Cornerstones of Financial Accounting
4th Edition
ISBN: 9781337690881
Author: Jay Rich, Jeff Jones
Publisher: Cengage Learning
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Chapter A1, Problem 9MCQ
To determine
Concept introduction:
International financial reporting framework (IFRS):
International
To choose:
The true statement.
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Which of the following refers to the similarity between the U.S. GAAP and IFRS regarding accounting for Long-Lived Assets?
Depreciation is based on the fair value of assets.
An impairment loss occurs if the carrying value exceeds the recoverable amount, defined as the higher of the asset’s fair value (less costs to sell) and its value in use, which is the discounted net cash flows.
For the purposes of determination which expenses may be capitalized, Research and Development expenditures are treated differently.
Intangible assets are acquired at amortized cost.
IFRS GAAP and U.S. GAAP agree most of the time. In which instance might their disagreement have a big impact on an investment decision?
A. revenue recognition
B. goodwill
C. plant, property and equipment
D. accelerated depreciation
Which statements are correct concerning measurement of cost of property, plant and equipment?I. The purchase price of an item of property, plant and equipment is the cash price equivalent at the date of recognitionII. If payment is deferred beyond normal credit terms, the difference between the cash price equivalent and total payment is recognized as interest expense over the life of the asset.III. If an item of property, plant and equipment is acquired in exchange for a nonmonetary asset or a combination of monetary and nonmonetary asset, the cost of such item is measured at fair value unless the exchange transaction lacks commercial substance or fair value of either asset received or given up is not reliably determinable.IV. If an entity is able to determine reliably the fair value of both the asset given up and asset received in an exchange, the fair value of the asset given up is used to measure the cost of asset received in exchange.
Chapter A1 Solutions
Cornerstones of Financial Accounting
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- Which of the following statement is incorrect as to acquisition of Property, Plant and Equipment on a cash basis?. a. The cost of an item of property, plant and equipment is the cash price equivalent at the recognition date. b. Directly attributable cost to be capitalized includes freight, installation cost and other cost necessary in bringing the asset to the location and condition for the intended use. c. The cost of asset acquired on a cash basis simply includes the cash paid plus directly attributable cost d. When several assets are acquired at a “basket price” or “lump sum price”, it is necessary to apportion the single price to the assets acquired on the basis of relative carrying value.arrow_forwardRingler Corporation exchanges one plant asset for a similar plant asset and gives cash in the exchange. The exchange is not expected to cause a material change in the future cash flows for either entity. If a gain on the disposal of the old asset is indicated, the gain will Group of answer choices A) be reported in the Other Revenues and Gains section of the income statement. B) effectively reduce the amount to be recorded as the cost of the new asset. C) effectively increase the amount to be recorded as the cost of the new asset. D) be credited directly to the owner's capital account.arrow_forwardAssets and liabilities, and income and expenses, when material, shall not be offset against each other. Which among the following is not an allowed offsetting? * a. foreign exchange gains and losses b. gain from the proceeds of selling equipment and the related selling expenditures c. share premium and organizational costs d. "gain" from donated land and the related cost of transferring the titlearrow_forward
- 1. IAS 36 applies to which of the following assets? (a) Inventories. (b) Financial assets. (c) Assets held for sale. (d) Property, plant, and equipment. 2. Value-in-use is (a) The market value. (b) The discounted present value of future cash flows arising from use of the asset and from its disposal. (c) The higher of an asset’s fair value less cost to sell and its market value. (d) The amount at which the asset is recognized in the balance sheet. 3. If the fair value less costs to sell cannot be determined (a) The asset is not impaired. (b) The recoverable amount is the value-in-use. (c) The net realizable value is used. (d) The carrying value of the asset remains the same. 4. If assets are to be disposed of (a) The recoverable amount is the fair value less costs to sell. (b) The recoverable amount is the value-in-use. (c) The asset is not impaired. (d) The recoverable amount is the carrying value. 5. Estimates of future cash flows normally would cover projections over a maximum…arrow_forwardUnder IFRS, the recoverable amount of an asset is The higher of an asset’s value in use or its fair value minus costs to sell. The estimated selling price in the ordinary course of business minus the estimated costs of completion and the estimated costs necessary to make the sale. The present value of the future cash flows expected to be derived from an asset. The amount obtainable from the sale of an asset in an arm’s length transaction between knowledgeable, willing parties, minus the costs of disposal.arrow_forwardAssets and liabilities, and income and expenses, when material, shall not be offset against each other. Which among the following is not an allowed offsetting? * foreign exchange gains and losses gain from the proceeds of selling equipment and the related selling expenditures share premium and organizational costs "gain" from donated land and the related cost of transferring the titlearrow_forward
- Choose the correct. In which of the following areas does the IASB not allow firms to choose between two acceptable treatments?a. Measuring property, plant, and equipment subsequent to acquisition.b. Measuring noncontrolling interest in a business combination.c. Recognizing development costs that meet criteria for capitalization as an asset.d. Classifying interest paid in the statement of cash flows.arrow_forwardIn which of the following areas does the IASB not allow firms to choose between two acceptable treatments?a. Measuring property, plant, and equipment subsequent to acquisition.b. Measuring noncontrolling interest in a business combination.c. Recognizing development costs that meet criteria for capitalization as an asset.d. Classifying interest paid in the statement of cash flows.arrow_forwardAll of the following statements are true, except: When property is acquired in exchange for another, its cost is usually determined by reference to the fair value of the asset surrendered When a group of assets is acquired for a lump sum price, the lump sum price should be allocated to the individual assets based on their carrying values. Donation of PPE should be recorded at the fair value of the donated asset Property acquired in exchange for shares or other securities of the enterprise should be recorded at its fair value or the fair value of the securities, whichever is more clearly evidentarrow_forward
- Which of the following is not a part of the impairment test of equipment under IFRS? Group of answer choices determine the fair value of the cash-generating unit without the asset determine the discounted value of the future cash flows expected to be derived from the asset determine the asset's fair value less costs to dispose determine the asset's carrying valuearrow_forwardWhich of the following is not a difference between U.S. GAAP and IFRS treatment of impaired assets? Multiple Choice The use of discounted cash flow. Due to differences, U.S. GAAP may trigger an impairment loss that would not be triggered by IFRS. The right to reverse prior impairment losses when there is a change in the estimates used to measure the loss. In determining the valuation, costs to sell are deducted from fair value.arrow_forwardWhich of the following is not a part of the impairment test of equipment under IFRS? Group of answer choices determine the asset's fair value less costs to dispose determine the fair value of the cash-generating unit without the asset determine the asset's carrying value determine the discounted value of the future cash flows expected to be derived from the assetarrow_forward
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