MORNIN’ JOE INTERNATIONAL
DISCUSSION QUESTIONS
1.
U.S. GAAP Term IFRS International Term
Statement of comprehensive income* Statement of comprehensive income
Balance sheet Statement of financial position
Interest expense Finance costs
Net income Profit for the year
Trading investments Financial assets at fair value through profit or loss
Excess of issue price over par Share premium
Examples: Accumulated other comprehensive Reserves
income, treasury stock, unrealized gain (loss)
on available-for-sale investments
Notes payable Loans
Wages and salaries payable, payroll taxes Employee provisions
payable
*Note: U.S. GAAP and IFRS have converged on the title and disclosure requirements for other comprehensive in-
come items, such as Unrealized Gain (Loss) on Available-for-Sale Investments.
2. The nature of an expense is how the expense and valued using fair value. They can be sepa-
would naturally be recorded in a journal entry rately disclosed in a footnote.
reflecting the economic benefit received for
7. IFRS allow property, plant, and equipment to
that expense. An example is wages expense.
be valued at either historical cost or fair value.
The function of an expense identifies the
This is in contrast to U.S. GAAP, which
purpose of the expense, such as selling ex-
requires historical cost for property, plant, and
pense or administrative expense.
equipment.
3. If an expense is classified by function on
8. A share premium is an international term for
the income statement, then the natural
“excess of issue price over par value.”
classification must be disclosed in the
footnotes. Both classifications cannot be 9. A reserve under IFRS denotes an element of
comingled on the income statement. stockholders’ equity. Most reserve items are
accumulated other comprehensive income.
4. Under U.S. practice, the term “provision”
An example would be the revaluation reserve
usually denotes an expense, as in provision
for the accumulated unrealized gains and
for income taxes (income tax expense). Inter-
losses from plant and equipment revaluation or
national practice uses the term “provision”
unrealized gain (loss) from available-for-sale
to denote a liability. Thus, an income tax
investments. The term “reserve” typically
provision would be income taxes payable.
denotes a liability in the United States, such as
5. First, under IFRS, LIFO is prohibited, whereas “reserve for restructuring.”
it is acceptable under U.S. GAAP. Second, in
10. Treasury stock need not be disclosed on an
using a lower-of-cost-or-market valuation, IFRS
IFRS balance sheet as a separate line item. It
define “market” as net realizable value. U.S.
may be included as a reduction within reserves
GAAP, in contrast, defines “market” as
or share premium. U.S. GAAP favors disclo-
replacement cost in most circumstances.
sure of treasury stock as a separate line item,
6. A biological asset is an agricultural asset, such often as the last item in the stockholders’
as a forest, a vineyard, a farm, or livestock. equity section.
These assets must be separately identified
MJ–1
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or
in part.
DISCUSSION QUESTIONS
1.
U.S. GAAP Term IFRS International Term
Statement of comprehensive income* Statement of comprehensive income
Balance sheet Statement of financial position
Interest expense Finance costs
Net income Profit for the year
Trading investments Financial assets at fair value through profit or loss
Excess of issue price over par Share premium
Examples: Accumulated other comprehensive Reserves
income, treasury stock, unrealized gain (loss)
on available-for-sale investments
Notes payable Loans
Wages and salaries payable, payroll taxes Employee provisions
payable
*Note: U.S. GAAP and IFRS have converged on the title and disclosure requirements for other comprehensive in-
come items, such as Unrealized Gain (Loss) on Available-for-Sale Investments.
2. The nature of an expense is how the expense and valued using fair value. They can be sepa-
would naturally be recorded in a journal entry rately disclosed in a footnote.
reflecting the economic benefit received for
7. IFRS allow property, plant, and equipment to
that expense. An example is wages expense.
be valued at either historical cost or fair value.
The function of an expense identifies the
This is in contrast to U.S. GAAP, which
purpose of the expense, such as selling ex-
requires historical cost for property, plant, and
pense or administrative expense.
equipment.
3. If an expense is classified by function on
8. A share premium is an international term for
the income statement, then the natural
“excess of issue price over par value.”
classification must be disclosed in the
footnotes. Both classifications cannot be 9. A reserve under IFRS denotes an element of
comingled on the income statement. stockholders’ equity. Most reserve items are
accumulated other comprehensive income.
4. Under U.S. practice, the term “provision”
An example would be the revaluation reserve
usually denotes an expense, as in provision
for the accumulated unrealized gains and
for income taxes (income tax expense). Inter-
losses from plant and equipment revaluation or
national practice uses the term “provision”
unrealized gain (loss) from available-for-sale
to denote a liability. Thus, an income tax
investments. The term “reserve” typically
provision would be income taxes payable.
denotes a liability in the United States, such as
5. First, under IFRS, LIFO is prohibited, whereas “reserve for restructuring.”
it is acceptable under U.S. GAAP. Second, in
10. Treasury stock need not be disclosed on an
using a lower-of-cost-or-market valuation, IFRS
IFRS balance sheet as a separate line item. It
define “market” as net realizable value. U.S.
may be included as a reduction within reserves
GAAP, in contrast, defines “market” as
or share premium. U.S. GAAP favors disclo-
replacement cost in most circumstances.
sure of treasury stock as a separate line item,
6. A biological asset is an agricultural asset, such often as the last item in the stockholders’
as a forest, a vineyard, a farm, or livestock. equity section.
These assets must be separately identified
MJ–1
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or
in part.
