International Financial Reporting Standards Quiz! Trivia

The three key elements used to decide whether an item meets the criteria of an intangible asset are control, identifiability, and future economic benefits. Control refers to the entity's ability to obtain future economic benefits from the asset. Identifiability means that the asset is capable of being separated or divided from the entity and sold, transferred, licensed, rented, or exchanged. Future economic benefits refer to the asset's ability to generate cash flows or contribute to the entity's future cash flows.

Under IAS 36: Asset Impairment, the amount by which the carrying amount of an asset or a cash-generating unit exceeds its recoverable amount is called an impairment loss. This loss occurs when the value of an asset or cash-generating unit is no longer fully recoverable, indicating a decrease in its value or potential future cash flows. It is important to recognize and account for impairment losses to accurately reflect the true value of assets in financial statements.

IAS 2: Inventories does not allow the use of the LIFO (Last-In, First-Out) inventory cost method. This method assumes that the most recent inventory items purchased are the first ones to be sold. However, IAS 2 requires that inventories be valued at the lower of cost and net realizable value, and the LIFO method does not reflect this principle accurately. Instead, IAS 2 allows the use of the FIFO (First-In, First-Out) and Weighted Average cost methods, which are considered more appropriate for determining the cost of inventories.

IFRS (International Financial Reporting Standards) indeed requires comprehensive income to be presented in one statement of comprehensive income or two separate statements. This means that entities following IFRS guidelines have the option to present comprehensive income in a single statement or separate it into two statements, namely an income statement and a statement of other comprehensive income. The choice depends on the reporting entity's preference and the level of detail they want to provide to stakeholders.

Under IFRS (International Financial Reporting Standards), companies are required to disclose the components of cash and cash equivalents in the notes to the financial statements. This means that in addition to reporting the total amount of cash and cash equivalents, companies must provide a breakdown of the different types of cash and cash equivalents they hold. This disclosure ensures transparency and helps users of financial statements understand the composition of a company's cash position. Therefore, the statement "True" is correct.

IFRS (International Financial Reporting Standards) does indeed define certain key measures in relation to income statement presentation. These measures are important for ensuring consistency and comparability in financial reporting across different companies and industries. By providing clear guidelines on how to present income statement information, IFRS helps investors and stakeholders make informed decisions and evaluate the financial performance of a company. Therefore, the statement "True" is correct.

Under IFRS, extraordinary items are not reported on the income statement. Extraordinary items are events or transactions that are both unusual in nature and infrequent in occurrence. IFRS does not require the reporting of extraordinary items separately on the income statement, rather it encourages the disclosure of such items in the notes to the financial statements. This is in contrast to US GAAP, where extraordinary items are reported separately on the income statement.

According to IAS 7: Statement of Cash Flows, bank overdrafts that are considered an integral part of an entity's cash management are included as a component of cash and cash equivalents. This means that bank overdrafts are treated as if they were cash on hand or readily convertible into cash, and are therefore included in the cash and cash equivalents balance on the statement of cash flows.

The requirements of IAS 1 apply to general purpose financial statements, consolidated financial statements, and separate general purpose financial statements of entities. However, they do not apply to condensed interim financial statements. Condensed interim financial statements are typically prepared and presented on a less detailed basis than annual financial statements, providing a summary of financial performance and position for a shorter period, such as a quarter or a half-year. These statements are subject to specific requirements and guidance outlined in other accounting standards.

An item of property, plant, and equipment is recognized as an asset under IAS 16 when it can be reliably measured and when it is probable that economic benefits will flow to the entity from the asset. These criteria ensure that the item meets the definition of an asset, as it has a measurable value and is expected to generate future economic benefits for the entity.