True/False
1. IFRS requires the use of straight-line method for amortization of a discount or premium.
2. U.S. GAAP and IFRS have the same accounting guidelines for bond issue costs.
3. Under IFRS, bond issue costs are recorded as an asset.
4. Under IFRS, all troubled-debt restructurings are accounted for as extinguishments.
5. Under IFRS the required procedure for amortization of a discount or premium is the effective-interest method.
Multiple Choice Questions
6. IFRS generally assumes that all restructurings be accounted for as:
a. extinguishments of debt.
b. loss on debt.
c. amortization expense.
d. bad-debt expense.
7. All of the following are differences between IFRS and U.S. GAAP in accounting for liabilities except:
a. When a bond is issued at a discount U.S. GAAP records the discount in a separate contra-liability account. IFRS records the bond net of the discount.
b. Under IFRS, bond issuance costs reduces the carrying value of the debt. Under U.S. GAAP, these costs are recorded as an asset and amortized to expense over the term of the bond.
c. U.S. GAAP, but not IFRS uses the term "troubled debt restructurings."
d. U.S. GAAP, but not IFRS uses the term "provisions" for contingent liabilities which are accrued.
8. IFRS requires bond issue costs:
a. to be recorded as an asset.
b. to be excluded while computing the interest expense.
c. to be netted against the carrying amount of the bonds.
d. to be considered when computing income tax payable.
9. Both IFRS and U.S. GAAP permit valuation of long-term debt and other liabilities at
a. present value discounted at the firm’s cost of capital.
b. current market values of the obligations, based on changes in the discount rate with unrealized gains and losses reflected in a separate account in stockholders’ equity.
c. fair value with gains and losses on changes in fair value recorded in income in certain situations.
d. historic costs without reflecting changes in valuation as obligations will be retired at their maturity date.
