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GAAP vs. IFRS: Merchandising quiz

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  • Who sets GAAP and where is it primarily used?
    GAAP is set by the Financial Accounting Standards Board and is primarily used in the United States.
  • Who creates IFRS and where is it applied?
    IFRS is created by the International Accounting Standards Board and is used internationally.
  • What inventory systems are used under both GAAP and IFRS?
    Both GAAP and IFRS use perpetual and periodic inventory systems.
  • How do GAAP and IFRS define inventory?
    GAAP and IFRS have the same basic definition for inventory.
  • How many years of income statements does GAAP require for comparison?
    GAAP requires three years of income statements to be shown for comparison.
  • How many years of income statements does IFRS require for comparison?
    IFRS requires only two years of income statements for comparison.
  • What is a key difference in income statement presentation between GAAP and IFRS?
    GAAP specifies the format of the income statement (single-step or multi-step), while IFRS does not.
  • Does IFRS specify the use of single-step or multi-step income statements?
    No, IFRS does not specify whether to use a single-step or multi-step income statement.
  • What is the fair value principle under IFRS?
    The fair value principle under IFRS allows revaluation of long-term assets to their market value.
  • Where are gains from revaluation of long-term assets reported under IFRS?
    Gains from revaluation of long-term assets under IFRS are reported in comprehensive income, not net income.
  • What is comprehensive income?
    Comprehensive income includes net income and other more abstract accounting items like asset revaluations.
  • Do revaluation gains affect net income under IFRS?
    No, revaluation gains do not affect net income; they are included in comprehensive income.
  • Why do both GAAP and IFRS require multiple years of income statements?
    Both require multiple years to allow users to compare current results with previous years.
  • Are the rules for creating the income statement exactly the same under GAAP and IFRS?
    No, GAAP specifies the format, while IFRS provides general rules but not a specific format.
  • What types of issues are included in comprehensive income beyond net income?
    Comprehensive income includes items like asset revaluations and other abstract accounting issues not part of main revenues and expenses.