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GAAP vs. IFRS: Adjusting Entries quiz

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  • Who sets GAAP and what region does it apply to?
    GAAP is set by the Financial Accounting Standards Board (FASB) and applies to the United States.
  • Who sets IFRS and where is it used?
    IFRS is set by the International Accounting Standards Board and is used internationally.
  • What type of accounting is required under both GAAP and IFRS?
    Both GAAP and IFRS require accrual accounting.
  • What is the Periodicity Assumption in accounting?
    The Periodicity Assumption involves breaking up an indefinite timeline into artificial time periods, usually a year, for financial reporting.
  • Why are adjusting entries necessary in accrual accounting?
    Adjusting entries are necessary to properly record revenues and expenses in the correct time periods under accrual accounting.
  • Are revenue recognition rules the same under GAAP and IFRS?
    Yes, the revenue recognition rules discussed in the course are generally the same under both GAAP and IFRS.
  • What principle does IFRS use that can affect asset valuation?
    IFRS uses the fair value principle, which can change the value of long-term assets.
  • How does the fair value principle under IFRS impact depreciation calculations?
    Revaluation of assets under IFRS can change depreciation calculations based on the updated asset value.
  • Does GAAP allow revaluation of long-term assets?
    No, GAAP does not allow revaluation of long-term assets, making depreciation calculations simpler.
  • Are the methods for calculating depreciation generally the same under GAAP and IFRS?
    Yes, the methods for calculating depreciation are generally the same, but IFRS may adjust asset values.
  • How does GAAP classify losses outside the normal course of business?
    GAAP classifies losses outside the normal course of business as 'losses.'
  • How does IFRS classify losses outside the normal course of business?
    IFRS categorizes losses outside the normal course of business as 'expenses.'
  • What is a key terminology difference between GAAP and IFRS regarding losses?
    GAAP uses 'losses' for events outside normal business, while IFRS uses 'expenses' for similar events.
  • What is the main focus of adjusting entries in both GAAP and IFRS?
    The main focus is to ensure revenues and expenses are recorded in the correct time periods.
  • Do businesses stop operations for financial reporting under the Periodicity Assumption?
    No, businesses continue operating, but financial reporting is done for artificial time periods.