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Chapter 3: 5ISTQ (page 150)

The purpose of presenting comparative information in the

transition to IFRS is:

(a) to ensure that the information is a faithful representation.

(b) to be in accordance with the Sarbanes-Oxley Act.

(c) to provide users of the financial statements with information on GAAP in one period and IFRS in the other period.

(d) to provide users of the financial statements with information on IFRS for at least two periods.

Short Answer

Expert verified

The correct option is “d”.

Step by step solution

01

Explanation to correct option

When the company is opting to use IFRS instead of GAAP, then in this case company is required to present the statements issued in the past least two years, as per the IFRS. This is done to provide the information and show the effect, to the users of financial statements.

02

Explanation of incorrect options

Option a) Comparative financial statements are prepared on the basis of IFRS at the transition date does not indicate the faithful representation.

Option b) The Sarbanes-Oxley Act has no relation to the conversion from GAAP to IFRS.

Option c) In the first and second periods, IFRS is used to prepare the financial statements.

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Most popular questions from this chapter

E3-1 (L02) (Transaction Analysis—Service Company) Beverly Crusher is a licensed CPA. During the first month of operations of her business (a sole proprietorship), the following events and transactions occurred.April 2 Invested \(32,000 cash and equipment valued at \)14,000 in the business.2 Hired an administrative assistant at a salary of \(290 per week payable monthly.3 Purchased supplies on account \)700. (Debit an asset account.)7 Paid office rent of \(600 for the month.11 Completed a tax assignment and billed client \)1,100 for services rendered. (Use Service Revenue account.)12 Received \(3,200 advance on a management consulting engagement.17 Received cash of \)2,300 for services completed for Ferengi Co.21 Paid insurance expense \(110.30 Paid administrative assistant \)1,160 for the month.30 A count of supplies indicated that \(120 of supplies had been used.30 Purchased a new computer for \)6,100 with personal funds. (The computer will be used exclusively for business purposes.)InstructionsJournalize the transactions in the general journal. (Omit explanations.)

Information in a company’s first IFRS statements must:

(a) have a cost that does not exceed the benefits.

(b) be transparent.

(c) provide a suitable starting point.

(d) All the above.

Distinguish between cash-basis accounting and accrual-basis accounting. Why is accrual-basis accounting acceptable for most businesses and the cash-basis unacceptable in the preparation of an income statement and a balance sheet?

BE3-5 (L02,3) Assume that on February 1, Procter & Gamble (P&G) paid $720,000 in advance for 2 years’ insurance coverage. Prepare P&G’s February 1 journal entry and the annual adjusting entry on June 30.

Midwest Enterprises made the following entry on December 31, 2017.

Interest Expense 10,000

Interest Payable 10,000

(To record interest expensedue on loan from Anaheim

National Bank)

What entry would Anaheim National Bank make regarding its outstanding loan to Midwest Enterprises? Explain why this must be the case.
See all solutions

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