b. what would be the appropriate accounting treatment under ifrs

IFRS does not provide specific guidance on recognizing related costs. However, under US GAAP

, the accounting for related legal costs is subject to an accounting policy election. Acceptable accounting policies include expensing related costs as incurred or accruing related costs when they are deemed probable and reasonably estimable.

Full Answer

What is the accounting treatment under IFRS for operational nature?

Accounting Treatment Under IFRS The IFRS does not hold special distinctions for items of operational nature that occur irregularly or infrequently; rather, all results are disclosed as revenues, finance costs, post-tax gains or losses, or results from associates and joint ventures.

What is the basis of accounting for inventory in IFRS?

Both IFRS and U.S. GAAP are based on the principle that the primary basis of accounting for inventory is fair value. B. Under both IFRS and U.S. GAAP, the cost of inventory includes all direct expenditures to ready inventory for sale, including selling and storage costs. C.

How are business combinations accounted for under IFRS?

IFRS 3 Business Combinations outlines the accounting when an acquirer obtains control of a business (e.g. an acquisition or merger). Such business combinations are accounted for using the 'acquisition method', which generally requires assets acquired and liabilities assumed to be measured at their fair values at the acquisition date.

How are extraordinary items treated under IFRS?

Under IFRS, there is no special distinction for extraordinary items either. All results are disclosed as revenues, finance costs, post-tax gains or losses, or results from associates and joint ventures. How Unusual or Infrequent Items Are Treated

What type of accounting does IFRS use?

IFRS is a set of international accounting standards, which state how particular types of transactions and other events should be reported in financial statements. Some accountants consider methodology to be the primary difference between the two systems; GAAP is rules-based and IFRS is principles-based.

What are the 4 principles of IFRS?

IFRS requires that financial statements be prepared using four basic principles: clarity, relevance, reliability, and comparability.

Which 3 assumptions are followed under IFRS?

Four underlying assumptions characterizes the IFRS: going concern, accrual basis, stable measuring unit assumption and units of cost purchasing power.

What costs can be capitalized under IFRS?

The primary costs that companies can capitalize under IAS 2 include purchase and conversion costs. The former category consists of the following costs: Purchase price of the inventory items, including import duties, transport and handling costs.

What does IFRS means in accounting?

International Financial Reporting StandardsOverview. International Financial Reporting Standards (IFRS) are a set of accounting standards that govern how particular types of transactions and events should be reported in financial statements. They were developed and are maintained by the International Accounting Standards Board (IASB).

What is IFRS principle?

IFRS fosters transparency and trust in the global financial markets and the companies that list their shares on them. If such standards did not exist, investors would be more reluctant to believe the financial statements and other information presented to them by companies.

What is the main objective of IFRS?

The objectives of the IFRS Foundation are: to develop, in the public interest, a single set of high quality, understandable, enforceable and globally accepted financial reporting standards based upon clearly articulated principles.

What is IFRS in accounting and its objectives?

What are IFRS and its purpose? IFRS full form is International Financial Reporting Standards. As the name suggests, its purpose is effective, efficient, and accurate reporting of financial statements using standard accounting principles to ensure transparency, consistency, growth, and interest of public services.

What is IFRS and needs of IFRS?

IFRS specifies how businesses need to maintain and report their accounts. Created to establish a common accounting language, the goal of the international financial reporting standards is to make financial statements coherent and consistent across different industries and countries.

Which expenses can be capitalized?

Capitalized costs can include intangible asset expenses can be capitalized, like patents, software creation, and trademarks. In addition, capitalized costs include transportation, labor, sales taxes, and materials.

What costs can be capitalized under IFRS 15?

IFRS15 requires that, in order for contract acquisition and retention costs to be capitalised, they must be incremental (i.e. costs that would not have been incurred had it not been for the acquisition/retention of the customer contract). IFRS15 does not determine how much costs should be capitalised or when.

How do you account for free assets received under IFRS?

IFRS does not provide any recognition criteria or guidance to account for these free assets with no conditions attached to it for the receipt of it. So, one can develop an accounting policy to account for these assets. The conceptual framework of IFRS requires an entity to report any asset that it controls.

What is IFRS disclosure?

The IFRS does not hold special distinctions for items of operational nature that occur irregularly or infrequently; rather, all results are disclosed as revenues, finance costs, post-tax gains or losses, or results from associates and joint ventures .

Which accounting standard requires unusual items to be included in the income statement?

The two main accounting standards, GAAP and IFRS, approach reporting unusual or infrequent items in slightly different fashions, however, both no longer use the classification of extraordinary items for simplicity purposes. Both standards also require the items to be included in either the income statement or the notes to the financial statements.

What are irregular items?

Irregular items can include discontinued operations, lawsuits, damage from natural disasters, and restructuring costs. GAAP no longer requires the reporting of extraordinary items separately from irregular items, only as nonrecurring items. Under GAAP, unusual or infrequent transactions must be reported either on the income statement ...

Why do you report irregular items separately?

While used rarely, the reasoning behind reporting irregular items separately is to make clear which ones are totally unrelated to the operational and financial results of a business. Investors should have a good understanding of these types of unusual items and how they are reported. Many items that are reported as irregular or unusual used ...

Why is it important to report irregular items?

Reporting irregular items helps investors and analysts determine the current and future performance of a business.

When did IASB stop recognizing extraordinary items?

The International Accounting Standards Board (IASB) ceased recognizing extraordinary items under IFRS rules in 2002. 2  The IFRS has a separate disclosure required for income or expenses of abnormal size or nature. These disclosures can be on the face of the income statement or in the notes section of the report. 3 

Where do you report unusual transactions?

Under GAAP, unusual or infrequent transactions must be reported either on the income statement or disclosed in the financial statement footnotes.

What is IFRS 10 guidance?

The guidance in IFRS 10 Con­sol­i­dated Financial State­ments is used to identify an acquirer in a business com­bi­na­tion, i.e. the entity that obtains 'control' of the acquiree. [IFRS 3.7]

What is IFRS 3 accounting?

IFRS 3 Business Com­bi­na­tions outlines the accounting when an acquirer obtains control of a business (e.g. an ac­qui­si­tion or merger). Such business com­bi­na­tions are accounted for using the 'ac­qui­si­tion method', which generally requires assets acquired and li­a­bil­i­ties assumed to be measured at their fair values at the ac­qui­si­tion date.

What is IFRS 3?

IFRS 3 (2008) seeks to enhance the relevance, re­li­a­bil­ity and com­pa­ra­bil­ity of in­for­ma­tion provided about business com­bi­na­ tions (e.g. ac­qui­si­tions and mergers) and their effects. It sets out the prin­ci­ples on the recog­ni­tion and mea­sure­ment of acquired assets and li­a­bil­i­ties, the de­ter­mi­na­tion of goodwill and the necessary dis­clo­sures.

When deter­mining whether a par­tic­u­lar item is part of the exchange for?

When de­ter­min­ing whether a par­tic­u­lar item is part of the exchange for the acquiree or whether it is separate from the business com­bi­na­tion, an acquirer considers the reason for the trans­ac­tion, who initiated the trans­ac­tion and the timing of the trans­ac­tion. [IFRS 3.B50]

When do you apply IFRS 3?

IFRS 3 must be applied when accounting for business com­bi­na­tions, but does not apply to: The formation of a joint venture [IFRS 3.2 (a)] The ac­qui­si­tion of an asset or group of assets that is not a business, although general guidance is provided on how such trans­ac­tions should be accounted for [IFRS 3.2 (b)]

When was IFRS 3 revised?

A revised version of IFRS 3 was issued in January 2008 and applies to business com­bi­na­tions occurring in an entity's first annual period beginning on or after 1 July 2009.

What is business com­bi­na­tion?

Business com­bi­na­tions can be struc­tured in various ways to satisfy legal, taxation or other ob­jec­tives, including one entity becoming a sub­sidiary of another, the transfer of net assets from one entity to another or to a new entity [IFRS 3.B6]

What is IFRS 10?

IFRS 10 Con­sol­i­dated Financial State­ments outlines the re­quire­ments for the prepa­ra­tion and pre­sen­ta­ tion of con­sol­i­dated financial state­ments , requiring entities to con­sol­i­date entities it controls. Control requires exposure or rights to variable returns and the ability to affect those returns through power over an investee.

What is the objective of IFRS 10?

The objective of IFRS 10 is to establish prin­ci­ples for the pre­sen­ta­tion and prepa­ra­tion of con­sol­i­dated financial state­ments when an entity controls one or more other entities. [IFRS 10:1]

What is the role of an investor in an investor's investment?

An investor controls an investee when the investor is exposed, or has rights, to variable returns from its in­volve­ment with the investee and has the ability to affect those returns through its power over the investee

When was IFRS 10 issued?

Control requires exposure or rights to variable returns and the ability to affect those returns through power over an investee. IFRS 10 was issued in May 2011 and applies to annual periods beginning on or after 1 January 2013.

When assessing whether an investor controls an investee, an investor with de­ci­sion-mak?

When assessing whether an investor controls an investee an investor with de­ci­sion-mak­ing rights de­ter­mines whether it acts as principal or as an agent of other parties. A number of factors are con­sid­ered in making this as­sess­ment. For instance, the re­mu­ner­a­tion of the de­ci­sion-maker is con­sid­ered in de­ter­min­ing whether it is an agent. [IFRS 10:B58, IFRS 10:B60]

What is a reporting entity?

A reporting entity includes the income and expenses of a sub­sidiary in the con­sol­i­dated financial state­ments from the date it gains control until the date when the reporting entity ceases to control the sub­sidiary. Income and expenses of the sub­sidiary are based on the amounts of the assets and li­a­bil­i­ties recog­nised in the con­sol­i­dated financial state­ments at the ac­qui­si­tion date. [IFRS 10:B88]

What is financial statement?

The financial state­ments of a group in which the assets, li­a­bil­i­ties, equity, income, expenses and cash flows of the parent and its sub­sidiaries are presented as those of a single economic entity

What is the purpose of IAS 21?

IAS 21 prescribes how an entity should: translate the entity’s financial statements into a presentation currency, if different from the entity’s functional currency. IAS 21 permits an entity to present its ...

What is IAS 21?

IAS 21 permits an entity to present its financial statements in any currency (or currencies). The principal issues are which exchange rate (s) to use and how to report the effects of changes in exchange rates in the financial statements.

When was IAS 21 adopted?

In April 2001 the International Accounting Standards Board (Board) adopted IAS 21 The Effects of Changes in Foreign Exchange Rates, which had originally been issued by the International Accounting Standards Committee in December 1983.

What is functional currency?

An entity’s functional currency is the currency of the primary economic environment in which the entity operates (ie the environment in which it primarily generates and expends cash). Any other currency is a foreign currency.

How Unusual Or Infrequent Items Are Treated

Accounting Treatment Under U.S. GAAP

Accounting Treatment Under IFRS

• The IFRS does not hold special distinctions for items of operational nature that occur irregularly or infrequently; rather, all results are disclosed as revenues, finance costs, post-tax gains or losses, or results from associates and joint ventures. The International Accounting Standards Board (IASB) ceased recognizing extraordinary items under IF...

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