External Financial reporting

Which of the following indicates an asset is impaired?

• Recoverable amount exceeds carrying value.

• Carrying value exceeds recoverable amount.

• Depreciation expense increases.

• Market value of the asset increases.

A company decides to revalue its land and buildings. What happens to the revaluation surplus?

• It is recognized as income.

• It is charged to retained earnings.

• It is recorded in other comprehensive income.

• It is deducted from accumulated depreciation.

What is the purpose of impairment testing?

• To calculate depreciation expense.

• To determine if an asset's value is recoverable.

• To increase the value of non-current assets.

• To estimate an asset's residual value.

Which of the following scenarios results in a contingent liability?

• A warranty claim has been submitted and approved.

• A court case with an uncertain outcome is ongoing.

• An invoice is overdue for payment.

• A lease agreement is signed.

The lower of cost and net realizable value principle ensures:

• Inventory is overstated in the balance sheet.

• Inventory is recorded conservatively.

• Inventory is adjusted for inflation.

• Inventory costs include all overheads.

Which inventory valuation method is prohibited under IFRS?

• FIFO

• Weighted Average Cost

• Specific Identification

• LIFO

What distinguishes development costs from research costs?

• Development costs must be expensed, while research costs can be capitalized.

• Development costs are incurred after the asset is available for use.

• Development costs lead to identifiable future benefits, while research costs may not.

• Development costs are treated as liabilities.

Which of the following is an intangible asset?

• Property under construction

• Copyright purchased from a third party

• Inventory held for resale

• Prepaid insurance

What is the key factor in classifying a liability as current or non-current?

• The interest rate on the liability

• Whether the liability is secured or unsecured

• The expected time for settlement

• The liability's impact on cash flow

An operating lease requires the lessee to:

• Record the lease as an asset and liability.

• Pay variable amounts based on the lessor's expenses.

• Treat payments as an expense in the income statement.

• Transfer ownership of the leased asset.