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WorksheetsFR - Ch-7 Conceptual Framework 2024-25
Total questions: 35
Worksheet time: 1hrs 9mins
How does the Conceptual Framework define an asset?
A resource owned by an entity as a result of past events and from which future economic benefits are expected to flow to the entity
A resource over which an entity has legal rights as a result of past events and from which economic benefits are expected to flow to the entity
A resource controlled by an entity as a result of past events and from which future economic benefits are expected to flow to the entity
A resource to which an entity has a future commitment as a result of past events and from which future economic benefits are expected to flow from the entity
Which one of the following would be classified as a liability?
Dexter's business manufactures a product under licence. In 12 months' time the licence expires and Dexter will have to pay $50,000 for it to be renewed.
Reckless purchased an investment 9 months ago for $120,000. The market for these investments has now fallen and Reckless's investment is valued at $90,000.
Carter has estimated the tax charge on its profits for the year just ended as $165,000.
Expansion is planning to invest in new machinery and has been quoted a price of $570,000
The Conceptual Framework identifies an underlying assumption in preparing financial statements. This is:
Going concern
Materiality
Substance over form
Accruals
The Conceptual Framework identifies four enhancing qualitative characteristics of financial information. For which of these characteristics is disclosure of accounting policies particularly important?
Verifiability
Timeliness
Comparability
Understandability
Which of the following is NOT a purpose of the IASB’s Conceptual Framework?
To assist the IASB in the preparation and review of IFRS
To assist auditors in forming an opinion on whether financial statements comply with IFRS
To assist in determining the treatment of items not covered by an existing IFRS
To be authoritative where a specific IFRS conflicts with the Conceptual Framework
Recognition is the process of including within the financial statements items which meet the definition of an element according to the IASB’s Conceptual Framework for Financial Reporting.
Which of the following items should be recognised as an asset in the statement of financial position of a company?
A skilled and efficient workforce which has been very expensive to train. Some of these staff are still in the employment of the company.
A highly lucrative contract signed during the year which is due to commence shortly after the year end
A government grant relating to the purchase of an item of plant several years ago, which has a remaining life of four years
A receivable from a customer which has been sold (factored) to a finance company. The finance company has full recourse to the company for any losses.
Comparability is identified as an enhancing qualitative characteristic in the IASB’s Conceptual Framework for Financial Reporting.
Which of the following does NOT improve comparability?
Restating the financial statements of previous years when there has been a change of accounting policy
Prohibiting changes of accounting policy unless required by an IFRS or to give more relevant and reliable information
Disclosing discontinued operations in financial statements
Applying an entity's current accounting policy to a transaction which an entity has not engaged in before
he accountant of Lisbon is considering a number of transactions and events and how they should be treated in accordance with the concepts and qualitative characteristics of financial information as set out in the Conceptual Framework.
During the year ended 31 March 20X6, Lisbon experienced the following transactions or events.
A Sold an asset to a finance company and leased it back for the remainder of its useful life. The accountant has decided that this should be treated as a secured loan.
B The company’s statement of profit or loss prepared using historical costs showed a loss from operating its shops, but the company is aware that the increase in the value of its properties during the period far outweighed the operating loss
C Inventory has up to this year been valued using FIFO but the accountant is considering changing to the weighted average method for the year to 31 March 20X6.
The accountant is aware that some members of the Board of Lisbon have little understanding of accounting and he is worried about his presentation of the financial statements at the Board meeting.
How should he deal with this situation?
A In doing his presentation he should omit any complex issues, so that everybody can understand what he is saying.
He should open his presentation with the advice that some of them may not understand all of it.
He should classify, characterise and present the information clearly and precisely.
He should deliver his presentation just to those who are financially qualified.
The accountant of Lisbon is considering a number of transactions and events and how they should be treated in accordance with the concepts and qualitative characteristics of financial information as set out in the Conceptual Framework.
During the year ended 31 March 20X6, Lisbon experienced the following transactions or events.
A Sold an asset to a finance company and leased it back for the remainder of its useful life. The accountant has decided that this should be treated as a secured loan.
B The company’s statement of profit or loss prepared using historical costs showed a loss from operating its shops, but the company is aware that the increase in the value of its properties during the period far outweighed the operating loss
C Inventory has up to this year been valued using FIFO but the accountant is considering changing to the weighted average method for the year to 31 March 20X6.
Which concept or qualitative characteristic has influenced the decision in (A) above
Faithful representation
Verifiability
Accruals
Comparability
The accountant of Lisbon is considering a number of transactions and events and how they should be treated in accordance with the concepts and qualitative characteristics of financial information as set out in the Conceptual Framework.
During the year ended 31 March 20X6, Lisbon experienced the following transactions or events.
A Sold an asset to a finance company and leased it back for the remainder of its useful life. The accountant has decided that this should be treated as a secured loan.
B The company’s statement of profit or loss prepared using historical costs showed a loss from operating its shops, but the company is aware that the increase in the value of its properties during the period far outweighed the operating loss
C Inventory has up to this year been valued using FIFO but the accountant is considering changing to the weighted average method for the year to 31 March 20X6.
In looking at issue (B) above, the accountant decides that the properties should be revalued. Which concept or qualitative characteristic has been applied in making this decision?
Materiality
Going concern
Relevance
Timeliness
The accountant of Lisbon is considering a number of transactions and events and how they should be treated in accordance with the concepts and qualitative characteristics of financial information as set out in the Conceptual Framework.
During the year ended 31 March 20X6, Lisbon experienced the following transactions or events.
A Sold an asset to a finance company and leased it back for the remainder of its useful life. The accountant has decided that this should be treated as a secured loan.
B The company’s statement of profit or loss prepared using historical costs showed a loss from operating its shops, but the company is aware that the increase in the value of its properties during the period far outweighed the operating loss
C Inventory has up to this year been valued using FIFO but the accountant is considering changing to the weighted average method for the year to 31 March 20X6.
Because loss on operating the shops, the accountant is considering the issue of going concern. If it were decided that Lisbon was no longer a going concern at 31 March 20X6, which of the following would apply in accordance with the Conceptual Framework?
Financial statements do not need to be prepared.
All the assets should be liquidated.
The financial statements should be prepared on a different basis.
The financial statements should be prepared as normal and the going concern status disclosed in the notes.
The accountant of Lisbon is considering a number of transactions and events and how they should be treated in accordance with the concepts and qualitative characteristics of financial information as set out in the Conceptual Framework.
During the year ended 31 March 20X6, Lisbon experienced the following transactions or events.
A Sold an asset to a finance company and leased it back for the remainder of its useful life. The accountant has decided that this should be treated as a secured loan.
B The company’s statement of profit or loss prepared using historical costs showed a loss from operating its shops, but the company is aware that the increase in the value of its properties during the period far outweighed the operating loss
C Inventory has up to this year been valued using FIFO but the accountant is considering changing to the weighted average method for the year to 31 March 20X6.
In applying the principle of comparability, how should the change of inventory valuation basis be accounted for?
The change should just be disclosed.
The financial statements for 31 March 20X6 should show both methods
The notes should show what the profit would have been if the change had not taken place.
The financial statements for the prior period as shown at 31 March 20X6 should be restated using the weighted average basis.
The process for developing an International Financial Reporting Standard involves a number of stages. Following receipt and review of comments on a Discussion Paper, what will be the next step undertaken by the IASB?
Publication of an Exposure Draft
Establishment of an Advisory Committee
Consultation with the Advisory Committee
Issue of a final IFRS
Which of the following statements regarding systems of regulation of accounting are true?
Principles-based system will require more detailed regulations than a rules-based system.
Rules-based system will tend to give rise to a larger number of accounting standards than a principles based system.
Principles-based system seeks to cover every eventuality.
All of the above
Which one of the following would NOT be an advantage of adopting IFRS?
It would be easier for investors to compare the financial statements of companies with those of foreign competitors.
Cross-border listing would be facilitated.
Accountants and auditors would have more defence in case of litigation.
Multinational companies could more easily transfer accounting staff across national borders.
In accordance with the Conceptual Framework which of the following is/are true in relation to the enhancing characteristic of comparability?
(1) Permitting alternative accounting treatments for the same economic phenomenon enhances comparability
(2) Comparability requires uniformity
Both 1 and 2
Neither 1 nor 2
1 only
2 only
Which TWO of the following statements would be an advantage of adopting IFRS?
It would be easier for investors to compare the financial statements of companies with those of foreign competitors
Cross-border listing would be facilitated
Accountants and auditors would have more defence in case of litigation
The accounting standards can be more easily tailored to reflect the industries of the territory adopting them
The process for developing an International Financial Reporting Standard involves a number of stages. During the early stages of a project, the IASB will undertake consultation on the key issues. Which of the following is correct regarding the early stages of the process:
In the early stages of the project, the IASB will issue a Discussion Paper to obtain views from the public
In the early stages of the project, the IASB will consult with the Advisory Committee and IFRS Advisory Council to seek out the key issues
In the early stages of the project, the IASB will issue a Discussion Paper then consult with the Advisory Committee
In the early stages of the project, the IASB will issue an Exposure Draft to obtain views from the public
Relevant & faithful representation is part of the?
Definition
Expenses
Conclusion
Recognition criteria
Allowing entities to estimate rather than physically count inventory at an interim period
(a)
The process for developing an IFRS Accounting Standard involves a number of stages. Following receipt and review of comments on a Discussion Paper, what will be the next step undertaken by the International Accounting Standards Board (the Board)?
Publication of an Exposure Draft
Establishment of an Advisory Committee
Consultation with the Advisory Committee
Issue of a final IFRS Accounting Standard
Which TWO of the following statements would be an advantage of adopting IFRS Accounting Standards?
It would be easier for investors to compare the financial statements of companies with those of foreign competitors
Cross-border listing would be facilitated
Accountants and auditors would have more defence in case of litigation
The IFRS Accounting Standards can be more easily tailored to reflect the industries of the territory adopting them
Which TWO of the following statements regarding systems of regulation of accounting are true?
A principles-based system will require more detailed regulations than a rules-based System
A rules-based system will tend to give rise to a larger number of IFRS Accounting Standards than a principles-based system
A principles-based system Seeks to cover every eventuality
A principles-based system requires the exercise of more judgement in application than o rules-based system
The process for developing an IFRS Accounting Standard involves a number of stages. During the early stages of a project, the International Accounting Standards Board (the Board) will undertake consultation on the key issues.
Which of the following is correct regarding the early stages of the process:
In the early stages of the project, the Board will issue a Discussion Paper to obtain views from the public
In the early stages of the project, the Board will consult with the Advisory Committee and IFRS Advisory Council to seek out the key issues
In the early stages of the project, the Board will issue a Discussion Paper then consult with the Advisory Committee
In the early stages of the project, the Board will issue an Exposure Draft to obtain views from the public
Historical cost accounting remains in use because of its practical advantages.
Which of the following is NOT an advantage of historical cost accounting?
Amounts of transactions are reliable and can be verified
Amounts in the statement of financial position can be matched to amounts in the
statement of cash flows
It avoids the overstatement of profit which can arise during periods of inflation
It provides fewer opportunities for creative accounting than systems of current value accounting
Which of the following statements about the International Sustainability Standards Board (SSB) is correct?
The ISSB will issue mandatory laws that companies complying with IFRS Accounting Standards will be required to apply.
The ISSB will initially focus on climate-related disclosures
The standards issued by the ISSB will replace those issued by the International Accounting Standards Board (the Board).
There has been no previous guidance for preparers of financial information in respect of sustainability disclosures
Drexler acquired an item of plant on 1 October 20X2 at a cost of $500,000. It has a useful life of five years (straight-line depreciation) and an estimated residual value of 10% of its historical cost or current cost as appropriate. As at 30 September 20X4, the manufacturer of the plant still makes the some item of plant and its current price is $600,000.
What is the correct carrying amount to be shown in the statement of financial position of Drexler os at 30 September 20X4 under the historical cost and current cost measurement bases?
Historical cost (S) (1)
Current cost (S) (2)
Historical cost- 320.000
Current cost -384,000
Historical cost-300,000
Current cost -600,000
Under the current value measurement basis, what is the definition of fulfilment value?
The amount of consideration received to Incur the liability, less transaction costs
The price that would be paid to settle the liability at the measurement date
The consideration that would be received for incurring an equivalent liability at the measurement date
The present value of the estimated cash flows needed to fulfil a liability
Which of the following statements is an advantage of using the value in use measurement basis?
It assists a user to assess the future prospects of the business
Amounts used are objective and free from bias
It is an easily understood system of valuation
Amounts are reliable and con be verified to invoices and documents
Under the current cost measurement basis, what is the definition of the value in use measurement method?
Costs incurred at the time of acquisition
Present value of future cash flows, less costs of disposal
Open market value of the asset
Open market value of the asset, less the present value of the future cash outflows
Which statement best describes the intention of the International Sustainability Standards Board (ISSB)?
To develop standards that result in a high-quality, comprehensive global baseline of sustainability disclosures focused on the needs of investors and the financial markets
To develop auditing standards to assist auditors who are providing an opinion on sustainability disclosures
To investigate complaints made against companies who are breaching local and international laws on environmental waste
To provide a framework for companies to follow when developing their own internal policies on sustainability
The process for developing an International Financial Reporting Standard involves a number of stages.
Following receipt and review of comments on a Discussion Paper, what will be the next step undertaken by
the IASB?
Publication of an Exposure Draft
Establishment of an Advisory Committee
Consultation with the Advisory Committee
Issue of a final IFRS
Which of the following would NOT be an advantage of adopting IFRS?
It would be easier for investors to compare the financial statements of companies with those of
foreign competitors.
Cross-border listing would be facilitated.
Accountants and auditors would have more defence in case of litigation.
Multinational companies could more easily transfer accounting staff across national borders.
Which TWO of the following statements regarding systems of regulation of accounting are true?
A principles-based system will require more detailed regulations than a rules-based system.
A rules-based system will tend to give rise to a larger number of accounting standards than a
principles-based system.
A principles-based system seeks to cover every eventuality.
A principles-based system requires the exercise of more judgement in application than a rules-based
system.
The process for developing an International Financial Reporting Standard involves a number of stages.
During the early stages of a project, the IASB will undertake consultation on the key issues.
Which of the following is correct regarding the early stages of the process:
In the early stages of the project, the IASB will issue a Discussion Paper to obtain views from the
public
In the early stages of the project, the IASB will consult with the Advisory Committee and IFRS
Advisory Council to seek out the key issues.
In the early stages of the project, the IASB will issue a Discussion Paper then consult with the
Advisory Committee
In the early stages of the project, the IASB will issue an Exposure Draft to obtain views from the
public
