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1

In an Ernst and Young 2005 survey of 130 companies’ Forms 20-F filed with the SEC, what issue required the greatest adjustment?
A) goodwill
B) leases
C) pensions
D) business combinations

C) pensions

2

What types of issues cause differences between International Financial Reporting Standards and U.S. GAAP?
A) measurement
B) alternatives available
C) disclosure
D) All of the above may be different between IFRS and U.S. GAAP.

D) All of the above may be different between IFRS and U.S. GAAP.

3

Which of the following is generally true about the differences between U.S. GAAP and IASB standards?
A) U.S. GAAP is generally more flexible than IASB standards.
B) U.S. GAAP tends to be more rule-based and the IASB standards tend to be principles-based.
C) More professional judgment is required to apply U.S. GAAP than is required for implementing IASB standards.
D) In all cases, U.S. GAAP is more detailed than the IASB standards.

B) U.S. GAAP tends to be more rule-based and the IASB standards tend to be principles-based.

4

Which of the following inventory valuation methods commonly used in the U.S. is NOT allowed under IAS 2 (Inventories)?
A) LIFO
B) FIFO
C) weighted average
D) retail inventory method

A) LIFO

5

The following inventory information above was taken from the records of GlobeKom Ltd.:



Under IAS 2, what should the Balance Sheet report for Inventory?
A) $9,000
B) $8,500
C) $9,500
D) $10,000

C) $9,500

6

The following inventory information above was taken from the records of GlobeKom Ltd.:

Under U.S. GAAP, what should the Balance Sheet report for Inventory?
A) $9,000
B) $8,500
C) $9,500
D) $10,000

A) $9,000

7

The following inventory information was taken from the records of Kleinfeld Inc.:

Under IAS 2, what should the Balance Sheet report for Inventory?
A) $7,000
B) $8,500
C) $7,600
D) $9,000

B) $8,500

8

The following inventory information was taken from the records of Kleinfeld Inc.:

Assume that subsequent to your adjustment the expected selling price increases to $13,000. (All the rest of the facts are the same.) What adjustment to inventory should be made under IAS 2 after this event?
A) Inventory should be increased (debited) by $3,500.
B) Inventory should be increased (debited) by $4,000.
C) No adjustment should be made to inventory once it is written down.
D) Inventory should be increased (debited) by $1,000.

A) Inventory should be increased (debited) by $3,500.

9

The following inventory information was taken from the records of Kleinfeld Inc.:

Under U.S. GAAP, what should the Balance Sheet report for Inventory?
A) $9,000
B) $8,500
C) $7,600
D) $10,000

C) $7,600

10

The following inventory information was taken form the records of a foreign corporation whose stock is listed on an exchange in the U.S.



How will income under the U.S. GAAP compare to income the company reported under IFRS after reconciliation?
A) Income will not be affected by the reconciliation.
B) Income under U.S. GAAP will be lower by $1,700.
C) Income under U.S. GAAP will be lower by $2,500.
D) Income under U.S. GAAP will be equal to income under IFRS.

B) Income under U.S. GAAP will be lower by $1,700.

11

Under IAS 2, what adjustment needs to be made after an inventory write-down if the selling price subsequently increases?
A) No adjustment is necessary. Once inventory is written down, it cannot be increased under IASB standards.
B) It should be sold at the replacement cost.
C) The inventory write-down should be reversed to bring it in line with the new net realizable value.
D) Recovery of inventory loss should be debited to reflect the increase in inventory value.

C) The inventory write-down should be reversed to bring it in line with the new net realizable value.

12

What is the basis for choosing depreciation methods for fixed assets under IAS 16 (Property, Plant, & Equipment)?
A) Tax minimization
B) Profit maximization
C) Useful life of the fixed asset
D) Pattern of economic benefits to be derived from the asset

D) Pattern of economic benefits to be derived from the asset

13

According to IAS 16 (Property, Plant & Equipment), what is the term used to indicate the amount for which an asset could be exchanged between knowledgeable, willing parties in an arm's length transaction?
A) replacement cost
B) net realizable value
C) fair market value
D) historical cost

C) fair market value

14

Which of the following items should be included in the cost of property, plant, and equipment under IAS 16?
A) all costs directly attributable to getting the asset to the proper location
B) import duties and taxes
C) estimated costs of removing the asset
D) All of the above should be considered part of the cost of the asset.

D) All of the above should be considered part of the cost of the asset.

15

In what way does IAS 16 (Property, Plant, & Equipment) differ from U.S. GAAP concerning fixed asset measurement subsequent to initial recognition?
A) IAS 16 allows for upward revaluation of the asset based on fair value.
B) IAS 16 does not allow accumulated depreciation to be shown on the balance sheet.
C) IAS 16 requires that fixed assets be carried at fair value less accumulated impairment losses.
D) IAS 16 allows both upward and downward revaluation of fixed assets, whereas U.S. GAAP only allows upward revaluation.

A) IAS 16 allows for upward revaluation of the asset based on fair value.

16

If a company chooses the revaluation model permitted in IAS 16 for fixed asset measurement:
A) annual revaluations must be performed on each class of assets.
B) it must update the valuation so that the balance sheet represents fair value on the balance sheet date.
C) appraisals must be performed by an official of the IASB.
D) the depreciated replacement cost must be used as the fair value of the fixed asset.

B) it must update the valuation so that the balance sheet represents fair value on the balance sheet date.

17

Chien Bleu Ltd. purchased a building in 2004 for €10,000,000 and as of December 31, 2010 had recorded accumulated depreciation on the building of €3,000,000. December 31, 2010 the company conducted its first revaluation when the fair value was €12,000,000. According to IAS 16, what account should be credited for €5,000,000?
A) retained earnings
B) gain from revaluation of building
C) revaluation surplus
D) revaluation revenue

C) revaluation surplus

18

According to IAS 16, a decrease in the carrying amount of a fixed asset that is identified on an asset's first revaluation should be recorded as:
A) an expense on the Income Statement.
B) a prior period adjustment to Retained Earnings.
C) a credit to Revaluation Surplus.
D) a debit to Revaluation Surplus.

A) an expense on the Income Statement.

19

Blanco Chemical Company spent €15,000,000 in development efforts to create a fertilizer for which it was able to obtain a patent; however, the expected distribution costs make it infeasible to market the chemical in the foreseeable future. According to IAS 38 (Intangible Assets), how should Blanco Chemical Company record the €15,000,000?
A) as a “Deferred Development Cost” on the Balance Sheet
B) as “Fertilizer Revenue” on the Income Statement
C) as “Development Expense” on the Income Statement
D) It should only be reported in the notes to the financial statements.

C) as “Development Expense” on the Income Statement

20

As defined by IAS 38, how are intangible assets unlike other assets?
A) They must have arisen from past events.
B) Their value cannot be reasonably measured.
C) They must be controlled by the enterprise.
D) They are non-monetary and lack physical substance.

D) They are non-monetary and lack physical substance.

21

IAS 38 states that an intangible asset is deemed to have an indefinite life when there is no foreseeable end to the expected cash flows the asset is likely to generate. What is the impact of an indefinite life on amortization of the intangible asset's cost under IAS 38?
A) Management may choose any number of years over which to amortize the cost.
B) No amortization is taken as long as the life is considered indefinite.
C) The cost of the asset should be amortized over 20 years.
D) The cost of the asset should be expensed in the period the intangible asset is acquired.

B) No amortization is taken as long as the life is considered indefinite.

22

When a patent or trademark is acquired in a business combination, what does IAS 38 say about recording these intangibles?
A) 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.
B) The cost of the intangibles should be expensed by the acquiring company on the merger date.
C) They should be recorded as separate intangible assets only if their useful life is indefinite.
D) They should be recorded as separate intangible assets if their fair value can be reliably measured.

D) They should be recorded as separate intangible assets if their fair value can be reliably measured.

23

Through 50 years of high quality service, Domo Diagnostics Laboratory has created goodwill with its clients that management estimates is worth at least $20,000,000. Under IAS 38, how should this be recognized?
A) An intangible asset “Goodwill” should be debited for $20,000,000.
B) The $20,000,000 should be expensed over a period of 20 years.
C) The $20,000,000 should be expensed over a period of 50 years.
D) It should not be recognized in Domo's accounting records at all.

D) It should not be recognized in Domo's accounting records at all.

24

Under IAS 38, which of the following items is specifically EXCLUDED from being recognized as an internally generated intangible asset?
A) computer software costs
B) copyrights
C) customer lists
D) motion pictures

C) customer lists

25

How does IAS 38 (Intangible Assets) differ from U.S. GAAP with respect to development costs?
A) U.S. GAAP does not allow capitalization of development costs, whereas IAS 38 allows capitalization of these costs.
B) U.S. GAAP requires capitalization of development costs, whereas IAS 38 makes capitalization of these costs optional.
C) U.S. GAAP treats development costs as part of “Goodwill” whereas IAS 38 treats these costs as an intangible asset.
D) U.S. GAAP requires expensing of all development costs and IAS 38 requires capitalizing all development costs.

A) U.S. GAAP does not allow capitalization of development costs, whereas IAS 38 allows capitalization of these costs.

26

Agro-World Technologies Inc. incurred $1,000,000 to construct a pilot plant to study the feasibility of building agricultural machinery more inexpensively for emerging economies. How would this cost be classified under IAS 38 (Intangible Assets)?
A) research
B) development
C) neither research nor development
D) It could be either research or development, depending on management's wishes.

B) development

27

Rive Rouge Confections Company incurred €5,000,000 to determine if chocolate could be made to resist melting by adding certain inert minerals to the mixture. According to IAS 38, how should Rive Rouge record this cost?
A) It should be capitalized as a Deferred Development Cost.
B) It should be treated as a cost of products it currently markets.
C) It should be expensed currently.
D) It should be amortized over 20 years.

C) It should be expensed currently.

28

How does the definition of asset impairment differ between IAS 36 and U.S. GAAP?
A) U.S. GAAP does not consider selling price in determining impairment, but IAS 36 does.
B) U.S. GAAP considers cash flows in assessing value of continued use, but does not discount them, whereas IAS 36 requires discounting in assessing asset impairment.
C) Asset impairment is more likely to occur under IAS 36 than under U.S. GAAP.
D) All of the above are differences between IAS 36 and U.S. GAAP.

D) All of the above are differences between IAS 36 and U.S. GAAP.

29

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

Using IAS 36, what is the amount of Impairment Loss?
A) €18,000
B) €37,000
C) €15,000
D) €25,000

A) €18,000

30

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

What is the amount of Impairment Loss under U.S. GAAP?
A) €37,000
B) €18,000
C) €15,000
D) €25,000

D) €25,000