1. There are differences between IFRS and US GAAP. They are classified into:
• Definition differences. The definition of alike concepts which can result into different meaning.
• Recognition differences. The criteria of how, when, or whether an item will be recognized can be different.
• Disclosure differences. The difference in the information presented in the financial statement notes.
• Measurement differences. Measuring amount can be taken with different approaches.
• Presentation differences. Presentation of the statements can be different.
• Lack of regulations. The US GAAP requires some issues be addressed which the IFRS does not.
2. By applying lower costs and inventories’ market rule, the IAS 2 market definition is a net realizable value (NRV) while the US GAAP definition of the market is a replaceable cost.
3. The estimated costs are included in the assets costs upon initial recognition.
4. IAS 16 allows two models; cost model and revaluation model. On this model, the revaluation model, a revalued amount of plant, property, and equipment is reported in the balance sheet. Under the cost model the cost less than the depreciation value is carried by the asset.
5. Any property, plant, and equipment is accounted for under the revaluation model. Classes of PPE are revalued at the same time. Revaluation of the assets must be often to have a material difference between the fair value and the revalued assets.
6. When a revalued asset is realized the surplus in revaluation is transferred to the retained earnings either as a lump sum after the asset is disposed or for each period, the difference between depreciation on the revalued amount and depreciation on historic costs.
7. Assets that consists of many parts that are significant, they are divided and valued for depreciation differently. Such assets as airplane are separated into different parts and then depreciated differently.
8. For the fair value model, net income identifies the changes in fair value while comprehensive income takes the changes in fair value for the revaluation model.
When the carrying value of an asset is more than the assets recoverable amount, impairment loss occurs. The net selling price is less than the recoverable amount.
Impairment loss occurs when the carrying value of an asset is greater than the unexpected future cash flows. If there is impairment, the difference between the carrying and fair value is the recorded loss.
10. For an asset which has been previously impaired a backup can only be written to what before impairment its carrying value was.
11. The intangible assets are:
• Purchased intangible assets
• Internally generated
• Those acquired in a combination of a business
The internally generated are classified as finite assets which the purchased and those acquired are either finite or indefinite. All these classes of assets are tested for impairment. The internally generated assets must be tested annually.
The classification of the expenditures from this class of assets is either development or research. The development expenditure after a criteria is met is classified as an asset while the research expenditure when it has occurred it is then expensed.
Under this, both expenditures, development and research, are expensed after ther have occurred. For software development, after meeting a certain criteria, can be recognized as an asset under the US GAAP.
13. i. In definitely lived assets
14. Goodwill is the surplus from the difference between transferred and non-controlling assets, over firm’ acquired assets’ fair value
15. The gain exists when the firms’ acquired assets’ fair value is greater than non-controlling assets and transferred consideration. A negative gain is whenever the fair value is less than non-controlling assets and transferred consideration.
16. Impairment on Goodwill is tested annually. A bottom up test is carried out to test impairment on specific cash generating unit allocated from goodwill. In the bottom up test, the carrying value of the generating unit is compared with the recoverable amount. The goodwill is impaired if the recoverable amount is less than the carrying value.