Question 1

The Totto Ltd. (G) has 1 million Euros in convertible bond, with 300,000 Euros determined to be the equity portion of the debt. The journal entry for the sale of the bond to the German public on the DAX would be:

		Debit to cash for 1 million Euros, Credit to bond payable for 1million Euros
		Debit to cash for 300,000 Euros, Credit to stock for 300,000 Euros
		Debit to cash for 300,000 Euros, Credit to bond payable for 300,000 Euros
		Debit to cash for 1 million Euros, Credit to bond payable for 700,000 Euros and credit to equity for 300,000 Euros

5 points

Question 2

What should be the basis for choosing depreciation methods for fixed assets under IAS 16 (Property, Plant, and Equipment)?

		Tax minimization
		Profit maximization
		Useful life of the fixed asset
		Pattern of economic benefits to be derived from the asset

5 points

Question 3

A major difference between the IFRS and US GAAP is:

		US GAAP is principle-based and IFRS is rule-based
		US GAAP allows capitalization of successful development for all industries
		GAAP is more cash flow oriented
		US GAAP allows LIFO

5 points

Question 4

Under IAS 1, Presentation of Financial Statements, how must deferred taxes be classified on the balance sheet?

		As either a current asset or a current liability
		As always a noncurrentasset or a noncurrent liability
		As either a current or noncurrent asset or liability based on the expected timing of realization
		As a separately stated positive or negative component of equity

5 points

Question 5

When a patent or trademark is acquired in a business combination, what does IAS 38 say about recording these intangibles?

		If they had not been previously recorded as separate assets by the acquired company, they should always be recorded as Goodwill on the balance sheet of the company acquiring them.
		The cost of the intangibles should be expensed by the acquiring company on the merger date.
		They should be recorded as separate intangible assets only if their useful life is indefinite.
		They should be recorded as separate intangible assets if their fair value can be reliably measured.

5 points

Question 6

How should the cost of borrowing funds to acquire or construct property, plant, and equipment be accounted for under IASB rules, as revised in 2007?

		It should be expensed in the period incurred.
		It should be added to the other costs of acquiring fixed assets to determine the amount for the balance sheet.
		Both methods are acceptable.
		Neither method is acceptable under IASB rules.

5 points

Question 7

What is one major difference between IFRS and U.S. GAAP relative to correction of errors?

		U.S. GAAP is silent as to how to treat errors that have been discovered.
		IFRS is silent as to how to treat errors that have been discovered.
		Under U.S. GAAP, a prospective approach is taken.
		Under IFRS, if its impractical to restate financial statements, then no restatement is necessary.

5 points

Question 8

What is true about both IFRS and U.S. GAAP with respect to service contracts?

		IFRS and U.S. GAAP both allow the use of the percentage-of-completion method.
		Neither IFRS, nor U.S. GAAP allows the use of the percentage-of-completion method.
		IFRS allows the use of the percentage-of-completion methodwhile U.S. GAAP does not.
		U.S. GAAP allows the use of the percentage-of-completion method while IFRS does not.

5 points

Question 9

Which of the following inventory valuation methods, commonly used under the U.S. GAAP,is NOT allowed under IAS 2 (Inventories)?

		LIFO
		FIFO
		Weighted average
		Retail inventory method

5 points

Question 10

The term provision as it is used in IAS 37, is most closely related to what term in U.S. GAAP?

		Contingent liability, where the outflow of resources is remote.
		Contingent liability, where the outflow of resources is probable.
		Current liability, where the outflow is difficult to measure.
		Reserve for bad debt, where the amount recoverable is uncertain.

5 points

Question 11

Under IAS 38, which of the following items is specifically EXCLUDED from being recognized as an internally generated intangible asset?

		Computer software costs
		Copyrights
		Customer lists
		Motion picture films

5 points

Question 12

Under IAS 39, Financial Instruments: Recognition and Measurement, which of the following terms describes the removal of a financial asset or liability from the balance sheet when certain appropriate criteria have been met?

		Decoupling
		Extinguishment
		Derecognition
		Reversal

5 points

Question 13

Under IAS 32,how should an equity instrument be classified?

		It must always be classified as equity by its very nature.
		The entity has the option of classifying it as a liability or equity.
		If it contains a contractual obligation that meets the definition of a financial liability, it should be classified as a liability.
		The entity should apportion the classification between liability and equity if there is a contractual obligation that meets the definition of a financial liability.

5 points

Question 14

Under IFRS 2, Share-based Payment, what approach is used to account for the transaction?

		Comparable transaction approach
		Fair value approach
		Market approach
		Notional value approach

5 points

Question 15

What are the four classes of financial assets? Explain in detail what these assets are and give an example of each type of asset.

Question 16

How does the application of the lower of cost or market rule for inventories differ between IFRS and US GAAP?

Question 17

The following information was taken from the fixed asset records of Bosco Ltd. as of December 31, 2010:

Carrying value	$100,000
Selling price	$85,000
Cost of disposal	$3,000
Expected future cash flows	$75,000
Present value of expected future cash flows	$63,000

Required:

a. Using IAS 36, what is the amount of impairment loss?

b. What is the amount of impairment loss under U.S. GAAP?

Show work for partial credit.