Financial and Managerial Accounting Study Set 1

Business

Quiz 14 :
MJI

bookmark
Unbookmark

Quiz 14 :
MJI

The contrast U.S. GAAP income statement terms with their differing IFRS terms are: 1) According to the U.S. GAAP terms use like gross profit, operating expenses, selling expenses, administration expense. Whereas, according to the IFRS terms share in profit (loss) of associates, finance costs. 2) As per the IFRS terms the statement is known as 'statement of comprehensive income' and as per the U.S. GAAP it is termed as 'income statement'. 3) IFRS provides flexibility regarding headings and sub totals but U.S. GAAP provides less flexibility for public companies.

a. Turnover means sales. Generally it is also called as sales turnover. Unilever group includes selling of goods and services also. Hence, the Unilever might have used the word turnover instead of sales. b. The main difference is that the Unilever prepared one Income statement and one comprehensive income statement, where as the Mornin' Jeo followed single statement of comprehensive income. The IFRS is allowing these two forms for preparing income statement. Since the Unilever activities are largely diversified, it is very difficult for the company to consolidate all the financial statements of various activities carried on by various group companies of Unilever all over the world. But Mornin' Joe's activities are limited. Hence, it can give a clear picture in the income statement. Mornin Joe financial statements are giving clear information on the face of it. Whereas the Unilever financial statements are not giving clear information on the face of it, but it gives all the information in the "additional disclosures'. Nature type classification is being followed by Mornin Joe, where as the Unilever followed the function type classification. c. Under US GAAP financial costs are termed as interest expense. It is shown under 'other income and expense'. But the Unilever adjusted finance income and pension and similar obligations to the finance cost.

According to the IFRS, expenses are classified by their nature and the function in the income statement. Classification of the expenses by nature - Expense is recorded in a manner to reflect the economic benefits associated with it. All the expenses are disclosed separately. When the expenses are classified in nature, income statement on the amount of specific expenditure incurred during the year can be identified directly. Examples of the expenses are salaries, depreciation, wages, rent, supplies, depreciation, interest, income tax, etc. Classification of the expenses by function- In a function based classification all the expenses are pooled under few heads, like production expenses, administration expense and selling expenses. Expenses are identified depending upon their function, such as selling expenses, administrative expense, production expenses, operating expenses, finance costs.

There is no answer for this question

Related Quizzes