for which the company intends to collect interest payments and sell the securities, must be carried at fair value with gains and losses reported as other comprehensive incomes under -
A. IFRS only
B. U.S GAAP only
C. Both GAAP and IFRS
My original answer was C but the mock answer sheet is saying its B. I’m looking through the relevant section in the book and it appears that the treatment of available for sale securities is VERY similar between IFRS and GAAP. Can someone help explain why it’s only US GAAP? Thank you!
Hi, I know this is late, and you probably already wrote your exam, but…
This question was giving me trouble as well. I had the same assumption as you, and did some digging into the material to find out why the correct answer was B.
Like you, I thought the treatment of securities available for sale was the same for IFRS and US GAAP. The reason that B is correct is because the question asks if the securities Must be carried at fair value through OCI.
The following is quoted directly from the text:
Under IFRS, firms can make an irrevocable choice to carry any financial asset at fair value through profit and loss. This choice is not available under U.S. GAAP.
Since IFRS allows them to carry Any financial asset at fair value through P/L, it is not the case that they Must report securities held for sale through OCI - as they have the option to make the irrevocable decision to carry them through P/L
Hope this helps future candidates who struggle with this question!