Classifying financial statement accounts. The balance sheet or income statement classifies various items in one of the following ways: CA—Current assets NA—Noncurrent assets CL—Current liabilities NL—Noncurrent liabilities CC—Contributed capital RE—Retained earnings NI—Income statement item (revenue or expense) X—Item generally does not appear on a balance sheet or an income

Question

statement Using the abbreviations in the previous list, indicate the classification of each of the following items under U.S. GAAP and IFRS. If the classifications differ between U.S. GAAP and IFRS, indicate what that difference would be.
a. Interest revenue.
b. Factory.
c. Treasury shares repurchased by a corporation.
d. Research and development expenditures.
e. Automobiles used by sales staff.
f. Cash on hand.
g. Promise to a vendor to buy inventory from it next period.
h. Commissions earned by sales staff.
i. Supplies inventory.
j. Note payable, due in six months.
k. Increase in fair value of land held.
l. Income taxes owed to state or city government.
m. Note payable, due in ten years.
n. The portion of the note payable in part n that is due next year.
o. Dividends declared.

Answer 1

(Classifying financial statement accounts.) (Unless indicated, classifications do not differ
between U.S. GAAP and IFRS.)
a.NI (revenue).
b.NA.
c.CC.
d.NI (U.S. GAAP); NI and NA (IFRS). Under U.S. GAAP, all R&D expenditures
are expensed in the period incurred. Under IFRS, the portion of R&D associated
with research is expensed in the period incurred; development (D) expenditures
are capitalized as a noncurrent asset on the firm's balance sheet, if the
expenditures are on a product that has reached a sufficient stage
(called technological feasibility).
e.NA.
f.CA
g.X
h.NI (expense).
i.CA.
j.CL.
k. X (U.S. GAAP); X or NA (IFRS). Under U.S. GAAP, an increase in the
value of the land would not be recognized as a gain until the firm sells the land.
Under IFRS, the firm has the option to revalue the land upward prior to sale.
l.CL.
m.NL.
n.CL.
o.RE.