1. Which of the following does not represent a pair of GAAP/ IFRS-comparable terms?

(a) Additional paid-in capital/Share premium.

(b) Treasury stock/Repurchase reserve.

(c) Common stock/Share capital—ordinary.

(d) Preferred stock/Preference shares.

Previous outstanding shares that are reacquired by a business entity are known as treasury shares. Such an account is a contra-equity account and, therefore, reduces the overall amount of equity.

Option (b) Treasury stock/Repurchase reserve is the correct answer.

Reason: Treasury stock represents a contra-equity account arising due to the repurchase of shares. The repurchase reserve is maintained for liability that will arise in the future due to the repurchase agreement. Therefore, both of these do not represent comparable items, and therefore, it is the correct option.

(a) It is an incorrect option because the amount received over the issued price of the shares is reported as additional paid-in-capital under GAAP, and share premium under IFRS.

(c) It is an incorrect option because equity shares issued by the business entity are reported as common stock under GAAP and ordinary shares under IFRS.

(d) Under GAAP preference shares are reported as preferred stock, and under IFRS, these are reported as preference shares. Therefore, it is an incorrect option.