Exercises Unit 1 - 1, 2, 3

Unit 1

1. International Financial Reporting Standards are comprised of which of the following?

d. all of the above

2. How can national standard-setting bodies be involved in setting International Financial

Reporting Standards?
d. all of the above

3. How are International Financial Reporting Standards enforced?

b. Regulatory bodies of individual countries

Exercises Unit 2 - 1, 2, 3, 4

1. The conceptual framework for IFRS addresses:

d. all of the above

2. What is the status of the IFRS/US GAAP convergence project related to conceptual frameworks?
c. It is part of the long-term convergence project

3. What are differences between the conceptual framework for IFRS and US GAAP?
a. Measurement methods

4. Your company is considering switching from US GAAP to IFRS. Your CEO, Julie Jones, has
asked you to identify the major differences in the conceptual frameworks of US GAAP
and IFRS so that she can understand the different foundations of the accounting rules.

While there are many similarities (e.g. objectives of financial statements) between the Framework
and the conceptual framework established by FASB in the six Statements of Financial Accounting
Concepts, there are differences as well. The greatest difference lies in the concepts of capital and capital
maintenance, which include measurement methods to be used in recognizing elements of the financial
statements. While US GAAP relies primarily on historical cost (with the exception of certain financial
instruments which are carried at fair value), IFRS lists several options – historical cost, current cost,
realizable value, and present value – without providing guidance on which method to implement.
 An additional difference is found in the elements of financial statements. While the definitions are
similar for the two organizations, there are differences in the details – e.g. the line between liabilities
and equity as applied to convertible debt. A minor difference is also found in the qualitative
characteristics identified in each framework. The IASB Framework focuses on understandability, relevance,
reliability, and comparability. US GAAP also includes these characteristics, but adds a focus on consistency – the ability
to compare the financial statements of an entity at two different points in time.

As part of the long-term convergence project, IASB and FASB are jointly working on developing a
conceptual framework to be adopted by both organizations. Early stages of the project include
agreement on the objectives, qualitative characteristics, and elements of financial statements. Later
stages focus on measurement issues, reporting entities, and presentation and disclosure.