Under both IFRS and US GAAP, goodwill is not amortized, but is
tested for impairment annually. If goodwill is impaired, it is
written down and the impairment loss is shown on the income
statement.
Financial Reporting And Analysis MCQ - Financial Reporting And Analysis Section 1
67
An analyst included in his presentation below accounting treatment for marketable securities under IAS No. 39C
| Category | MeasurementMethod | Realized Gains & LossesReported In |
| Trading | Fair Value | Income Statement |
| Held to maturity | Amortized Cost | Income Statement |
| Available for sale | Fair Value | Equity |
The treatment for which category is least likely accurate?
All categories treat realized gains or losses in the same way -
they are reported on the income statement. It is the unrealized
gains and losses that are included in other comprehensive
income (in owner’s equity) for available for sale securities
carried at market value.
68
Alpha-Sine Corporation has the following portfolio of marketable securities which was acquired at the end of 2012:-
| Category | Original Cost in €as at the Year End,2012 | Fair Market Valuein € as at the Year End, 2013 |
| Held for trading | 10000000 | 10,500,000 |
| Available for sale | 5000000 | 5500000 |
If the company reports under IFRS instead of U.S. GAAP, its net income will
most likely be:
most likely be:
Whether securities are classified as held for trading or available for sale, they are measured at their fair value on the balance sheet, but all gains/losses on held for trading securities are reported on the income statements. The unrealized gains/losses on available for sale securities are reported as part of equity. However, this treatment is the same under both IFRS and U.S. GAAP.
69
The following information is from a company’s investment portfolio:Investment
| Classification | Held-to-maturity |
| Market value, 31 Dec 2009 | $10,000 |
| Cost/Amortized cost 31 Dec 2009 | 12,000 |
| Market value, 31 Dec 2010 | 9,000 |
| Cost/Amortized cost 31 Dec 2010 | 10,000 |
If the investment is reclassified as available-for-sale as of 31 December 2010, the balance sheet carrying value of the company’s investment portfolio would
most likely:
most likely:
Held-for-trading and available-for-sale securities are carried at market
value, whereas held-to-maturity securities are carried at amortized
cost. If the investment is reclassified as available-for-sale in 2010, the
carrying amount should be adjusted to its market value, which is
$9,000. Compared with the amortized cost of $10,000, it is a decrease
of $1,000.
Intangible assets with indefinite lives are tested for impairment
annually.
