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Chapter 13: Q1ISTQ (page 658)

All of the following are critical similarities between GAAPand IFRS concerning accounting for investments except:

(a) IFRS and GAAP require the exact accounting for equity securities.

(b) IFRS and GAAP apply the equity method to significant influence equity investments.

(c) IFRS and GAAP have a fair value option for financial instruments.

(d) the accounting for impairment of investments is similar, although IFRS allows recovery of impairment losses.

Short Answer

Expert verified

Option (a) is correct option

Step by step solution

01

Definition of GAAP

It stands for Generally Accepted Accounting Principles; it contains all the principles and rules which are used by the accountant for financial reporting purposes

02

Similarities between IFRS and GAAP

From these four statements, three statements are the similarity of IFRS and GAAP, but statement one is not the similarity between IFRS and GAAP. Because both do not require exact accounting for equity securities.

Hence, option (a) is correct.

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Most popular questions from this chapter

BE13-6 (L01) Lexington Corporation’s weekly payroll of \(24,000 included FICA taxes withheld of \)1,836, federal taxes with-held of \(2,990, state taxes withheld of \)920, and insurance premiums withheld of $250. Prepare the journal entry to record Lexington’s payroll.

Question: In determining the amount of a provision, a company using IFRS should generally measure:

(a) Using the midpoint of the range between the lowest possible loss and the highest possible loss.

(b) Using the minimum amount of the loss in the range.

(c) Using the best estimate of the amount of the loss expected to occur.

(d) Using the maximum amount of the loss in the range.

Question: On February 1, 2018, one of the huge storage tanks of Viking Manufacturing Company exploded. Windows in houses and other buildings within a one-mile radius of the explosion were severely damaged, and a number of people were injured. As of February 15, 2018 (When the December 31, 2017, financial statements were completed and sent to the publisher for printing and public distribution), no suits had been filed or claims asserted against the company as a consequence of the explosion. The company fully anticipates that suits will be filed and claims asserted for injuries and damages. Because the casualty was uninsured and the company is considered at fault, Viking Manufacturing will have to cover the damages from its own resources.InstructionsDiscuss fully the accounting treatment and disclosures that should be accorded the casualty and related contingent losses in the financial statements dated December 31, 2017.

Briefly describe some of the similarities and differences between GAAP and IFRS with respect to the accounting for

investments.

Question: (Lessee-Lessor Entries, Operating Lease) Cleveland Inc. leased a new crane to Abriendo Construction under a 5-year noncancelable contract starting January 1, 2017. Terms of the lease require payments of \(33,000 each January 1, starting January 1, 2017. Cleveland will pay insurance, taxes, and maintenance charges on the crane, which has an estimated life of 12 years, a fair value of \)240,000, and a cost to Cleveland of \(240,000. The estimated fair value of the crane is expected to be \)45,000 at the end of the lease term. No bargain-purchase or -renewal options are included in the contract. Both Cleveland and Abriendo adjust and close books annually at December 31. Collectibility of the lease payments is reasonably certain, and no uncertainties exist relative to unreimbursable lessor costs. Abriendo’s incremental borrowing rate is 10%, and Cleveland’s implicit interest rate of 9% is known to Abriendo.

Instructions

  1. Identify the type of lease involved and give reasons for your classification. Discuss the accounting treatment that should be applied by both the lessee and the lessor.
See all solutions

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