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GAAP vs. IFRS: Stockholders' Equity quiz

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  • Who creates GAAP and who creates IFRS?
    GAAP is created by the Financial Accounting Standards Board (FASB) in the US, while IFRS is developed by the International Accounting Standards Board.
  • How do GAAP and IFRS handle the record keeping for issuing and repurchasing equity shares?
    Both GAAP and IFRS use the same calculations and journal entries for issuing and repurchasing equity shares.
  • What happens when a prior period adjustment is needed under GAAP and IFRS?
    Prior period adjustments are handled through retained earnings in both GAAP and IFRS.
  • How are changes in accounting principles, like switching inventory methods, treated under GAAP and IFRS?
    Changes in accounting principles require retroactive adjustments to previous years under both GAAP and IFRS.
  • Are EPS (Earnings Per Share) calculations different between GAAP and IFRS?
    No, EPS calculations are the same under both GAAP and IFRS.
  • What does comprehensive income include under GAAP and IFRS?
    Comprehensive income includes net income plus other comprehensive elements under both GAAP and IFRS.
  • What term does IFRS use for items not classified as paid-in capital?
    IFRS uses the term 'reserves' for items not classified as paid-in capital.
  • What is included in IFRS reserves besides retained earnings?
    IFRS reserves include retained earnings and other general reserves like revaluation accounts.
  • How does IFRS handle revaluation of long-term assets?
    IFRS records revaluations of long-term assets in revaluation accounts within reserves.
  • What is paid-in capital composed of?
    Paid-in capital includes common stock, additional paid-in capital (APIC), less any treasury stock, and sometimes preferred stock.
  • What is the main difference in terminology between GAAP and IFRS regarding equity holders?
    GAAP uses 'stockholders' while IFRS uses 'shareholders', but they generally mean the same thing.
  • Are the terminology differences between GAAP and IFRS significant?
    No, the terminology differences are minor and generally represent the same concepts.
  • Where do prior period adjustments appear in the financial statements under both GAAP and IFRS?
    Prior period adjustments appear in retained earnings under both GAAP and IFRS.
  • What happens to revaluation gains under IFRS?
    Revaluation gains are recorded in revaluation accounts within reserves under IFRS.
  • Should students memorize all terminology differences between GAAP and IFRS?
    No, students should be aware of the differences but not memorize them, as they are mostly minor.