FCCA Financial Reporting and Standards Flashcards

Which IFRS standard addresses financial instruments, covering classification, measurement, and impairment?

Answer: IFRS 9

IFRS 9 (Financial Instruments) covers the classification and measurement of financial assets and liabilities, as well as the expected credit loss impairment model.

Under the IFRS conceptual framework, which qualitative characteristic ensures that financial information represents what it purports to represent?

Answer: Faithful representation

Faithful representation means that financial information is complete, neutral, and free from error, accurately depicting the economic phenomena it describes.

A US company reports a deferred tax liability. This arises most commonly due to which situation?

Answer: When tax depreciation exceeds accounting depreciation in the current year

A deferred tax liability typically arises when accelerated tax depreciation exceeds book depreciation, creating a temporary difference that will reverse in future periods.

Under IFRS, inventory is measured at which amount on the balance sheet?

Answer: The lower of cost or net realizable value

IAS 2 (Inventories) requires inventory to be measured at the lower of cost and net realizable value, applying the conservatism (prudence) principle.

Which method of inventory cost flow is NOT permitted under IFRS but IS permitted under US GAAP?

Answer: LIFO (Last-In, First-Out)

LIFO (Last-In, First-Out) is prohibited under IAS 2 (IFRS) but is an accepted inventory costing method under US GAAP.

Under IFRS, how is a contingent liability treated in the financial statements if it is possible but not probable?

Answer: Disclosed in the notes but not recognized

IAS 37 requires a possible (but not probable) contingent liability to be disclosed in the notes to financial statements, not recognized on the balance sheet.