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1 U.S. GAAP and IFRS 2 Some of the differences between U.S. GAAP and IFRS 3 Balance Sheet 4 Income Statement 5 Statement of Cash Flows
 U.S. GAAP and IFRS
The transition from US GAAP to w:International Financial Reporting Standards (IFRS) affects the way one reports and accounts for information on financial statementsis. IFRS is already impacting business decisions. Switching to IFRS will help eliminate the differences between companies financial statements which ultimately is a huge thing allowing better camparabilitiy among companies. IFRS is principle based accounting, which simply means instead of a having a lot of rules to follow it is more broad with its concepts to guide the accountants. The goal of a principle based system is to avoid numerous rules. This makes it easier to go about your business more freely. Comparing your company to another has always been important. To see what you have to do to stay on top, and to actually know you are, through comparing is an important motivation. IFRS will help make this more feasible, and hopefully encourage companies and motivate them along with their competitors now having a better understanding of where they stand.
 Some of the differences between U.S. GAAP and IFRS
Accounting for contingent losses is very similar between the two however IFRS is "more likely than not" as well as as "probable". IFRS requires reporting present values of estimated cash flows when the effect of time value of money is material whereas U.S. GAAP allows this when the timing of cash flows is fixed or reliably determinable. Question 1: Under IFRS, if every amount in a range of contingent losses is equally likely the amount accrued is the?
Mid point of the range 2. such as legal costs printing costs.Under.Cunningham)) . a company that prepares it's financial statements using IFRS: As shown there are still similarities between U.S. Immediately recognizes the gain on the sale ((A. When making this determination less judgement. the lessor. Question 3: When recording a capital lease Blue Company is aware that the implicit interest rate used by the Greay Company. transaction costs are recorded separately as an asset b.S. under U. we increase the recorded amount of the debt by the transaction costs c. Blue's incremental borrowing rate is 6%. the implicit rate. GAAP the lessor uses oen rate. and underwriting fees. the decrease in the effective interest rate is reflected in the interest expense. the incremental borrowing rate unless the other rate is lower. Using IFRS: a. However. GAAP and IFRS but as more and more companies transform over to IFRS it is important to know the differences in the way they account for things! All of the questions can be found in the Study Guide Volume 2 for Chapters 13-21. are referred to as debt issuance costs. GAAP or IFRS. GAAP 5.S. Blue should record the leased asset and lease liability at the present value of the lease payments discounted at: Question 4: A lease is a capital lease if substantially all risks and rewards of ownership are transferred whether using U. Question 2: Cost incurred in connection with the issuance of bond's and other debt. there also are more IFRS question for self-study within this book: Answers: 1.S. convertible debt is divided into its liability and equity elements. not like U.S. Under IFRS the rate used for leases is usually the rate implicit to discount the minimum lease payments. 7%. IFRS. the increase i nthe effective interest rate is reflected in the interest expense d. and the lessees use another. more specificity is applied using? Question 5: When the leaseback in a Sale-leaseback transaction is an operating lease. GAAP. if using IFRS 4. C 3. U. to calculate lease payments is 7%.
A categorization of cash flows by Operating vs. What is provided is summary in major account areas. The multi-step method takes several steps to arrive at the net income. Question 1 Prepare an income statement based on the following information: Service Revenue . and shareholder equities of the firm. Salaries Expense. Financing cash flows has been adopted and is now part of required U. There is much detail in subaccounts of the firm's accounting system which is not reported. 7000. Income Statement is the statement of operations or statement of earnings is used to summarize the profit generating activities that occurred during a particular period of time.S. Investing vs.12000.  Income Statement The income statement presented in published financial statement is also summary. Miscellaneous Expenses. The multi-step income statement is more complex than the single step. Single step income statement which is an easier approach. long-term assets and liabilities. The income statement consist of revenues and expenses. There are two ways in preparing an income statement. Using the simple step method.See Intermediate Accounting wikibook overview The three major financial statements are: the Balance Sheet. . then subtract the total revenue from the total expenses to arrive at the net income. the Income Statement.  Balance Sheet The balance sheet presented in the financial statements published by a firm provides summary information of the assets.The income statement describes a company's revenue and expenses along with the resulting net income or loss over a period of time due to earning activities. for the period of the income statement. and the Statement of Cash Flows. GAAP reporting. Income Staement Service Revenue 38000 Supplies Expenses (16000) Salaries Expenses (12000) Miscellaneous Expenses (7000) Net Income 3000  Statement of Cash Flows The statement of cash flows provides a reconciliation between beginning vs. you total revenues and total expenses. liabilities. end balances of cash and cash equivalents of a firm.16000.38000. Supplies Expenses. and includes classification of short-term vs.
For example. The reconciliation of the net increase or decrease in cash with the change in the balance of the cash account.SFAS #95 230-10-45-1 A statement of cash flows shall report the cash effects during a period of an entity's operations. Direct Method is when each cash effect is reported directly. if the sales revenue is 300 and the Accounts Receivable increases by 20 then the cash received from customers would be 280. So. in order to find out the cash inflow from customer we need to know the sales revenue. In order to identify the inflows and outflows for operating activities you need to analyze the components of the income statement. The cash inflows are when the assets are sold. its investing transactions. Cash Flows from Operating Activities: Includes inflows and outflows of cash that are from activities reported on the income statement. But. So. Noncash investing and financing activities. if the cost of goods sold was 220 and inventory increased by 7 and accounts payable decreased by 15 . It has three primary categories: 1. they are elements of the net income. In order to determine the cash paid to suppliers you need to look at two accounts: inventory and accounts payable and then determine their effect on the cost of goods sold. Cash flows from financing activities There are also two other categories 4. The statement of cash flows lists all cash inflow and cash outflow during a reporting period. There is the direct method and the indirect method. but the sales revenue is also affected by the account receivable account. and its financing transactions. The cash outflows are when operational assets are acquired. 5. Cash flows from investing activities 3. For example. Indirect Method is when the cash effects are reported indirectly by beginning with reported net income and working backwards to convert the amount to cash basis. Cash flows from operating activities 2. resale of the assets are reported as investing activities except the purchase and sale of inventory are reported as operating activities. There are two different methods that can be used to report the cash flows of operating activities.
Found on p. For example. Spiceland. 4.the cash paid to suppliers would be 242. Noncash investing and financing activities: 1. Cash flows from investing activities: SFAS #95 230-10-45-11 Cash flows from purchases. The cash paid for interest is determined by the bond interest expense and discount on the bonds payable. buyback of stock.000 and you sold it for $150. and payment of cash dividends to shareholders. which means more money was paid. Exchanging noncash assets or liabilities for other noncash assets or liabilities. For example. if the book value was $120. . 3. issuance of bonds and other debt securities. Whether it is a gain or loss is determined by the difference between the amount of cash received from the sale and the book value.000. Converting debt into common stock or other equity securities. Activities that considered financing activities are sale of common and preferred stock. if the interest expense is $10 and the unamortized discount decreases by $3 then the cash paid for interest is $7.000 that would be a gain of $30. and maturities of available-for-sale securities shall be classified as cash flows from investing activities and reported gross in the statement of cash flows. Cash flows from financing activities: The cash flows from financing activities are the inflows and outflows of cash resulting from external financing of a business. Acquiring an asset by incurring a debt payable to seller. Reconciliation with change in cash balance: The financial statements must report a reconciliation of net income to net cash flows from operating activities. Acquiring an asset by entering into a capital lease. Payments to acquire property. payment of debt. 1116 of Intermediate Accounting textbook. plant. 2. You add 7 because the inventory increased and you add 15 because the accounts payable decreased. A gain or loss on sale of land is reported as an investing activity. sales. and non-trade receivable are reported as investing activities. and equipment. investment in securities (except trade securities).
Sales Revenue: 150 Accounts Receivable Increase: 5 b. Purchase of land c. or investing activity. Purchase of inventory e. financing.Questions 1) State whether the following transactions are considered an operating. the direct or indirect method Statement of Cash Flows: Operating Activities: Cash inflows: From customers 105 From Investment Revenue 7 Cash outflows: To Suppliers for goods (50) To employees (10) Income taxes (8) Net cash flows 44 3) Given the sales revenue and the account receivable determine the cash inflow from customers. Issuance of a bond 2) Which method is being used. Issuance of common stock for land d. a. Payment of cash dividends b. Sales Revenue: 450 Accounts Receivable decrease: (30) . a. or if they are not reported.
Financing Activity b. and accounts payable determine the cash outflow to supplier. Operating Activity e.4) Given the cost of goods sold. Cost of goods sold: 400 Inventory decrease: (25) Accounts Payable increase: 30 b. Cash received from customers: $145 b. Cash paid to suppliers: $345 b. Cash received from customers: $420 4) a. a.Not reported d. Cost of goods sold: 500 Inventory increase: 20 Accounts payable increase: 10 5) Determine the cash paid for interest given the bond interest expense and unamortized discount Bond Interest expense: 30 Unamortized Discount: (7) Answers: 1) a.Financing Activity 2) Direct Method 3) a. Investing Activity c. Cash paid to suppliers: $510 5) Cash paid for interest: $23 . inventory.
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