Questions:

5. The statement of changes in equity is a link between the entity's statement of financial position and its

a. statement of profit and loss

b. statement of changes in OCI

c. Balance sheet

d. None of the above

Please explain reasoning.

Exercises

1. Describe the difference between the nature of expense method and the function of expense method. Which method is appropriate under US GAAP? Which is appropriate under IFRS?

2. Audit Entity is performing the audit of a company that reports under IFRS. Audit Entity is concerned with areas of the financial statements that require significant amounts of judgment. Specifically, Audit Entity wants to focus on the evaluating the company's statements of PL for significant judgements. What are some significant areas of judgment in relation to the statement of PL?

3. What is a reclassification adjustment? What is the purpose of this type of adjustment? Name two specific instances when reclassification adjustments would arise.