Question

Which of the following statements about International Financial Reporting Standards (IFRS) is NOT true?

A. IFRS sets out broad and general principles that accountants should follow when preparing financial statements.

B. IFRS offers simplicity but also possibly more leeway for accounting malpractice than does GAAP.

C. In 2008, the Securities and Exchange Commission (SEC) announced its plan to convert U.S. companies from GAAP to IFRS.

D. IFRS leaves LESS room for discretion than GAAP does.

2. Rogue Corp. has sales of $4,250,000; the firm's cost of goods sold is $2,500,000; and its total operating expenses are $600,000. The firm's interest expense is $250,000, and the corporate tax rate is 40%. What is Rogue's tax liability?

• A. $260,000
• B. $360,000
• C. $600,000
• D. $258,000

Answer 1

1

Correct answer is D IFRS leaves less room for discretion than GAAP does.

IFRS guidelines provide much less overall detail than GAAP. Consequently, the theoretical framework and principles of the IFRS leave more room for interpretation and may often require lengthy disclosures on financial statements.

2

Correct asnwer is B.$360,000

Net income=Sales-Cost of goods sold-Operating expense-Interest expense

=$4,250,000-2,500,000-600,000-250,000

Net income=$900,000

Tax laibility=Net income*Tax rate

=$900,000*40%

Tax liability=$360,000