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Transaction costs associated with the issuance of debt should be expensed as incurred using IFRS.




a. True


b. False

b. False

Banks Billiard Company (BBC) issued $5 million in bonds with a $100,000 premium over par.BBC incurred $200,000 in accounting fees and $50,000 in banking fees related to thistransaction. What amounts should BBC record for the bonds upon issuance using US GAAP?




a. $5 million recorded as bonds payable, $100,000 to premium on bonds and$250,000 to bond issuance expense as the issuance costs are expensed.


b. $5 million recorded as bonds payable, $100,000 to premium on bonds and$250,000 to unamortized bond issuance costs.


c. $4.75 million recorded as bonds payable and $100,000 to premium on bonds.

c. $4.75 million recorded as bonds payable and $100,000 to premium on bonds.

BBC issued $5 million in bonds with a $100,000 premium over par. BBC incurred $200,000 inaccounting fees and $50,000 in banking fees related to this transaction. What carrying valueshould BBC record for the bonds upon issuance using IFRS?




a. $5 million recorded as bonds payable, $100,000 to premium on bonds and$250,000 to bond issuance expense as the issuance costs are expensed.


b. $5 million recorded as bonds payable, $100,000 to premium on bonds and$250,000 to unamortized issuance costs.


c. $4.75 million recorded as bonds payable and $100,000 to premium on bonds.

c. $4.75 million recorded as bonds payable and $100,000 to premium on bonds.

Using IFRS, discounts and premiums on long-term debt are amortized using the straight-linemethod over the term of the debt compared to US GAAP, which amortizes these amountsusing the effective-interest method.




a. True


b. False

b. False

Using IFRS, if a company temporarily invests funds borrowed to finance the acquisition of aqualified asset, how should the interest earned be recorded?




a. As interest revenue.


b. As an offset to interest expense on these funds.

b. As an offset to interest expense on these funds.

Capitalizable interest:




a. Should be based on a specific borrowing, if available.


b. Should be based on the weighted-average of borrowings.


c. May exceed actual interest.


d. a. or b.


e. b. and c.

d. a. or b.




Capitalizable interest is based on the specific borrowings, if available, or the weighted-average costs of the borrowings and cannot exceed the actual interest for the period.

To construct an asset, a German company borrows US dollars during a 24-monthconstruction period of: $250,000 on January 1, 2014; $100,000 on June 30, 2014; $100,000on January 1, 2015; and $50,000 on June 30, 2015. Construction of the asset is completedon December 31, 2015, and it is ready for its intended use. The specific interest rate on thisborrowing is 8%, with the amounts being borrowed as the expenditures are made. OnDecember 31, 2015, the German company uses euros to repay its US-dollar loan and incursan exchange loss of $10,000. What costs should be capitalized using US GAAP?




a. $62,000


b. $40,000


c. $72,000


d.$10,000

a. $62,000

To construct an asset, a German company borrows US dollars during a 24-monthconstruction period of: $250,000 on January 1, 2014; $100,000 on June 30, 2014; $100,000on January 1, 2015; and $50,000 on June 30, 2015. Construction of the asset is completedon December 31, 2015, and it is ready for its intended use. The specific interest rate on thisborrowing is 8%, with the amounts being borrowed as the expenditures are made. OnDecember 31, 2015, the German company uses euros to repay its US-dollar loan and incursan exchange loss of $10,000. What costs should be capitalized using IFRS?




a. $62,000


b. $40,000


c. $72,000


d.$10,000

c. $72,000

A company that has long-term debt and follows IFRS determines that it has breached a debtcovenant, which may accelerate payment at the option of the lender. When must this breachbe cured to allow for long-term classification at year-end?




a. After year-end, but before the financial statements are issued.


b. By March 1 of the next year for calendar year companies (60-day rule).


c. Prior to or on December 31 for calendar year companies.


d.No cure is required. Management’s intentions dictate the classification.

c. Prior to or on December 31 for calendar year companies.

For costs associated with an extinguishment of debt due to the significance of the debtmodifications, how are the costs treated using US GAAP?




a. Expensed as incurred.


b. Deferred and amortized over the life of the modified debt.


c. Directly reduce the carrying value of the modified debt and amortized over theremaining term of the modified debt.


d.Recognized as part of the gain or loss.

b. Deferred and amortized over the life of the modified debt.

For costs associated with a debt modification deemed as an extinguishment, how are thecosts treated using IFRS?




a. Expensed as incurred.


b. Deferred and amortized over the life of the modified debt.


c. Directly reduce the carrying value of the modified debt and amortized over theremaining term of the modified debt.


d. Recognized as part of the gain or loss.

d. Recognized as part of the gain or loss.

For costs associated with a debt modification, how are the costs treated using US GAAP?




a. Expensed as incurred.


b. Deferred and amortized over the life of the modified debt.


c. Costs adjust the carrying amount of the liability and are amortized over theremaining term of the modified debt.


d.Recognized as part of the gain or loss related to the modification.

a. Expensed as incurred.

For costs associated with a non-substantial debt modification, how are the costs treatedusing IFRS?




a. Expensed as incurred.


b. Deferred and amortized over the life of the modified debt.


c. Costs adjust the carrying amount of the liability and are amortized over theremaining term of the modified debt.


d.Recognized as part of the gain or loss related to the modification.

c. Costs adjust the carrying amount of the liability and are amortized over the remaining term of the modified debt.

If a company has several long-term debt issuances and discloses these in the footnotes tothe financial statements, what information is disclosed for each issuance using IFRS? Pickthe answer you deem most comprehensive to the users of the financial statements.




a. The name of the borrower and the maturity date.


b. The amounts outstanding, the type of borrowing, the interest rate, the paymentterms and the final maturity date.


c.The name of the borrower, the interest rate and the maturity date.

b. The amounts outstanding, the type of borrowing, the interest rate, the payment terms and the final maturity date.

Which standard in IFRS directly addresses accounting for troubled debt restructurings?




a. IAS 1, Presentation of Financial Statements


b. IAS 23, Capitalization of Borrowing Costs


c. SIC 12, Special Purpose Entities


d. IAS 39, Financial Instruments – Recognition and Measurement


e. None of the above.

e. None of the above.




There is no IFRS standard that specifically addresses troubled debt restructurings.

Which of the following is not a component of the statement of changes in equity required byIFRS?




a. Share capital


b. Long-term debt


c. Retained earnings


d.Minority interests

b. Long-term debt

What term does IFRS use to reference paid-in capital?




a. Issued capital


b. Share premium


c. Capital stock


d.Retained earnings

b. Share premium

Is a statement of stockholders’ equity required to be presented when following IFRS?Whether true or false, describe how this compares to US GAAP and SEC requirements.




a. True


b. False

a. True




US GAAP does not require this statement although it is predominantly used. TheSEC does require this statement.

If dividends are paid during a period, where is this disclosed in the financial statements usingIFRS?




a. Statement of changes in equity


b. Income statement


c. Notes to the financial statements


d. Balance sheet.


e. a. or c.


f. b. or c.

e. a. or c.




IAS 1 permits dividends to be disclosed in the statement of changes in equity or the notesto the financial statements.

Both US GAAP and IFRS permit the presentation of the changes in the individualcomponents that comprise accumulated OCI to be presented in the statement of changes inequity or in the notes to the financial statements.




a. True.


b. False

a. True