Q3ISTQ - Intermediate Accounting (Kieso)

Question

IFRS is comprised of: 

(a) International Financial Reporting Standards and FASB Financial Reporting Standards. 

(b) International Financial Reporting Standards, International Accounting Standards, and International Accounting Interpretations. 

(c) International Accounting Standards and International Accounting Interpretations. 

(d) FASB Financial Reporting Standards and International Accounting Standards.

Step-by-Step Solution

Answer

The correct option is (b) International financial reporting standards, international accounting standards, and international accounting interpretations.

Step 1: Definition ofAccounting Standards

Accounting standards are the common principles and procedures that provide information regarding basic accounting practices. The standards promote comparability and transparency of the financial statement.

Step 2: Explanation of correct option

Option (b) is correct because any company reporting its financial information according to the IFRS must comply with the following standards:

1. International financial reporting standards.
2. International accounting standards.
3. International accounting interpretations.

Step 3: Explanation for incorrect options

1. Option (a) is incorrect because IFRS does not comprise FASB because it is country-specific and works only for U.S accounting standards.
2. Option (c) is incorrect because IFRS comprises one more standard, the international financial reporting standard.
3. Option (d) is incorrect because IFRS does not comprise standards developed by FASB because these are only for the U.S.