IFRS quiz

What is the authoritative statutes of the Framework?

• It has the highest level of authority. In case of a conflict between Framework and a Standard or Interpretation, the Framework overrides the Standard of Interpretation.

• If there is a Standard or interpretation that specifically applies to a transaction, it overrides the Framework. In the absence of a Standard or an Interpretation that specifically applies, the Framework should be followed

• If there is a Standard or interpretation that specifically applies to a transaction, it overrides the framework. In the absence of a Standard or an Interpretation that specifically applies to a transaction, management should consider the applicability of the Framework in developing and applying an accounting policy that results in information that is relevant and reliable

• The Framework applies only when IASB developes new or revised Standards. An entity is never required to consider the Framework

What is the objective of financial statements according to the Framework?

• To provide information about the financial position, performance, and changes in financial position of an entity that is useful to a wide range of users in making economic decisions

• To prepare and present a balance sheet, an income statement, a cash flow statement, and a statement of changes in equity

• To prepare and present comparable, relevant, reliable, and understandable information to investors and creditors

• To prepare financial statements in accordance will applicable Standards and Interpretations

Which of the following are underlying assumptions of financial statements?

• Relevance and reliability

• Financial capital maintenance and physical capital maintenance

• Accrual basis and going concern

• Prudence and conservatism

What are qualitative characteristics of financial statements according to the Framework?

• Qualitative characteristics are the attributes that make the information provided in financial statements useful to users

• Qualitative characteristics are broad classes of financial effects of transactions and other events

• Qualitative charcteristics are nonquantitative aspects of an entity's position and performance and changes in finacial position

• Qualitative characteristics measure the extent to which an entity has complied with all relevant Standards and Interpretations

Which of the following is not a qualitative characteristics of financial statements according to the Framework

• Materiality

• Understandability

• Comparability

• Relevance

When should an item that meets the definition of an element to be recognized, according to the Framework?

• When it is probable that any future economic benefit associated with the item will flow to or from the entity

• When the element has a cost or value that can be measured with reliability

• When the entity obtains control of the rights or obligations associated with the item

• When it is probable that any future economic benefit associated with the item will flow to or from the entity and the item has a cost or value that can be measured with reliability

XYZ Inc. changes its method of valuation of inventories from weighted average method to fist in first out (FIFO) method. XYZ Inc. should account for this change as

• A change in estimate and account for it spectively

• A change in accounting policy and account for it prospectively

• A change in accounting policy and account for it retrospectively

• Account for it as a correction of an error and account for it retrospectively

Change in accounting policy does not include

• Change in useful life from 10 years to 7 years

• Change of method of valuation of inventory from FIFO to weighted average

• Change of method of valuation of inventory from weighted average to FIFO

• Change from the practice (convention) of paying as Christmas bonus one month's salary to staff before the end of the year to the new practice of paying one half month's salary only

When a public shareholding company changes an accounting policy voluntarily, it has to

• Inform shareholders prior to taking the decision

• Account for it retrospectively

• Treat the effect of the change as an extraordinary item

• Treat it prospectively and adjust the effect of the change in the current period and future periods

When it is difficult to distinguish between a change of estimate and a change in accounting policy, then an entity should

• Treat the entire change as a change in estimate with appropriate disclosure

• Apportion, on a reasonable basis, the relative amounts of change in estimate and the change in accounting policy and treat each one accordingly

• Treat the entire change as a change in accounting policy

• Since this change is a mixture of two types of changes it is best if it is ignored in the year of the change; the entity should then wait for the following year to see how the change develops and then treat it accordingly