IFRS exam 2 questions & answers
2024/2025
1. Which of the following standards will allow companies to choose between capitalizing and expensing
borrowing costs incurred during the construction of a fixed asset?
a. US GAAP
b. IFRS
c. Both US GAAP and IFRS.
d. None of the above. - ANSWERSd
2. Which of the following standards allows a company to revalue its PP&E after acquisition? a. US GAAP
b. IFRS
c. Both US GAAP and IFRS. d. None of the above. - ANSWERSb
3. A French company reporting using IFRS purchased its only building on January 1, 2009, for
€20,000,000. The building has a 20-year useful life with no net salvage value. The building is being
depreciated on a straight-line basis. Assume the company intends to revalue the building to its
December 31, 2012, fair value of €17,000,000. What is the amount of the entry and the account affected
to reflect this revaluation?
a. €0 - No gain should be recorded.
b. €3,000,000 Loss - should be record as expense in the income statement.
c. €3,000,000 Gain - should be recorded in the income statement.
d. €1,000,000 Gain - should be recorded in the income statement.
e. €1,000,000 Gain - should be recorded as credit through OCI to revaluation surplus. - ANSWERSe
A company owns a piece of equipment with a net cost of $30,000 (cost of $50,000 net of accumulated
depreciation of $20,000). There are indicators that this equipment is impaired. The expected net future
undiscounted cash flows are $31,000. The expected net future discounted cash flows are $28,000. The
fair value of the equipment is $25,000 and selling costs are minimal.
A. What is the impairment loss for the company using US GAAP?
, a. $0
b. $2,000
c. $5,000
d. None of the above. - ANSWERSa
4. A company owns a piece of equipment with a net cost of $30,000 (cost of $50,000 net of accumulated
depreciation of $20,000). There are indicators that this equipment is impaired. The expected net future
undiscounted cash flows are $31,000. The expected net future discounted cash flows are $28,000. The
fair value of the equipment is $25,000 and selling costs are minimal.
What is the impairment loss using IFRS?
a. $0
b. $2,000
c. $5,000
d. None of the above. - ANSWERSb
A company uses the cost method for all of its fixed assets. A machine was purchased on January 1, 2009,
for $100,000. The company believes the machine will not have any net salvage value at the end of its 10-
year useful life. The machine is depreciated using the straight-line depreciation method. At December
31, 2010, the machine is deemed impaired and written down by $24,000. At December 31, 2012, the fair
value of the machine is $70,000 and selling costs are minimal.
A. What is the recorded net value of this machine on December 31, 2012, using IFRS?
a. $42,000
b. $60,000
c. $70,000
d. None of the above. - ANSWERSa
A company uses the cost method for all of its fixed assets. A machine was purchased on January 1, 2009,
for $100,000. The company believes the machine will not have any net salvage value at the end of its 10-
year useful life. The machine is depreciated using the straight-line depreciation method. At December
31, 2010, the machine is deemed impaired and written down by $24,000. At December 31, 2012, the fair
value of the machine is $70,000 and selling costs are minimal.
