Question

1) IFRS standards:

  

A. Are established by the Financial Accounting Standard Board (FASB)

   

B. Are established by the International Accounting Standard Board (IASB)

   

D. Are established by the Securities and Exchange Commission (SEC)

   

C. Are enforced by the International Accounting Standard Board (IASB)

2)

What are the main reasons why US GAAP and IFRS differ?

  

D. Cultural differences have no effect on developing multiple different standards in the world including IFRS and US GAAP

   

C. IFRS and US GAAP standard setters are operating in the countries with the same court and legal system

   

B. US GAAP was developed to primarily satisfy the need of tax authorities and government planners.

   

A. US GAAP was developed to primarily satisfy the need of investors and creditors.

3)

Select the true statement from the following:

  

A. There are only two accounting standards in the world: US GAAP and IFRS

   

B. Many countries have their own accounting standards, but US GAAP is the only one that is allowed for the publicly traded companies on the global stock exchanges

   

D. There are over 130 countries that have either adopted or signed to adopt US GAAP.

   

C. There are two sets of acceptable rules for international stock exchanges—GAAP and IFRS

Answer 1

1.

Answer: C

This is enforced by IASB.

The purpose is to establishing a common language of accounting so that all records and statements become reliable and comparable between companies and countries.

2.

Answer: A

The purpose of GAAP is to protect the interests of stakeholders, like investors and creditors. Therefore, it becomes rule-based.

IFRS, on the other hand, is principles-based for increasing transparency in accounting.

This makes them differ, since their purposes are different.    

3.

Answer: C

Both GAAP and IFRS are accepted in international stock exchanges.

Other options are not correct:

Option A: there are more than two standards.

Option B: there is no such specification in global stock exchange.

Option D: there are more than 130 countries opt for IFRS but not GAAP.