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GAAP vs. IFRS: Liabilities quiz

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  • Who sets the rules for GAAP in the United States?
    The Financial Accounting Standards Board (FASB) sets the rules for GAAP in the United States.
  • Who is responsible for creating IFRS internationally?
    The International Accounting Standards Board (IASB) is responsible for creating IFRS.
  • How do both GAAP and IFRS define a liability?
    Both define a liability as a future outflow of resources.
  • In what order are liabilities presented under GAAP and IFRS?
    Liabilities are presented in order of liquidity under both GAAP and IFRS.
  • How might IFRS differ in presenting liabilities compared to GAAP?
    IFRS may present liabilities in reverse liquidity, showing long-term liabilities before current liabilities.
  • What method is required by both GAAP and IFRS for bond premium amortization?
    Both require the effective interest method for bond premium amortization.
  • What is a convertible bond?
    A convertible bond is a bond that can be converted into shares of stock, starting as a liability.
  • Do GAAP and IFRS treat convertible bonds the same way?
    No, there may be differences in accounting for convertible bonds between GAAP and IFRS.
  • What is the statement of financial position called under IFRS?
    Under IFRS, the statement of financial position is equivalent to the balance sheet.
  • What calculation is often shown on the statement of financial position under IFRS?
    Working capital is often shown on the statement of financial position under IFRS.
  • How is working capital calculated?
    Working capital is calculated as current assets minus current liabilities.
  • Why is working capital important for investors?
    It helps investors assess a company's liquidity and financial health.
  • Are there major differences in liability presentation between GAAP and IFRS?
    No, there are not any major differences in liability presentation between GAAP and IFRS.
  • What type of liability are bonds payable considered?
    Bonds payable are considered a long-term liability.
  • What information do you need to calculate working capital?
    You need the current assets and current liabilities from the balance sheet.