International Financial Reporting Standards (IFRS) is one of the most dreaded sections of the FAR exam. Every testing window, I am inundated with the same question, “how many IFRS questions tested on the FAR exam?”
Many students have grown comfortable with the U.S. GAAP rules. They panic when they realize that they also need to know a thing or two about the international standards.
You probably are wondering why IFRS questions were put on the exam in the first place. The reason is that many entities are owned by foreign companies. For example, a CPA friend works for a Japanese owned firm in New York. She is required to have a working knowledge of IFRS.
So how many IFRS questions can you expect on the FAR exam? I think the average over the last year has been about 3-4 IFRS questions. Of course, I have to give the proviso that every exam is different. You never know how many IFRS questions to prepare for.
Most of the FAR IFRS questions revolve around knowing the difference between the IFRS and the GAAP standard.
Here are some sample IFRS questions to help you study for the FAR exam.
Sample IFRS Questions For FAR Exam
1. Under IFRS, interest and dividends received may be reported on the statement of cash flows as
A. Investing activities only.
B. Either operating or investing activities.
C. Operating activities only.
D. Neither operating nor investing activities.
ANSWER: B
Under IFRS, interest and dividends received may be reported on the statement of cash flows as either operating or investing activities.
2. Under IFRS reporting, what does a prior period error not include?
A. Changing accounting policies.
B. Incorrect application of accounting policies.
C. Measurement mistakes.
D. Disclosure mistakes.
ANSWER: A
Under IFRS reporting, prior period errors include arithmetic mistakes; accounting policy application mistakes; and recognition, measurement, presentation, and disclosure mistakes. Changes in accounting policies are not considered prior period errors and that is why “A” is the correct answer.
3. Yomoto Company reports under IFRS. At December 31, 2018, Genesis classified a note payable as a current liability. Under what conditions could Yomoto reclassify the note payable from current to noncurrent?
A. If Yomoto has the intent and ability to reclassify the note before the issuance of the financial statements.
B. If Yomoto has the intent and ability to reclassify the note before the statement of financial position date.
C. If Yomoto has executed an agreement to refinance the note before the statement of financial position date.
D. If Yomoto has executed an agreement to refinance the note before issuance of the financial statements.
ANSWER: C
Under IFRS an entity must have an executed agreement to reclassify the note before the statement of financial position date in order to treat the note as anything other than current.
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You can find 450 more FAR questions in our question bank. Each question is followed by a detailed answer to show you where you went wrong.