True/False
1. IFRS requires that gains and losses on non-trading equity securities be reported as part of other
comprehensive income.
2. Under IFRS, impairment charges related to held-for-collection debt securities may be reversed.
3. Both GAAP and IFRS classify debt investments as trading, available-for-sale, and held-to-
maturity.
4. IFRS requires that Company A consolidate Company B when it controls and owns more than 50%
of Company B.
5. Under IFRS, both the investor and the investee should follow the same accounting practices,
requiring adjustments be made to the investor’s books in order to prepare financial information.
Multiple Choice
6. Match the approach and location where gains and losses from non-trading securities are reported:
Location where gains/
Approach losses reported
a. GAAP Equity
b. IFRS Equity
c. GAAP Comprehensive income
d. IFRS Comprehensive income
Use the following information for questions 7 and 8
Rushia Company has a non-trading investment in the 10%, 10-year bonds of Pear Company. The
investment’s carrying value is $3,200,000 at December 31, 2020. On January 9, 2021, Rushia learns
that Pear Company has lost its primary manufacturing facility in an uninsured fire. As a result, Rushia
determines that the investment is impaired and now has a fair value of $2,300,000. In June, 2022,
Pear Company has succeeded in rebuilding its manufacturing facility, and its prospects have
improved as a result.
7. If Rushia Company determines that the fair value of the investment is now $3,900,000 and is
using GAAP for its external financial reporting, which of the following is true?
a. Rushia is prohibited from recording the recovery in value of the impaired investment.
b. Rushia may record a recovery of $900,000.
c. Rushia may record a recovery of $700,000.
d. Rushia may record a recovery of $1,600,000.
8. If Rushia Company determines that the fair value of the investment is now $2,900,000 and is
using IFRS for its external financial reporting, which of the following is true?
a. Rushia is prohibited from recording the recovery in value of the impaired investment.
b. Rushia may record a recovery of $600,000.
c. Rushia may record a recovery of $900,000.
d. Rushia may record a recovery, but is limited to 80% of the value of the recovery.
