Q4ISTQ - Intermediate Accounting (Kieso)

Question

When converting to IFRS, a company must:

(a) recast previously issued financial statements inaccordance with IFRS.

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

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

(d) use GAAP in the transition year but IFRS in thereporting 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 minimum one year comparative financial statements.  

Step 2: Explanation to 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, company is required to prepare comparative financial statementsfor at least one year. 

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