4ISTQ - Intermediate Accounting (Kieso)

Question

When converting to IFRS, a company must:

(a) recast previously issued financial statements in accordance with IFRS.

(b) use GAAP in the reporting period but subsequently use IFRS.

(c) prepare at least three years of comparative statements.

(d) use GAAP in the transition year but IFRS in the reporting year.

Step-by-Step Solution

Answer

The correct option is “a”.

Step 1: Explanation to correct option

In the process of conversion from GAAP to IFRS, companies are required to present the statements issued in past, as per the IFRS. Company opting conversion is required to prepare a minimum of one-year comparative financial statements.  

Step 2: Explanation of incorrect options

Option b) In the reporting period IFRS is used to prepare the financial statements, and also it is subsequently.

Option c) In the process of conversion, the company is required to prepare comparative financial statements for at least one year.

Option d) IFRS is used to prepare financial statements in the transition year and also in in reporting year.