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Chapter 3: 4ISTQ (page 150)

When converting to IFRS, a company must:

(a) recast previously issued financial statements in accordance with IFRS.

(b) use GAAP in the reporting period but subsequently use IFRS.

(c) prepare at least three years of comparative statements.

(d) use GAAP in the transition year but IFRS in the reporting year.

Short Answer

Expert verified

The correct option is “a”.

Step by step solution

01

Explanation to correct option

In the process of conversion from GAAP to IFRS, companies are required to present the statements issued in past, as per the IFRS. Company opting conversion is required to prepare a minimum of one-year comparative financial statements.

02

Explanation of incorrect options

Option b) In the reporting period IFRS is used to prepare the financial statements, and also it is subsequently.

Option c) In the process of conversion, the company is required to prepare comparative financial statements for at least one year.

Option d) IFRS is used to prepare financial statements in the transition year and also in in reporting year.

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Most popular questions from this chapter

Jay Hawk, maintenance supervisor for Boston Insurance Co., has purchased a riding lawnmower and accessories to be used in maintaining the ground and corporate headquarters. He has sent the following information to the accounting department.

Cost of Mover and Accessories

\(4,000

Date Purchased

7/1/2017

Estimated Useful Life

5 yrs

Monthly Salary of Groundskeeper

\)1,100

Salvage Value

\(0

Estimated Annual Fuel Cost

\)150

Compute the amount of depreciation expense(related to the mover and accessories) that should be reported on Boston’s December 31, 2017, Income Statement. Assume straight-line depreciation.

E3-2 (L02) (Corrected Trial Balance) The following trial balance of Wanda Landowska Company does not balance. Yourreview of the ledger reveals the following. (a) Each account had a normal balance. (b) The debit footings in Prepaid Insurance,Accounts Payable, and Property Tax Expense were each understated \(100. (c) A transposition error was made in AccountsReceivable and Service Revenue; the correct balances for Accounts Receivable and Service Revenue are \)2,750 and \(6,690,respectively. (d) A debit posting to Advertising Expense of \)300 was omitted. (e) A \(1,500 cash drawing by the owner was debited to Owner’s Capital and credited to Cash.

WANDA LANDOWSKA COMPANYTRIAL BALANCEAPRIL 30, 2017

Debit (\)) Credit (\()Cash \) 4,800Accounts Receivable 2,570Prepaid Insurance 700Equipment \( 8,000Accounts Payable 4,500Property Taxes Payable 560Owner’s Capital 11,200Service Revenue 6,960Salaries and Wages Expense 4,200Advertising Expense 1,100Property Tax Expense 800

Total \)20,890 $24,500

Prepare a correct trial balance.

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 theother period.

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

“A worksheet is a permanent accounting record, and its use is required in the accounting cycle. “Do you agree? Explain.

E3-13 (Lo5,6) (Closing Entries) The adjusted trial balance of Lopez Company shows the following data pertaining to sales at the end of its fiscal year, October 31, 2017: Sales Revenue \(800,000, Delivery Expenses \)12,000, Sales Returns and Allowances \(24,000 and Sales Discounts \)15,000.

Instructions:

(a) Prepare the revenues section of the income statement.
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