FCCA FCCA Financial Reporting and Standards 1 — Questions and Answers
Question 1: Which financial reporting framework is primarily used by publicly listed companies in the United States?
- IFRS as issued by IASB
- US GAAP as issued by FASB (Correct answer)
- UK GAAP (FRS 102)
- IPSAS for public sector entities
Correct answer: US GAAP as issued by FASB
Publicly listed US companies are required to use US GAAP (Generally Accepted Accounting Principles) as established by the Financial Accounting Standards Board (FASB).
Question 2: Under IFRS 15, revenue is recognized when a company satisfies which condition?
- When cash is received from the customer
- When a performance obligation is satisfied by transferring control of goods or services (Correct answer)
- When a contract is signed with the customer
- When the invoice is issued to the customer
Correct answer: When a performance obligation is satisfied by transferring control of goods or services
IFRS 15 requires revenue recognition upon satisfaction of a performance obligation, defined as the transfer of control of goods or services to the customer.
Question 3: Which IFRS standard governs the accounting treatment of leases for lessees, requiring most leases to be recognized on the balance sheet?
- IFRS 9
- IFRS 15
- IFRS 16 (Correct answer)
- IFRS 17
Correct answer: IFRS 16
IFRS 16 (Leases) requires lessees to recognize a right-of-use asset and a corresponding lease liability for most leases on the balance sheet.
Question 4: Under US GAAP, the accounting standard equivalent to IFRS 15 for revenue recognition is found in which codification topic?
- ASC 606 (Correct answer)
- ASC 842
- ASC 815
- ASC 350
Correct answer: ASC 606
ASC 606 (Revenue from Contracts with Customers) is the US GAAP equivalent to IFRS 15, both based on the same converged five-step model.
Question 5: Which financial statement shows a company's financial position at a specific point in time?
- Income statement
- Statement of cash flows
- Balance sheet (statement of financial position) (Correct answer)
- Statement of changes in equity
Correct answer: Balance sheet (statement of financial position)
The balance sheet (or statement of financial position) presents a snapshot of assets, liabilities, and equity at a given date.
Question 6: Under IFRS, goodwill arising from a business combination is subsequently accounted for using which method?
- Amortized over a maximum of 40 years
- Tested for impairment annually and not amortized (Correct answer)
- Revalued to fair value each reporting period
- Written off immediately against retained earnings
Correct answer: Tested for impairment annually and not amortized
Under IFRS 3, goodwill is not amortized but is subject to an annual impairment test, or more frequently if indicators of impairment exist.
FCCA FCCA Financial Reporting and Standards 1
Which financial reporting framework is primarily used by publicly listed companies in the United States?